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How does a Realtor get paid, and who pays them?

If you are planning to buy or sell a property, you may have wondered how Real Estate Agents, or Realtors®, get paid. In this article, we’ll explain the different types of Realtor® Fees, commission structures, and who typically pays them.

Understanding the Role of Realtors®

Before we delve into the compensation aspect, it’s essential to understand the role of a Realtor®. A Realtor® is a licensed professional who acts as a mediator between buyers and sellers of real estate properties. They help clients navigate the complex process of buying or selling a property by providing expert guidance and advice.

Realtor® typically work on a commission basis, which means they earn a percentage of the sale price of a property. However, the specific compensation structure can vary depending on several factors.

Types of Realtor® Fees and Commission Structures

There are mainly three types of compensation structures for Realtor®:

Commission-Based

As mentioned earlier, commission-based compensation is the most common form of payment for Real Estate Agents. This structure means that the Realtor® earns a percentage of the final sale price of the property. The commission rate is typically around 3-6% of the sale price, but it can vary depending on the region and the type of property.

Typically, commissions are split between the buyer’s agent and the seller’s agent.. The commission is paid by the seller, which is usually deducted from the proceeds of the sale.

Flat-Fee

In a flat-fee compensation structure, the Realtor® charges a fixed fee for their services, regardless of the final sale price of the property. This fee is typically agreed upon before the start of the sale process and is paid by the seller.

Flat-fee compensation structures are becoming increasingly popular, particularly for sellers who are looking to save money on commission fees.

Hourly or Retainer

Hourly or retainer-based compensation structures are relatively uncommon in the real estate industry. In this structure, the realtor charges an hourly rate for their services, or the client pays a retainer fee upfront.

This compensation structure is typically reserved for specialized services, such as legal or financial advice, rather than for the overall process of buying or selling a property.

Who Pays the Realtor® Fees?

Now that we’ve covered the different types of compensation structures let’s talk about who typically pays the Realtor®.

Seller

In most cases, the seller pays the Realtor’s® commission. The commission fee is deducted from the proceeds of the sale before the seller receives the remaining amount.

Buyer

In some cases, the buyer may be responsible for paying a portion of the Realtor’s® commission. This scenario can occur when the buyer has agreed to pay for the buyer’s agent’s services.

However, this situation is relatively rare, and the buyer is typically not responsible for paying any commission fees.

Conclusion

Realtors® are typically compensated through commission-based structures, where they earn a percentage of the final sale price of a property. The commission is typically paid by the seller, and the buyer is rarely responsible for any fees.

As a buyer or seller, it’s essential to understand the compensation structure of a realtor to avoid any confusion or surprises during the buying or selling process.

FAQs

How much commission do Realtor® usually earn?

The commission rate for realtors is typically around 3-6% of the sale price of the property, but it can vary depending on the region and the type of property.

Can buyers negotiate the commission fee with the Realtor®?

Yes, buyers can negotiate the commission fee with the Realtor®, but it’s important to remember that the commission rate is usually split between the buyer’s agent and the seller’s agent.

Can a seller choose to pay a flat fee instead of commission?

Yes, a seller can choose to pay a flat fee instead of commission, but it’s essential to ensure that the fee covers all the necessary services required for the sale process.

Do Realtors® get paid if a property doesn’t sell?

In a commission-based compensation structure, the realtor only gets paid if the property sells. However, some realtors may charge a flat fee for their services, regardless of the outcome.

Are there any additional costs associated with using a Realtor’s® services?

Aside from the commission or flat fee, there may be additional costs associated with using a Realtor’s® services, such as marketing expenses or administrative fees. It’s important to clarify all costs and fees with your realtor before entering into an agreement.

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Brad Patshkowski

Preparing future home owners is paramount to our customer's success and the success of our industry. The dream of homeownership is closer than you think!