Who Pays Realtor Fees?

Certified Mortgage Advisor
NMLS 1701021
Published 
July 2, 2019

Realtor fees, who will put the money down?

So if you're looking at buying a house as something that you may have thought of as working with a realtor and if so, great. Because it's a great decision. As I'm sure you'll hear a lot of people in the real estate space recommending working with a realtor, I wanna walk through number one, who's going to pay those realtors. And then why is it important that you work with a realtor and how can they help you save thousands of dollars? When purchasing a home.

And it's really not just something that we say there are a lot of examples that I've seen realtors be able to help people save money. One of those ways is I just closed on a deal about a month ago with a realtor that I was working with, helping the buyer save over $25,000 on the purchase of their home.

Often its the seller

So who pays the realtor fees? Most of the time, the seller is going to be paying the realtor fees. So I'm talking in general terms, real estate agent structure, their deals differently across the nation. So I can't speak for every single one. If you have more questions, talk with your realtor about what their structure looks like and who's paying for all that.

3% for the seller's agent and the buyer's agent

But in general, most of the time, what happens is the buyer's agent. So who you're working with as a buyer gets 3% and the seller's agent the agent working with the seller gets 3% as well. So what happens is the seller pays 3% to the buyer's agent and 3% to the seller's agent.

So most of the time it is the seller who is going to be paying all of the realtor fees, which is great for you as a buyer, which means essentially you're working with a buyer's agent for free, they don't charge you anything upfront, which is great.

Benefits we'll enjoy if we work with a realtor

Now let's talk a little bit more about what are the benefits of working with a realtor? Why would you wanna work with a realtor? I've heard some people have the counterargument of saying if I don't work with a realtor, then instead of the seller having to pay 3% in commission to my realtor, then I could have a lower purchase price. Which I'm going to argue is not true. Because the person who would be able to negotiate that purchase price down for you would be the realtor.

Guiding you to the right path

So the main thing that a realtor's gonna help you through is the complexity of a real estate transaction. See, the problem is most people only go through buying or selling real estate a couple of times in their life. Whereas a realtor has done probably 50, 70, or a hundred deals in a year. Where most people purchase. Let's say on the high end five times in their life, a realtor might have gone through that last month. So they have a lot of experience recognizing different problems and different things that happen.

All the challenges that happen throughout a deal front can help you navigate through.  That way when you're managing a job transition or a family transition or something is changing drastically in your life, that's causing you to either sell or buy or do both at the same time. The last thing you want to do is navigate all of the struggles and problems that come with buying or selling a house.

They will help you navigate

So realtor's going to be able to give you that game plan, show you the steps up front, and navigate the challenges that you might face. Some of those challenges might be problems with home things, with an inspection.  You might run into legal issues with a seller and the property and what's being disclosed. There really are a lot of challenges that could be, you could face in the transaction and a realtor's gonna help you a lot with that.

Negotiate the best price and terms

Not only that, but realtors also going to help you negotiate the best price and terms. They know how to structure your offer. So that one, it gets accepted by a seller, but then number two, it meets the goals that you have because you wanna purchase for a specific price so that you have a specific payment so that you have specific cash out of close or a better term for that would be cash out of pocket.

You have these goals in your mind of what you want from the deal and the realtor's going to be able to help you hit those every single time. Whereas since most of the time people only go through buying or selling a few times in their life, it's a lot more difficult to negotiate what you're looking for in an offer.

Negotiate in inspections and repairs

Also, a realtor's gonna be able to help you negotiate inspections and repairs. In the purchase contract. When you put in an offer on a home, you have a period of time that you can inspect the property, and then you can come back to the seller and ask for repairs and negotiate new terms of the deal.

If let's say, there's some problem with electricity or there are some problems with the plumbing or maybe you want to add in an additional $2,000 for other repairs, a realtor's going to be able to help you negotiate that because they understand how to work with another agent and they understand what's happening with a proper. And the best way to get that for you.

If you try to do it on your own, it probably won't work out as well as if you have someone who's done this time after time.

Managing the contract

Lastly, I think one of the biggest things that a realtor is going to help you with is managing that contract. Buying and selling real estate are all driven by a purchase contract. And there are a lot of terms, depending on where you're at that purchase contract might have 8, 20, or 30 different pages that lay out different terms of what's happening in that transaction. And there are a lot of places where you can put exit points in that contract to be able to get out of the contract safely if you need to.

I've worked with buyers before who don't work with a realtor and they don't know how to set up the contract to allow themselves to get out if needed. So let's run through, a fake scenario. If you're a buyer you're not working with an agent and you don't set up your contract properly, you can run the risk of being sued by the seller.

If you don't meet that contract and you don't follow the deadlines and all of the terms. Whereas if you worked with a realtor, they could help you. Put in different exit points in the contract. So let's say inspections went south, you would be able to get out of that contract with your realtor because they put in different safety points for you to get out of that contract.

Realtor fees is paid by the seller

So ultimately who pays realtor fees, most of the time, it's going to be the seller. If you're a buyer you shouldn't expect to pay any realtor fees, if you do, they're going to be very minimal. Working with a realtor has so much more upside than it does at any cost that might be there.

Working with the realtor will give you an advantage

And to touch back on that story of the buyer who saved $25,000 I was working with a client. The agent helped them negotiate the offer price for house. The agent set up the offer for them which was a great deal up front. And then what ended up happening is the appraisal came in and gave us a value that was $25,000 higher than the purchase price.

So what happened for that buyer is they closed on their home and instantly had $25,000 worth of equity in the property. So they saved 25 grand the market value was high but they bought it lower because they worked with a realtor.

That alone is a huge testament to working or why you should be working with a professional, like a real estate agent.

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