real estate fees

How Much Are Real Estate Fees?

by Sundaybell on April 10, 2014

How much are real estate fees? Pretty popular question for anyone new to the world of real estate! It could be a first time buyer, or seller, or both. So let’s get right down to it. How much are real estate fees? Who pays the real estate fees? Are real estate fees negotiable? And what else you might want to know about real estate fees.

How much are real estate fees?

As a home seller

  • Real estate fees (or commissions) are typically calculated as a percentage of the sale of a property. These fees are split between the selling agent (that’s the agent you decide you want to work with) and the buying agent (that’s the agent that represents the buyer of your home). These percentages are variable, depending on where you live. For example, there are areas in the United States where fees have been as low as 3.5% or as high as 10% and the same goes for Canada
  • So, for a house that is selling for $200,000 at a real estate fee (commission) of 6%, the total real estate fee paid would be $12,000 (some of which would go to the selling agent, some to the agent representing the buyer and their respective brokerage firms)
  • One thing to remember is that real estate fee is variable, and negotiable, but not always advertised as there are some brokerage companies that won’t allow their real estate agents the opportunity of advertising discounted fees and commissions. If you are confused about REALTORs vs. brokers vs. agents, this article could be a good reference for you. When it comes to brokerage companies, those are brands like RE/MAX, Better Homes and Gardens Real Estate, Prudential, Coldwell Banker etc.

As a home buyer

  • The real estate fee that the seller of the home negotiated with their respective real estate agent (or listing agent) is paid by the seller (from the total amount that is paid for the house for sale)
  • The real estate agent you decide to work with, who can help you find the home you want to buy, negotiate price, and navigate the home buying process, is working for you, but is not paid directly by you
  • When a house is “listed” by a real estate agent, the percentage fee (or commission) that is paid to the listing or selling agent, and the agent that represents the home buyer (or “buying” agent) has already been determined. In some cases, the buying agent fee (or commission) can also be higher than the listing agent. For example: if the total fee (or commission) negotiated by the seller is 4.5% to sell their house, the buying agent may receive 2.5% of the 4.5% total
  • When the total fee is negotiated in advance of a house being listed, the percentage that is to go to the buying agent is usually a standard amount and is in place to entice buying agents to show their clients (the buyers) the house that is for sale. If there is no incentive for a buying agent to show a house (which is the case in some For Sale By Owner scenarios – also known as FSBO), then they likely won’t show it; which is why you might see FSBO homes on the market for much longer and eventually listed by a real estate agent
  • That said, keep in mind that if the home you are buying is listed by a real estate agent, the fees have already been worked into the price of the house you are about to buy (so technically, although you are not paying directly for the commissions, the fact of the matter remains that you, as the home buyer, are paying the commissions indirectly as they are part of the overall cost of the house and the fee that was negotiated).

So who pays the real estate fees?

  • Simply put, you as the customer (either buyer or seller) pay the real estate fees!
  • It’s either directly as a bi-product of the total price a house is sold for, or how much the house if bought for
  • Either way you look at it: the real estate fees that are worked into the selling price of a house pay both sides of the real estate transaction. It pays the selling agent and the buying agent and although it might not be a direct payment (in the case of working with a buying agent), the real estate fees are paid by you, the consumer.

Are real estate fees (commissions) negotiable?

  • YES. In a nutshell, the answer is yes!
  • There are some real estate agents that are willing to negotiate on real estate fees; while there are some that will not
  • One thing to remember when you are negotiating real estate fees is that if you want “full service”, then you should be willing to pay for “full service”
  • If you are, or have done some of the work yourself, then it’s just fair that you ask for a break on the real estate fees
  • There are different fee structures available, depending on who you decide to work with as well: flat fee, a la carte etc.
  • Remember, it’s important to be fair. Real estate agents typically work on a fee (commission) structure which represents their entire income; from which their business expenses, license fees, brokerage fees etc. are paid
  • If negotiating real estate fees, be fair and courteous and remember, full service deserves full price while partial service can and should be negotiable
  • For tips on negotiating real estate fees/commissions, here is a good reference

So how much are real estate fees and commissions? The fact of the matter is that it is variable. If you want to learn more about real estate fees, and/or want to see what real estate agents in your area are offering, you can do so by meeting and interviewing real estate agents in your area anonymously.

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