What’s the main goal of any buyer or seller? To get to closing and settle their home buying/selling process as smoothly as possible, right? But, what about the cost to make that happen? It’s time to address the elephant in the room…commission. The way real estate agents get paid is through commission, but only if the transaction goes to closing. I’ll break this into two sections for understanding: the buyer side and the seller side.
The Buyer Side
When you decide to work with a real estate agent or REALTOR®, you are making the decision to better your process in buying a property. They are experts in the real estate industry that are supposed to represent you and YOUR best interest from start to finish. If you were to go through this alone and call an agent that has the home listed (representing the seller of that home) that you are interested in, you are doing yourself a disservice. They have an agreement with their sellers that they will have their interests in mind during the transaction. Having an agent to work with will minimize the risk associated with purchasing a property. When it comes to paying the real estate agent you’re working with, that gets done at closing and typically from the proceeds the seller receives at that time.
The Seller Side
When it comes time to list your house and you’re narrowing down who you would like to list your property with, hopefully you are not only thinking about what you’ll have to pay. Commission is paid by the seller at closing and would come out of the sale price of the property. It may be reflected as a percentage or as a flat fee. According to Bankrate, commissions range from 5-6% and are negotiable. While this may be true, there are many other things to consider when you evaluate an agent (which I’ll leave up to them to discuss with you through what is called a listing presentation). You may have seen “For Sale by Owner” signs in the yards of homes. Most people going this route may have been turned off by the fact that they have to pay a commission. Before you decide to go on that route alone, find out what all goes into selling a home and think about what it looks like in the eyes of a buyer who has a REALTOR® working with them. They may prefer a home that is listed with an agent simply because they know the transaction is more “safe”.