How much was your agent paid when you bought your home? If you don’t know, you’re not the only one.
According to a report commissioned by Redfin last month, more than one-quarter of respondents (28%) were unsure of the amount their agent was paid. Seventeen percent didn’t know how the amount was calculated, and 19% had no idea who paid the agent. The survey went out to almost 3,000 renters and owners, and the results zeroed in on those who had bought a home in the last year and used an agent (approximately 120).
The subject of real estate agent commissions is a hot topic, thanks to the National Association of Realtors (NAR) settlement of $418 million last month. The anti-trust series of class-action lawsuits tackled the percentage disclosure to home buyers of agent payment. As part of the settlement, NAR agreed agents must enter into written agreements with buyers before they tour any home. These agreements must specify the compensation that agents will receive.
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People Feel Awkward Talking About Money'
“Many Americans make the biggest purchase of their life without knowing precisely how the professional they hired to guide them through the transaction is getting paid,” said Redfin chief economist Daryl Fairweather. “Home sellers often have a candid conversation about fees with their agent before signing an agreement to work together. Buyers would benefit from doing the same. People feel awkward talking about money, but it’s important to understand what your agent is charging and discuss whether you will need to ask the seller to cover your agent’s fee as part of your offer negotiation or pay for it out of pocket.”
Some buyers may not know that the commissions received by the agent have always been negotiable. The typical process involves the home seller to covering payment for both their agent and the buyer’s agent. A commission equal to 2.5% to 3% of the home sale price typically goes to their agent, and another 2.5% to 3% is received by the buyer’s agent.
Nearly 40% of homeowners who plan to sell their house in the next year said they think a 3% commission for a buyer’s agent seems “a little” or “very” high. But a similar amount (36%) of likely sellers said it seems “just about right,” and 26% said it seems “a little” or “very” low.
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