How to Pay the Real Estate Agent


When it comes to one of the biggest financial transactions a person will make, having an expert on your side is essential. However, that expert can come with a price tag. Real estate commissions are typically a percentage of the sales price of a home and can add up quickly. Depending on who you are, and whether you’re selling or buying a home, how you pay the agent can vary.

Generally speaking, most real estate agents work on commission. The amount they earn is based on a pre-negotiated percentage of the home’s sales price that’s agreed upon before an agent contract is signed with a client. This arrangement encourages an agent to work hard to sell a home for the highest possible price and rewards them accordingly. The details of an agent’s fee should be clearly outlined in the agreement you sign when hiring an agent. Don’t be afraid to ask questions if you don’t understand something. Read more

Real estate commissions aren’t the only way real estate professionals get paid, though. They also often earn referral fees by suggesting other real estate or non-real estate professionals for a variety of services including mortgages, property management and relocation assistance. Those fees are negotiated between the agents and can sometimes include an exclusivity clause.

It’s also common for a single agent to work with both the seller and the buyer, which is known as dual agency. In this case, the agent may earn double the typical commission rate. When that’s the case, the agent is likely to split their earnings with their broker.

As with any profession, the actual dollars that an agent takes home after a transaction are eroded by taxes and expenses. Federal, state and self-employment taxes, insurance, real estate association dues and advertising costs can all take a significant chunk out of an agent’s commission.

The good news is that these expenses aren’t always passed on to clients. This is why it’s important to find an agent you feel comfortable openly discussing cost and negotiating. If you’re a seller, for instance, you might want to consider reducing your agent’s commission by offering to cover upfront expenses like professional photography and marketing.

It’s also worth noting that buyers can negotiate with their agent for a reduced commission or even offer to pay all or part of the agent’s fees. In many cases, this can be a great way to stand out in a competitive market or bidding war and show your appreciation for an agent’s work. However, keep in mind that buyers are also responsible for other closing costs like title insurance and appraisal fees, which should be factored into any offer. To learn more about how to best approach negotiations with your real estate agent, contact an experienced realtor. They’ll be able to guide you through the process and help ensure your best interests are protected. They’ll also be able to recommend local lenders that have experience with financing real estate transactions.


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