I have a basic question regarding selling your house and Realtor commissions. I realize Realtor commissions vary by state, and the amount negotiated by the parties, but its very common to see the following commission rates in Texas.
Pay only 3% commission if you sell by Owner
Pay only 6% commission if you sell by Realtor
With that being said I am confused about why working with a Realtor charges you the full 6% commission. I was under the impression when you work with a Realtor to sell a house, since you are just selling the house, you would only pay one side (seller side) of the Comission, or 3%. But according to the above to list it and FSBO its 3%, but if you want to add a realtor its 6%. Why is it the full 6% when the Realtor is only representing one side of the commission, the sellers side?
If the Realtor did both sides, buyer and seller, then 6% makes sense. I would greatly appreciate it if someone would clarify this for me, thank you.
The typical commission for a Realtor to sell your house is 6%. There is usually a listing agent and a buyer’s agent. If you are the seller, the listing agent would be “your” Realtor. This would be the person who would list the house and engage with a buyer’s agent. Your Realtor will generally charge a 6% commission for the sale of your house. The person buying your house will generally have their own Realtor - the buyer’s agent. So what usually happens is that the listing agent will split the commission down the middle with the buyer’s agent. In that case, each Realtor would get a 3% commission.
Let’s say you decided to sell your house on your own, also known as For Sale By Owner. In this case, only the buyer has a Realtor (assuming they are using one to help them find a house). You don’t have a Realtor because you’re doing it yourself. In this case, a normal commission would be 3% for the buyer’s agent. As you can see from above, 3% will be about what they’re used to getting per deal.
The other way this could work is if you decide to sell the house by owner (you have no Realtor for yourself) and you find a buyer who doesn’t have a Realtor. There’s no commission involved here because there are no Realtors involved.
Realtor’s can sometimes act as a dual agent representing the seller (you) and a buyer. This doesn’t happen all that often and you would have to sign a form stating you understand the Realtor is representing you and the buyer. This is kind of a conflict of interest because the Realtor should get you the highest price possible since you’re the seller. The same Realtor would also be trying to get the house as cheap as possible for the buyer. In this case, the Realtor would get the full 6% commission since there’s no one else to split it with.
Those are the basic examples. Hope that clears it up.
Thanks for the in-depth reply, I really appreciate it. I suppose the only matter that needs clarification is in regards for FSBO. If the buyer uses a realtor and buys your house 3% of the sales price goes to the buyer agent? Something about that doesnt seem fair to me I suppose. What if you had done all of the extensive marketing, and the buyer called off your sign but happened to have an agent. That agent would receive 3% for doing nothing since it was the client that called the sign.
Good question. I’d look at it like this… The seller doing the marketing is pretty much what the listing agent would be doing so the seller is saving that 3% of the commission by handling the advertising, whether that be buying a $10 sign for the front yard or paying a few hundred dollars for posting to the MLS. Most regular home buyers are going to use a Realtor. They feel safer that way. In the case you mentioned, the buyer’s agent will handle the paper work. A Real Estate lawyer or Title Company can help guide the seller thru the paper work too.
Also realize there are forms Realtors have people sign for exclusivity of agency where that Realtor will get a commission from the sale of a house while working with those people.