Does seller ALWAYS pay the Real Estate Agents’ Commissions? (duplex, 5%, clause)

[MikeJaquish]

Originally Posted by Hopelesscause

It hardly seems fair that those that sell more expensive homes receive more comp than those who sell lower priced ones.

Those who sell more expensive homes also often pay more for utilities, income and capital gains taxes, property taxes, homeowners insurance, housecleaning, landscaping, or to have a new roof installed.

[1insider]

For what it's worth, the selling prices of the MLS comps that agents and appraisers and consumers use to establish fair value included commission so the price suggested by those comps has commission built in. It's safe to assume that if the real estate industry went away overnight, prices would adjust downward by the amount of the average commission.

[JONOV]

Originally Posted by Hopelesscause

It hardly seems fair that those that sell more expensive homes receive more comp than those who sell lower priced ones.

Why? The salesman that sells a Mercedes makes more money than the Salesman selling a Toyota Corolla.

The salesman that sells a John Deere Harvester makes more than the one that sells a lawn mower.

The sales rep (and company) that sells rubber gloves and gauze pads make less money than the company selling artificial knees and hips.

Why should real estate be any different? (And, I understand that the higher the profile of the transaction, the more likely the agreement is to be "unique.)

[photogal9]

Originally Posted by Hopelesscause

I’m a first time home buyer, so I didn’t exactly know what to expect. I noticed the Closing Detail from my lender which reads that seller will pay BOTH commissions ($18,000 x 2)- highway robbery!!!! I only looked for 1 day to find the home and he has been handling the rest since- but REALLY???!!! So overcharged , but doesn’t look like I’m stuck paying it. Is this normal??

Yes, the seller pays the commission % based on their contracted amount with an agent, however, all home buyer's pay for this throughout the life of the loan, it's all rolled in to the cost of purchase. You are paying, one way or another.

[photogal9]

Originally Posted by 1insider

For what it's worth, the selling prices of the MLS comps that agents and appraisers and consumers use to establish fair value included commission so the price suggested by those comps has commission built in. It's safe to assume that if the real estate industry went away overnight, prices would adjust downward by the amount of the average commission.

^This^

I would add to your last sentence, "It's safe to assume that if the real estate industry went away overnight, prices would adjust downward by the amount of the average commission."

Then, negotiations would start from that amount.

[turf3]

Think about it for a minute.

At the sale of a house, where is all the money coming from?

The buyer.

Let's say the agreed on price is $250,000 for a house. There are "seller paid" expenses which reduce the amount that the seller actually receives. And there are "buyer paid" expenses which increase the amount the buyer shells out.

For round figures, let's say "seller paid" expenses are $17,500 (6% commish and some other stuff) in the above transaction, and "buyer paid" expenses are $5000.

The result:

The buyer, with their down payment + earnest money, and the mortgage company, with the remainder, produces $255,000. The seller nets (250,000-17,500) = $232,500.

Real estate agents and other entities make a total of $22,500 on the deal. Now - here's the important part - pay attention. EVERY SINGLE DOLLAR of that $255,000, and of the $22,500 that get paid to middlemen, and of the $232,500 the seller walks away with, came from THE BUYER.

Keep that in mind the next time you are buying a house. ALL THE MONEY INVOLVED COMES FROM THE BUYER. It's all your money. Do you care about where your money is spent? Then pay attention!

[beezle1]

Often agents will shell out more money to market a more expensive home.

And be prepared when the time comes for you to sell, you, as the seller, will be expected to pay the commission on both sides if you use an agent. Even a FSBO (for sale by owner) will frequently pay the buyer's agent commission.

[Lovehound]

Originally Posted by MikeJaquish

Of course, all funds come from the buyers.

I think this comment taken alone is a bit ambiguous.

The Realtor's commissions come out of the funds that the seller receives. In other words the commissions are subtracted from the sale price along with other charges against the sellers (HOA transfer fees, etc.).

The actual money comes from the buyer's earnest money, down payment, and from the buyer's mortgage company.

Commissions vary depending on the region, and may be negotiated if the selling Realtor is willing. At the current time the prevailing commission rates for both Los Angeles and Phoenix are 5% of the sale price, and that 5% is distributed 50/50 to buying and selling agents, the escrow company cuts the checks.

Just FWIW the check are paid to the Realtor's broker who takes a cut and gives the rest to the agent. I've never asked what the broker cut is, suppose I could, but the broker's cut goes towards running the realty company, office space, phones, maintenance, advertising, etc. Most Realtors do their client contacts via cellphone which allows them to take old contacts with them if they move to a new brokerage. My Realtor and I have a long term relationship (I'm a landlord) and that's where my insights come from.

Buyers, remember your Realtor and keep in contact. Your Realtor can be a valuable resource such as when you need repairs or maintenance you can call your Realtor who maintains a list of recommend contractors for all sorts of trades, and get referrals. Like I said, my Realtor is my BFF!

[Diana Holbrook]

Originally Posted by photogal9

^This^

I would add to your last sentence, "It's safe to assume that if the real estate industry went away overnight, prices would adjust downward by the amount of the average commission."

Then, negotiations would start from that amount.

I don't think there's any reason to think sellers would think their home is worth any less without real estate commissions. I don't think there's any evidence that FSBO sellers mark their homes DOWN because they don't have an agent. The price of a home is the price arrived at by perception of value, and that is based on many factors, but often most importantly how much buyers in that area are willing to spend for homes like it.

I think sellers complain about commissions because they want to make more from the sale, and I can understand that... I don't think they would say they think the house sold for too much and I don't think I've ever heard a seller say the price should be lower.

That's just not how people think... at least not when it's their own money.

[turf3]

Originally Posted by Diana Holbrook

I don't think there's any reason to think sellers would think their home is worth any less without real estate commissions. I don't think there's any evidence that FSBO sellers mark their homes DOWN because they don't have an agent. The price of a home is the price arrived at by perception of value, and that is based on many factors, but often most importantly how much buyers in that area are willing to spend for homes like it.

I think sellers complain about commissions because they want to make more from the sale, and I can understand that... I don't think they would say they think the house sold for too much and I don't think I've ever heard a seller say the price should be lower.

That's just not how people think... at least not when it's their own money.

Sellers probably wouldn't adjust their asking prices down by 6% in this fantasy scenario, but buyers darn sure would instantly adjust their offers down by 6% if they no longer had to pay commissions. And thus selling prices would work their way down. Though probably not by a full 6%.