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What You Should Know About Agent Commission

If you're new to selling, you may not know the ins and outs of agent commission. Use this primer to learn more.

If you're planning to list your home for sale, chances are you'll be relying on an experienced real estate agent to help you seal the deal. Both your agent and your future buyer's agent will play an important role in creating a smooth transaction process. In return, agents are usually compensated with a commission based on the home's final sale price. Because agents are only paid after a successful closing, they're motivated to help you sell quickly and efficiently while achieving the best possible sale price.

Agent commission structures can be confusing, and when it comes time for a closing, many clients are unsure how their agents are paid or how to calculate the fees. To help clear up any uncertainty, below are some common questions and answers related to agent commissions.

What Is An Agent Commission?
The majority of agents charge a commission based on a percentage of the home's sale price as payment for their services. The total commission for a home sale is generally between 5% and 6%. However, this commission is usually split between the buyer's agent and the seller's agent. Then, both agents usually have to split their take with their broker. The exact percentages may vary depending on the agent, location, and the unique transaction details. Because agents are only paid when you're paid, they're motivated to help you achieve the best possible outcome during the home selling process.
What Does The Agent Commission Cover?
Real estate agents provide a number of essential services to help you achieve the best possible return on your home. Helping you determine a sale price, market your listing, and guide you through the closing process are just a few of the many ways agents help their clients. Additionally, agents are experienced negotiators and they know how to handle buyers and buyer's agents. A commission based on the sale price is usually the only compensation an agent receives for their services.
Who Is Responsible For Paying The Commission?
It depends on how you look at it. Agent commission is not included in the closing costs, which are additional fees that support activities required to facilitate the transaction. Closing costs are usually covered by the buyer. Instead, agent commission is usually baked into the sale price of the home. As a result, some may consider agent commissions to be seller-funded, but unlike closing costs, agent commissions are not additional fees paid on top of the sale price.
Are Agent Commissions Negotiable?
In some cases, agents may be willing to negotiate lower commission rates. This most frequently occurs when a single agent is serving as both the buyer's and the seller's agent. However, because most agents are required to split their commissions with a broker, negotiating a lower commission rate isn't always feasible. Also, many agents self-fund marketing initiatives and reimburse themselves after the closing.
Do You Have To Pay A Commission If Your Home Doesn't Sell?
Sellers are not usually required to pay an agent if the home doesn't sell; however, there may be exceptions. Agent commission is usually triggered when the seller accepts a buyer's offer. If an agent finds a buyer while under contract, and the sale closes after the agent's contract expires, the seller may still owe the agent a commission. Another example may be backing out of the deal after you've accepted an offer. In this case, you'll likely still be liable for both seller and buyer commissions. It's always a good idea to read your contracts carefully and be sure you're clear on the terms.

Agent commissions can certainly be confusing, especially if you're selling your first home. While they may seem like extra fees, it's important to remember that you'll likely recover your costs and more if you're working with an experienced agent.

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What You Should Know About Agent Commission

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