Real Estate Agent Commission and Fees: What Are They and Who Pays?

Real Estate

Real estate broker fees for both the buying and the selling broker are typically paid for by the seller.

Most of the broker fees hover around 5%- 6% and is split between the buyer and seller’s broker. Each real estate broker would be getting anywhere from 2.5%-3% as a commission when the sale closes.

These fees are negotiated on the front end by the seller’s real estate agent. The cooperating broker who decides to show you the home, will know how much that number is before setting up a showing.

But you as a buyer, pay nothing to work with a buyer’s agent. Thus, it would be to your benefit to contract a real estate professional that is working for you, that someone else is paying for.

Real Estate Disclosure Form

This form helps parties understand the role of the real estate agent in the transaction.

Some buyer agents may ask you to sign an agency agreement right off the bat. This informs all parties about who is representing whom. In this case, You. Whether you sign it on the font end or the back end, it is a mandatory state and national disclosure that is required.

Seller’s agents have this state required disclosure filled out as soon as the seller decides to list the house with the selling real estate agent.

Once in a while there will be something called a dual agency. This is where the real estate agent represents both the buyer and the seller in a neutral capacity. This form gives informed consent that is signed by both parties.

When do real estate agents get paid their commission?

First off, real estate agents don’t get paid by the hour, are 100% commission based and 1099’s. They only get paid if the deal goes through.

You can be working with one for two years, and they get paid nothing. So, imagine all the hours, phone calls, showings, emails and other forms of communication or information they worked for and are not get paid.

They only get paid at closing…but even have one more step to go before actually being able to deposit that check in the bank.

At closing, the check is cut by the attorney or escrow company for the agreed amount. This amount doesn’t go directly to the real estate agent, it goes to the agent’s principal broker. The principal broker then takes their cut from the agent’s check, then writes a check to the real estate agent.

Only then does it make it to your agent’s bank.

Other Real Estate Agent Fees

There are other forms of real estate aside from houses that also require commissions to be paid, that are outside of buying or selling of a house.

Vacant land for instance can be anywhere from 10%-20% commission since it takes much longer to sell this type of real property than a home.

You also have rental commissions. In typical marketplaces the landlord will give an incentive of about $300-$500 for a rental referral.

In Manhattan, it is the renter who pays the real estate agent’s fee. That fee is a hefty 15% of an annual rental contract. If you rent a typical $3000 one bedroom, you will be paying $5400 in broker fees alone.

Commercial brokers typically fall between 4%-8% for deals under $1m, but that number goes down as the sale price goes up.

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