Are Commissions Negotiable?
Yes. Residential commission amounts are typically some percentage of the sales price. Some real estate companies will charge a set fee for their services and they may charge a non-refundable retainer fee. However, just like anything else in real estate, these amounts are negotiable. When completing the listing agreement, the Seller and the agent will agree on the terms including the amount of the real estate commission.
Buyer’s Realtor’s Commissions
In the past the Seller would agree to pay the listing agent the negotiated commission. The listing agreement also stated the amount of the commission the listing agent would pay to the Buyer’s realtor. This was communicated to the Buyer’s realtor through the realtor database called the Multiple Listing Service. Once there was an accepted contract the title company would confirm the commission payments with the Seller and pay them to the realtors at close of escrow. In August 2024 this changed due to a class action lawsuit. The plaintiffs said the Buyer should pay their realtor not the seller. However the Seller can still offer to pay commission to the Buyer’s realtor. All commissions were removed from the MLS because the plaintiffs said the Buyer’s realtor would not show homes that were paying low commissions. The Buyer’s realtor now needs to contact each listing agent to see if, and how much, commission the Seller is paying to the Buyer’s agent.
If the Seller wants to get the house sold it is strongly recommended they pay the Buyer’s agent a commission. The goal is to get as many potential Buyers interested in the house maximize the return and sell the house swiftly. The longer a house stays on the market the less attractive it becomes to potential Buyers. They may think the house has a problem. Worse yet they may think the Seller is getting tired of showing the house, may be getting desperate and ready to accept a low offer or they may not consider the house at all. Another issue with the Buyer’s paying the commission is they may not have the cash to do so after paying the down payment. With this change Seller’s may see Buyer’s asking the Seller to pay their realtor’s commission.
How and When Listing Commissions are Earned
The listing contract specifies a listing price. The listing agent’s job is to market the property to find a “ready, willing and able” Buyer to present an offer. If the Seller reaches agreement with the Buyer, then the listing agent has done his or her job and earned the commission. Once the sale has closed, the listing agent’s real estate broker gets paid from the proceeds of the sale.
If the Buyer proves unable or unwilling to conclude the sale, the house is placed back on the market and the listing agent has to begin earning his or her commission all over again. However, if the Seller backs out or does not accept an offer that meets the price and terms of the listing agreement, the listing agent has still earned the commission. She or he may ask to be paid, even though the house did not actually sell. It is very important to carefully consider every detail when completing the listing contract and reviewing and accepting an offer to sell your property.