Paying the Real Estate Agent—Whose Responsibility is It? | Topouzis & Associates, P.C.


December 24, 2018

Paying the Real Estate Agent—Whose Responsibility is It?

Paying the Real Estate Agent—Whose Responsibility is It?

Real estate agents in all three of the markets we serve—Rhode Island, Massachusetts, and Florida—mention from time to time how important it is that the parties they serve, whether sellers or buyers, have a sense for who in the transaction pays the real estate agents’ fees. We couldn’t agree more. But there is a level of complexity to the question, given the tendency for redistribution of costs in a real estate transaction. Let us explain.

First things first: as a general rule, you’ll find that real estate agents—on both sides—earn about 6% of the purchase price of the home (this is not hard and fast—and is determined by what is agreed upon in the listing contract). This fee includes the cost of an agent’s doing business on the buyer’s or seller’s behalf, including actions such as—on the listing agent’s side of the equation—taking pictures, listing the property (which comes with associated cost), printing materials like flyers and signs.  Of course, this being the real estate agent’s livelihood, a certain amount of profit needs to be made from their services, as well.

As for who pays for these services in the end: it depends.

As a practical matter, all things being equal, the standard practice is that a seller pays the agents on both sides of the transaction. Yet this is less straightforward than it may at first seem, because it is also fairly common for a seller of property to build the payment of fees into the asking price of the home. This means that in the end, if the offer made on the home is equal to or greater than the asking price, the payment for services is made by the buyer.

Which, of course, means that in large part it all depends on the “type” of market in which the transaction occurs. If it is taking place in a “seller’s market,” wherein a given property may have numerous offers made and perhaps even a bidding war that pushes the offers higher, the cost falls on the buyer. In fact, buyers even tend to offer to pay the fees outright as a way to sweeten the deal for the seller and improve their chances of acceptance. But in a “buyer’s market,” where a seller must accept less for the home than they may have asked—which essentially means cutting out that building-in of the cost of agent fees—the cost most definitely will come out of what the seller might otherwise have earned from the property.

Whichever the market situation, an experienced closing firm like Topouzis & Associates, P.C. is one you can count on to perform a thorough title search on any property, whether in Cranston, Rhode Island; Boca Raton, Florida; or Cambridge, Massachusetts, and to provide title insurance policies to back up our assessments. Whether you’re a lender, a realtor on either side of the transaction, or a prospective home buyer, feel free to contact us.