45 Percent of People Don’t Know Who Pays Their Real Estate Agent—Do You?
Buying a home is expensive. Selling a home is expensive. This is common knowledge. Something I recently learned is not common knowledge? Just who pays the buyer’s real estate agent once a house sells (and who pays the seller’s, too).
It’s likely you haven’t really thought about this ever. For expediency’s sake, the answer is “the seller.” Yes, the seller pays their listing agent and the buyer agent’s commission.
And if that isn’t what you thought, you’re not alone. Just in the past month, I’ve seen two surveys showing that this is a common misconception. The first was in a new report from Clever Real Estate, an online platform that connects buyers, sellers, and agents. They did a recent survey, asking 1,000 homeowners selling their houses in 2019 a couple of questions about the home selling process. One of the questions they asked was, “In most real estate transactions, who pays the buyer’s agent commission?” Almost half (45.5 percent) responded that the home buyer did.
Side note: It’s a little weird to think that people who once bought a home didn’t know that they didn’t pay their buyer’s agent. But that might be because closing costs are so expensive and include so many random fees, buyers just assume that their agent’s commission is somewhere on that closing statement.
“I think it’s one of those willful amnesia things, where you kinda forget how it all works and then are shocked by having to pay for both,” posits Dabney Frake, our Projects editor who recently went through the selling process.
But it’s not just sellers who forgot: I also came across the second misconception in a survey from home-improvement networking website Porch. They found that 35 percent of millennials aren’t using a real estate agent, and 60 percent of those who skipped the help said they were doing so to cut expenses. Again, it makes sense to do things your own way to save money—but it’s not correct in this case.
So just why do people not know this? Maria Koziakov, a real estate agent with Luxury & Beach Realty in St. Petersburg, Florida, says that most people know that real estate agents work on commission and that someone has to pay that commission. But, just like other things in life, most will assume the one seeking representation (e.g. hiring an agent) will be the one to pay for it.
But in real estate, it works a little differently. The seller pays because they’re the ones who are actually hiring their agent to sell their house: “The listing agent and the office are truly hired,” Koziakov says, meaning that there is an actual contract signed when one works with a seller’s agent. The contract, known as a listing agreement, specifies the commission, any fees, and the time period.
However with the buyers, there’s not this formal agreement required. Koziakov. notes that in places like Florida, there is a buyer brokerage agreement that buyers can sign that states that the broker’s compensation will be credited with any amount received from seller. However, it’s not obligatory to have one to work with a buyer’s agent. No formal contract, no predetermined fees! The more you know!
Interested in more real estate brass tacks? Here’s a dive into one recent homeowner’s mortgage costs every month.