How Much Should I Expect To Pay In Real Estate Agent Fees?

How much should I expect to pay in real estate agent fees? Real estate agent fees typically come out of the transaction. Richard Fryer, a real estate school president with over 30 years of experience in...

Richard Fryer, a real estate school president with over 30 years of experience in the housing business, explains that commissions are usually added into the final sale price of the house. "Real estate agent fees typically come out of the transaction. Actually the buyer always pays it. It is part of the selling price, but as far as the credits and debits on the closing statement, it shows up on the seller's side but commissions have dropped significantly in the last five years. The historic commission when I first got into this business was 7%. That was customary; it has dropped down now where it's somewhere nationally about 5.1% and you're going to pay between 5% and 6% if you are a seller. Typically the agents look to the seller's side to be compensated, but that's not always true and if so it's probably in the 3% range," Fryer explains. Under the typical real estate transaction, the buyer and seller would have their own agent. In some cases a dual agent will be working with both parties exclusively. The seller would then agree to pay the commission, which is spilt between the two agents. If the buyer and seller are working with a dual agent, he or she gets to keep all of the proceeds from the commission. While it is not a hard and fast rule (price fixing is illegal in most states), the average commission for a real estate agent to be paid averages between 5 and 6 percent.

The strength of the hot market has led many homeowners to seek out alternative measures to reduce the costs of real estate commissions they have to pay. Some sellers are opting to sell their homes on their own without the assistance of an agent. This is referred to as a For Sale By Owner (or FSBO) property. If you sell your home as a FSBO, you will not have to pay commissions and all of the proceeds from the transaction are yours to keep. Another avenue that sellers are taking to sidestep paying real estate fees is to work with fee-for-service brokers instead of the traditional full service agent. A fee-for-service agent will only charge you for the services that you want, and you assume responsibility for the services that are not covered by the agent. By purchasing services "a la carte" sellers can save a considerable amount of money in commissions.

Many real estate agents are very critical of FSBO and fee-for-service arrangements, citing that many sellers aren't aware of how much work, liability and red tape is involved in selling a home, and that lack of expertise could cost them a great deal in the long run. Additionally, many sellers who are working with limited assistance often make mistakes in pricing their home, which ends up in either the house selling for less money than it was worth or the house sitting on the marker longer because it was overpriced. In order to minimize risk, most agents recommend that FSBO and fee-for-service arrangements be reserved for people who either have sold a home before or has a thorough knowledge of real estate.

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