Why does a seller have to pay buyer’s agent commission?

Mark Phillips Flat Fee Commission , Real Estate , Real Estate Commissions Leave a Comment

Real estate commissions can be confusing and a little hard to understand to many home owners thinking of selling. If you are a home owners thinking of selling, the first thing you should know is that real estate commissions can often times be negotiated. Of course, this does not mean every real estate company in your area will be willing to negotiate what they charge, but there is no set national percentage when it comes to real estate commissions. In most cases, real estate commissions are tied to the sales price of your home (percentage based commission model), which for the most part, I disagree with.

Most real estate companies have expectations in place for their agents in terms of what they are to charge a seller, but that does not mean you cannot try to negotiate the commission. If the agent says, “Sorry, my broker does not allow us to budge from X %”, you have the right to say, “Thanks, but no thanks…I think I will call someone else.” Although there is not a set standard, 6% seems to be the most common percentage charged to a seller to sell a home. Who came up with this or what it is based upon, I truly could not tell you.

One question I have pondered for many years is, “Why does a seller have to pay a commission that ends up also paying the buyer’s agent?” Seems pretty backwards when you stop and think about it. Now I realize the seller is technically not paying the buyer’s agent directly, but the agreement a seller has in place almost inevitably has an understanding in place that the commission he/she will pay to his listing broker will be split in one way, shape or form with the buyer’s agent, so in essence the seller is paying both his or her listing agent, as well as the buyer’s agent. Where this gets backwards in my opinion is in essence, the seller is paying someone other than his listing broker to negotiate against the seller’s best interests and instead to negotiate on behalf of the buyer. Why would a seller pay someone who is not representing him a good amount of money to negotiate against his best interests?

This makes very little sense to me to be honest, but by and large, this is the compensation structure that has been in place for many, many years. Undoubtedly there will me industry disrupters who will devise a system that may make it more equitable for sellers in the future. Personally I think the simple solution is for the seller to pay his or her broker for their efforts and the buyer should pay his or her broker for theirs. Not sure why this isn’t done more often (it can happen every now and then, but this is not the norm). In cases where a buyer doesn’t have enough money to pay his or her real estate agent (after having to pay a down payment, closing costs, etc.), the solution would be to have the seller pay the buyer’s agent’s commission and simply add it to the sales price of the home so the seller isn’t loosing out on any additional money. Commissions come out of the seller’s equity at closing already so it’s not like a seller hand writes a commission check to their agent as it is.

In closing it will be interesting to see that the real estate industry looks like in 10 years, as I have to believe we will see many more alternatives to the current status quo.

As always, thanks for reading.

Hill Country Flat Fee Realty saves home sellers thousands of dollars of their equity, while still offering a full service experience. We serve the Boerne, San Antonio, Kerrville, Fair Oaks Ranch, Comfort, Fredericksburg, Bulverde & Spring Branch markets.

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Mark Phillips