Who pays the real estate commission?

Seller is Who pays the real estate commission when buying a home

The commission is generally negotiated between the owner aka seller and the Listing Agent at the time the house is placed on the market for sale.  Generally price, length of the listing agreement, terms acceptable to owner are all determined.  Other decisions such as what is included with the sale, the source of utilities and size of the home are disclosed in writing.  Most importantly, The seller negotiates the total real estate commission to pay out of the proceeds of selling the house.

The actual percentage of the sale is always negotiable at the time of the listing.  When asking Who pays the real estate commission, the answer lies in the Listing Agreement – the seller.  This is the person determining how the proceeds of the sale will be disbursed after mortgages, taxes, liens (if any) and transfer fees are paid out.

dreaming of the perfect home and wondering who pays the real estate commission

Not The Home Buyer

While ultimately responsible for the home buying commission, 99% of the time the buyer is not the one who pays the real estate commission.  So who pays the real estate commission when buying a home? The seller.  The commission is negotiated at the time of the listing agreement between the listing agent and owner. 

Why 99% of the time?

Occasionally the perfect home will not be listed with a cooperating broker. In which case a buyer searching for a home with a Realtor’s assistance may owe the commission.  This Rarely occurs, but mentioning it to share best practices.  According to the National Association of Realtors 2013 Profile of Home Buyers and Sellers, non-agent Realtor represented sellers accounted for 9% of 2013 transactions. 

This is including deals between family members and transactions where an agent represented the buyer but not the seller.  From my personal experience… frequently sellers without an agent will negotiate a commission to an agent bringing a home buyer offer.  So while this group accounted for 9% of sales, the actual number of deals with no commission is likely very small – about 1% of the time.  And, IMHO, buying FSBO is one of the most important times to have a Realtor representing your best interests.

What happens if there is no buyer’s agent?

What happens if I handle both the buying and selling side of the transaction.  This is all negotiated with the owner at the time of the listing.  Still, some buyers want to save the cost of commission when not working with an agent. I can respect that. 

Buyers will want to consider their options and Colorado’s procuring cause conditions when it comes to deciding if and when they need a Realtor in the transaction.

I want to save the cost of a commission

When considering who pays the real estate commission and opting for no Realtor to save the funds, keep in mind real estate contracts are quite involved. Legal fees can quickly eat away any perceived savings.  Since the seller negotiated to pay the buying agent at the time of the listing, why not have an agent representing your sole best interests? 

A good Realtor will generally save you a great deal more than the cost of a commission.  There is no requirement you have a Realtor represent you.  Keep in mind though, Realtors must disclose agency to home buyers – it is required in Colorado.  Having an agent is in your best financial interests.

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