How Does Commission Work When Selling A House?

25 September 2020
 Categories: Real Estate, Blog


When you buy a house, you can hire a Realtor to help you find the right home. This Realtor assists you with every step of buying a house, and you do not have to pay any fees for this service. The seller pays the fees, but have you ever wondered how this works when selling a home? Here is an explanation of how commissions work when people sell their homes.

The Seller Pays an Agreed-Upon Fee

When a homeowner chooses a Realtor to use for selling their home, they sign a contract. The contract requires the seller to pay the Realtor a stated commission rate upon closing of the home. The rate is usually around 6% of the home's selling price, but it can be different in some cases. When the seller attends the closing of the real estate deal, they must pay the rate based on the home's selling price. They cannot negotiate the rate after signing the contract, which means they are obligated to pay this fee at closing.

The Listing Realtor Does Not Receive the Entire Commission

What many people do not realize is that the listing Realtor does not receive the entire commission. Even though the seller pays the entire commission, the listing agent only receives a portion of it. The amount the listing Realtor receives depends on several factors. First, it depends on who found the buyer. If the listing agent finds the buyer, they will receive more money. If a different Realtor finds a buyer, they receive a portion of the commission.

The simple way to understand this is to know that the listing agent and buyer's agent each receive half of the commission. If the listing agent is also the buyer's agent, this agent gets the full commission.

In all cases, though, Realtors work for brokerage firms. Because of this, every agent must pay part of their commissions to the brokers they work for. The percentages they must pay depends on their contracts with their brokers.

When you sell a house and hire a Realtor, you might be tempted to try to pay a lower commission rate. You should keep in mind that Realtors have a lot of expenses they must pay themselves for the services they offer, and they do not earn the entire commissions from sales. If you have questions about selling a home or buying one, you can learn more by talking to a local Realtor.