Buying a house: How commission to realtors works

When it comes time to purchase or sell a home, there are generally several questions regarding who is responsible for paying the real estate agent, such as what is the commission rate and what does that money go towards?

Who pays the Realtor?

Standard practice is for the home’s seller to pay the real estate commission. Sometimes there are exceptions to this practice, which is why potential sellers should always have an open conversation with their agent when preparing to list a property.

What is commission rate?

Commission rates vary by brokerage. While some agencies and agents may offer lower commission rates, it’s important to understand the difference between full-service agents and fee-based/flat-fee agents. Full-service agents tend to charge slightly more in commission as they usually include:

  • More in-depth knowledge of the market
  • A team of associates
  • A full marketing plan to promote the property

Syndicated listing schedule for websites such as: Zillow.com, Realtor.com and other real estate sites across the country.

An agent’s fees should be outlined in the listing agreement when the agent is hired; however, it’s highly encouraged for sellers to ask questions about the fee. Also, it’s important to remember that real estate commissions, along with costs associated with buying and selling a home, are tax deductible.

What does a commission cover?

Money from a Realtor’s commission can be cut numerous ways; however, below is a common breakdown, based on a $150,000 home sale with a 6 percent commission rate ($9,000) that is paid by the seller.

  • 50 percent to the buyer’s agent ($4,500)
  • 30 percent to the buyer’s agent’s brokerage ($1,350)
  • 25 percent to taxes ($1,125)
  • 20 percent to marketing expenses, signs, website postings, photography, lockboxes and travel ($900)
  • 25 percent to the individual agent ($1,125)

The amount an agent brings home covers their time taking and editing photos, securing advertising, adding online listings and meeting with the seller to make the home ready for buyers.

Samantha Evans is a licensed Realtor and broker with Whalen Realty Group, which has more than 10 years of commercial and residential real estate experience. She is a member of MIBOR. She can be reached at Samantha@whalenrealtygroup.com.