It’s a common myth that, as a buyer, you don’t pay your real estate agent because the seller pays all commissions. However, that’s not really the case. . .
Let’s take a look at an example on how real estate commissions work
Bob is buying a $400,000 home that Susan is selling. Susan, the seller, has a real estate agent called a listing agent. Bob has his own real estate agent called a buyers agent.
Susan has offered 6% commission on the sale of the home.
Usually the listing agent will make 3% of the purchase price as a commission, and the buyer’s agent will also make around 3%. In this situation this works out to $24,000 or $12,000 per agent. Remember, these percentages are always negotiable, and there is no legal statute defining how much commission real estate agents should be paid or must charge the consumer.
So now that we understand how much is being paid in commission, we can answer the bigger question that brought you here.
Who pays real estate commission?
The short answer is the seller pays the commission. The longer answer is that the buyer technically pays both commissions in the purchase price of the home. It’s like saying if you buy a car, the dealer pays for the tires on the car. The dealer doesn’t pay for it. It’s included in the purchase price, just like in this situation. Bob is actually paying the $24,000 for agent fees in his purchase price of $400,000. For most folks, when you amortize the commissions paid in the purchase price, a home owner like Bob will actually spend his first 2-3 years paying off agent commissions. That’s crazy.
Looking to Buy or Sell a House without paying commission?
TRELORA real estate serves the Colorado Front Range, Summit County and Seattle Metro Area and our mission is simple: full service real estate for a fraction of the cost. When you hire a traditional agent to help you buy or sell your home, you pay that agent 3-6% of the home’s value.
When you hire TRELORA, you pay one flat fee rather than a variable commission on the price of your home. You’ll also get best-in-class customer service. A team of expert agents who close hundreds of deals per year. And a proprietary technology platform that puts you in the driver’s seat and an average refund of $13,500 in Colorado and $18,000 in Seattle.