Who Pays the Realtor Fees When You Buy a House and How Do Realtors Get Paid?

Posted by Andrew Fortune on Friday, February 17th, 2017 at 12:33pm. 52,068 Views

Who Pays Realtor Fees When You Buy a House?One of the most common questions that I hear when I am working with first-time home buyers is, “How does a Realtor get paid?” According to the National Association of Realtors, 88% of home buyers used a real estate agent when buying a home and approximately 91% of homeowners used a Realtor to sell their house in 2016 (click here to view the statistics). Based on these numbers, it’s obvious that there are many people working with Realtors every day. There are also predicting that the “Gen Y” homebuyers will be entering the real estate market with a bang during the next few years. This means that an influx of home buyers will be entering the market for the first time. Many of these first time home buyers have no idea what a Realtor actually does, or how they get paid.

I recently met a nice couple looking for a new home in the Briargate area in Colorado Springs. They have never bought a house and had many questions when I met them. They had been looking at homes online for a couple of months, but they were finally ready to get serious about home ownership. One of the first questions that they asked me was “How much do we have to pay you to help us find a home?” This is a common question for first-time homebuyers. When I told them the answer, they were relieved. Here’s why:

In Colorado (and most of the U.S), the Seller typically pays ALL of the Realtor fees in a real estate transaction.


 

The Seller Pays Realtor Fees

As a home buyer, you can choose any real estate agent in the city to work for you at no expense to you. For first time home buyers, this is very important information. Since there are many steps in the home buying process, it makes the most sense to start finding a Realtor as soon as you are ready to pursue home ownership. Their services are free to you, so you might as well use them to their fullest potential. Ask them as many questions as you can. A good full-time Realtor looks at homes every day. They have seen hundreds to thousands of homes at this point in their career. Their knowledge of the industry is invaluable to consumers. 

Now that we know who pays the Realtor fees in a real estate transaction, let’s look at how a Realtor gets paid. 

Interesting Real Estate Facts: Realtors do not get paid until closing.

When a Realtor is working with you to find you a home, they know that they will not make a dime unless you purchase a house and use their services to do so. It’s not enough to simply get a contract signed. Real estate agents have to stick with the transaction and make sure that it makes it to the closing table, or they will not get paid. The seller will pay the Realtor fees out of the proceeds from the sale of their home (if there is enough equity). If the deal falls apart before making it to closing, the Realtors will typically never get paid for their work. This is one of the reasons that being a Realtor is difficult. 


The infographic below shows the process of how a Realtor gets paid once a transaction closes. The money goes the from the Seller to the Sellers Agents Brokerage, then to the Buyers Agents Brokerage, then finally to the Buyers agent. All of this is coordinated before the closing so that the Realtors can get paid at the closing table if everything is documented correctly, and the transaction funds properly. Realtors pay tens of thousands of dollars in expenses whether or not they have closings, so they are very motivated to do what it takes to get you closed.

How Do Realtors Get Paid in Colorado?

It’s important to note that Realtor fees are negotiable. As a home buyer, Realtor fees are typically not negotiated, since the seller is paying for them. The negotiations usually happen between the listing agent and the home seller. As in any industry, you get what you pay for. You may be able to get your Realtor fees discounted as a home seller by negotiating with your listing agent, but make sure that you are still receiving the highest level of service. There are many good places to save some money in life, but real estate transactions are not typically the best place to go cheap. A good Realtor will NET you the highest amount possible for the sale of your home, and do so in the least amount of time on the market. They are motivated to by the commission they will receive when the job is done. If you lower their motivation, you will most likely lower your home selling potential. It’s something to think about before listing your home for sale.

If you're a first-time home buyer and you're wondering what the first step for you is, check out our article and infographic that lays out the whole home buying process from beginning to end. You can view it here: First Time Home Buyer Tips

If you are a homeowner looking to sell your home, check out our quick Home Evaluation Tool and please let us know if we can help you sell it. You will also find a wealth of information in our Blog posts for sellers. We'd love the opportunity to earn your business and exceed your expectations.


 Who Pays Realtor Fees When You Buy A House

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Andrew FortuneHi There! I'm the founder of Great Colorado Homes and the creator of much of the content on this website. Thanks for taking the time to read this article. Please feel free to leave a comment in the message box below, or to share this article on social media with someone who might benefit from it. I appreciate your time here on this site and am always open to suggestions and ideas from our readers. Feel free to contact me anytime at andrew@greatcoloradohomes.com


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9 Responses to "Who Pays the Realtor Fees When You Buy a House and How Do Realtors Get Paid?"

Mike Kelly wrote: Andrew, Very nice presentations on "Who Pays" the real estate agent. Here in lovely, sunny Northern California's "Wine Country" our buyers pay for title and escrow fees plus all Loan fees unless specificially negotiated out with a Seller contribution. Buyer's also pay for any and all inspections. We do NOT clear section One pest control work unless the buyer and seller agree to it. Our contracts has a clause as to who pays for report and who clears but we NEVER use it in Northern California as our Lenders then want to see the report/ clearance, etc. We try and keep the buyer and seller as the ONLY parties to the real estate transaction! Keep me in mind for any "Wine Country" referrals to Sonoma or Napa County.

Posted on Monday, October 27th, 2014 at 9:47am.

Laura Ludwig wrote: You have a very informative website. Keep up the good work!

Posted on Sunday, February 26th, 2017 at 12:04am.

Laura Ludwig wrote: Excellent article! Great points all around.

Posted on Monday, February 27th, 2017 at 9:47am.

Span Tower wrote: Great article .. and interesting too....something i really wanted to know about when I was an amateur home buyer.

Posted on Monday, March 6th, 2017 at 2:42am.

Real Estate Pipeline wrote: This is explained in detail to understand the fact that where will real estate agent get his fees from. Real estate transactions should be known by every buyer or seller.

Posted on Thursday, April 20th, 2017 at 3:49am.

Sophia Humphreys wrote: hey great page! great content!

Posted on Thursday, May 4th, 2017 at 6:39am.

Building inspection wrote: The Building inspection performs investigations to ensure construction is in consistence with pertinent Building, Plumbing, Electrical, Mechanical, Energy and Zoning Codes, and any unique examinations expected to address strange dangers. Construction laws are outlined particularly to guarantee the wellbeing and security of structures for the advantage of everybody. Investigations are for the most part the last strides of the improvement procedure. After a building grant is issued, examinations are performed in view of the extent of work and the development prerequisites. Completion of the inspections leads the issuance of a Certificate of Occupancy, which guarantees a structure is all right for inhabitance.

Posted on Saturday, May 6th, 2017 at 4:48am.

Max Jones wrote: I really like how you pointed out that when a realtor is helping you find homes for sale, they aren't getting paid until you make a purchase. I think that is really comforting to me because we know the realtor is going out of his way to help us get what we want before he gets anything. My wife and I have been looking for homes for sale for a while in our area, and after reading this, I don't see a problem with using a realtor to do so! Thanks for the help!

Posted on Wednesday, May 17th, 2017 at 12:43pm.

Max Jones wrote: My brother has been looking at getting his first home, and I think that being able to have the help of a realtor would be good for him. I'm glad that you talked about being able to get realtor fees discounted by negotiating, which I'm sure that my brother would like to do to try and save some money. I'm going to have to see if we can get some good realtor options for him to look into and try to negotiate the services to help him! Thanks for the article!

Posted on Thursday, July 27th, 2017 at 9:19am.

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