Who pays Realtor fees: a guide for buyers and sellers

Sellers traditionally pay real estate commissions for both their own listing agent and for the buyer's agent. This fee typically equals about 5 to 6 percent of the home's sale price.

But this doesn't mean buyers escape these costs entirely.

These costs get built into the home's sale price, so buyers indirectly pay these fees through higher purchase prices.

Understanding how much Realtor fees cost and who's responsible for paying them helps both buyers and sellers make informed decisions about their real estate transactions.

What are Realtor commissions on real estate?

Real estate commissions pay real estate agents for their professional work during a property transaction.

This fee covers agents' professional expertise, marketing efforts, and time invested in selling or buying a property. The commission is usually calculated as a percentage of the final sale price rather than a flat fee.

On closing day, these payments flow to the real estate brokerages involved, not directly to individual real estate agents or Realtors.

...in as little as 3 minutes – no credit impact

Typical percentage range

Commission rates in most markets range from 5 to 6 percent of the home sale price. This percentage gets split between the seller's brokerage and the buyer's brokerage.

For a $400,000 home, the total commission would range from $20,000 to $24,000, meaning the buyer's and the seller's brokerages would net $10,000 to $12,000 each. 

Commission rates aren't fixed by law and can vary based on market conditions, property value, and brokerage policies.

Who is involved in the transaction

Multiple parties participate in the commission structure during a home sale:

• Listing agent - Represents the seller and markets the property
• Buyer's agent - Represents the buyer and helps them find suitable properties
• Brokerages - The companies that employ agents and take a percentage of the commission
• Transaction coordinators - Sometimes receive a portion for handling paperwork

The commission changes hands during closing, where funds from sale proceeds get distributed. Agents receive a portion of the total commission only after their brokerage takes its share which can be as high as 50 percent. 

Sounds like a lot? Some home shoppers and sellers decide to move forward without a Realtor. This presents different challenges we'll explore below.

...in as little as 3 minutes – no credit impact

Who pays a real estate agent?

Most real estate transactions place the financial burden of agent commissions on one party: the seller. The commission paid by the seller benefits both the seller and the buyer agent. 

But this traditional practice could be changing, according to the National Association of Realtors (NAR). There's no regulation that states the seller has to pay both agents, and some sellers are starting to question whether they should cover both agents' commissions.

In any case, just because the seller hands over the money, the buyer still feels the cost.

Role of the seller in paying commission

When a home sells, Realtor commissions come directly from the seller's proceeds from the sale. If a home sells for $400,000, for example, the seller may part with $20,000 in commissions.

The seller typically pays the bill because home sellers control the transaction. Sellers set the asking price and agree to the purchase price, so they ultimately set the context for commissions.

How the buyer indirectly contributes

The home buyer does not write the commission check directly, but the buyer ultimately helps fund these fees. Home sellers factor commission costs into their asking price, meaning they charge more to accommodate the commissions. 

Consider this example: a seller who needs to net $300,000 might list at $318,000 to cover a 6 percent commission. This creates a hidden cost for buyers. Many buyers mistakenly believe they receive buyer's agent services for free.

Problems with buyer-paid model

Even though the buyer still pays, placing the burden of writing the check on home sellers still helps buyers.

If buyers were required to come up with the money directly, this would add another upfront cash expense. First-time homebuyers, in particular, often can't afford down payments, closing costs, and agent fees. And most mortgage loans won't finance Realtor commissions, creating a barrier to buying.

Can realtor fees be negotiated?

Commission rates aren't set in stone like other real estate costs. Sellers often miss opportunities to reduce this significant expense because they assume real estate agent commissions are non-negotiable.

When and how to negotiate

Homebuyers should negotiate Realtor commissions before they sign a purchase contract. To get an idea about commissions, research local market conditions and interview multiple agents to learn the ballpark range for commissionsin your market. 

High-value properties create natural negotiation opportunities. A 6 percent commission on a $800,000 home equals $48,000, while the same rate on a $400,000 property costs $24,000.

But buyers and sellers should focus on value-based discussions rather than demanding lower rates. For instance, sellersshould ask agents to explain their work and their costs. How much are they paying to advertise to sell your home, for example. What justifies their commission structure? 

Many homebuyers can see first-hand what their agents do. Even if the buyer's agent doesn't find the home, the agentshould be a valuable asset with signing the purchase agreement contract. 

Factors that influence flexibility

Agent willingness to adjust rates depends on several key elements:

• Market conditions: Hot sellers' markets give you more negotiation power
• Property value and desirability: Unique or high-end properties often warrant discussion
• Agent experience and current client volume: Busy agents may be less flexible
• Brokerage policies: Some firms set minimum commission requirements

Agents working under different brokerage fee structures have varying degrees of flexibility in rate adjustments.

What about dual agency? 

Dual real estate agents represent both the buyer and the seller in a real estate transaction. The agent will win all of the commission from the sale.

This isn't illegal, but it's typically not the best idea, especially for buyers. Each party should have their own representation, especially since the buyer ultimately funds the commission. 

Alternatives like flat-fee services

Traditional negotiation isn't your only option. Flat-fee MLS listings, discount brokerages, or buying without a Realtoroffer different cost structures. These services typically provide limited support—perfect for sellers comfortable managing showings and negotiations independently.

Understanding FSBO

FSBO (For Sale By Owner) transactions offer home sellers a way to avoid listing agent commissions while retaining control over their property sale. This approach can save thousands in real estate commissions, though it shifts responsibility for marketing, showing, and negotiating directly to the seller.

Do FSBO sellers cover buyer's agent fees?

FSBO sellers face a strategic choice about buyer's agent compensation. Some might choose to offer commissions to buyer's agents, typically 2.5 to 3 percent of the sale price, to attract qualified buyers who work with agents expecting compensation.

Here's why this matters for a property's marketability:

• Offering buyer's agent fees expands your buyer pool: Properties that compensate buyer's agents appear in more agent searches and receive broader exposure to qualified buyers.
• Refusing to pay limits showing opportunities: Buyers working with agents often skip FSBO properties that don't offer agent compensation, reducing your pool of potential offers.
• Buyers may request interested party contributions: When FSBO sellers don't offer agent fees, buyers might ask sellers to cover these costs anyway, reducing your net proceeds.

Some FSBO sellers negotiate reduced commissions or flat fees instead of percentage-based compensation. Others may decide to pay no commissions from the sale's proceeds. This typically limits the pool of homebuyers. 

Understanding which third-party fees sellers typically handle helps FSBO sellers prepare for negotiations, especially when buyers compare traditional sales to buying a house without a Realtor.

Who pays Realtor fees FAQs

Here are some FAQs about Realtor fees for both buyers and sellers.

Do FSBO sales typically yield higher proceeds?

FSBO sellers save on listing agent commissions but face important trade-offs. Avoiding the listing fee seems nice at first, but studies show FSBO properties often sell for 5 to 7 percent less than agent-listed homes. This price difference frequently exceeds commission savings.

FSBO sellers must also manage marketing, negotiations, and paperwork by themselves. Some knowledge is essential.

Can low-cost brokerages provide reliable support?

Discount brokers deliver varying service levels depending on their fee structure. Full-service discount brokers provide comprehensive support comparable to traditional agents at reduced commission rates. Limited-service options offer specific services à la carte.

The primary difference centers on pricing structure rather than compromising what a buyer's agent does. Evaluate which services matter most for your situation and compare current mortgage rates when calculating total transaction costs.

Are there alternatives to traditional real estate commission structures?

Yes, alternatives include discount brokerages, flat-fee MLS listings, and negotiating lower commission rates with traditional agents. These options can potentially save sellers money, but may offer different levels of service compared to full-commission agents.

How do Realtor fees impact the overall cost of buying or selling a home?

Realtor fees are typically factored into the home's listing price by sellers. For buyers, this means the cost is indirectly built into the purchase price. Sellers should consider commission costs when determining their net proceeds from the sale. Both parties should factor these fees into their financial planning for the transaction.

Are a real estate agent and a Realtor the same?

Realtors are members of the National Association of Realtors (NAR). Not all real estate agents are Realtors. 

Do closing costs include real estate agent fees?

No, closing costs do not include Realtor fees. They do include lender's fees, attorney fees, title fees, and fees for other professional services. 

Commissions are just one of several big ticket costs

The real estate commission model keeps evolving. Understanding who pays Realtor fees helps buyers and sellers make smarter financial decisions during a home sale.

Sellers write the commission check for both the buyer agent and the seller agent. But buyers typically fund both commissions through paying a higher purchase price.

Commissions are just one of several big ticket items homebuyers have to think about. Working with a lender like Better helps buyers estimate their monthly payments so they can make the best homebuyeng decisions.

A preapproval can estimate these costs within three minutes.

...in as little as 3 minutes – no credit impact