Expert Advice: Should Home Sellers Pay All Realtor Fees?

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Since the recent NAR settlement, there has been much discussion about who should be responsible for paying the buyer broker fees. Generally, sellers pay all Realtor fees for both the buying agent and listing agent. However, as a result of the NAR settlement discussion about who should pay the agents is prevelant.

While some home sellers are excited about the potential to save on commissions when selling their homes, real estate agents—including myself—are advising sellers why it is in their best interest to include the buyer brokerage commission in the sale of their home. In this article, we will define what these fees are, outline common broker fee rates, and explain why sellers typically cover these costs.

What Are Realtor Fees?

Real estate agents earn their compensation through a commission based on the sale of a home, whether for buying or selling. These fees are typically a percentage of the home’s final sale price, usually around 5-6%. While this may sound like a significant amount, it’s essential to remember that this commission is split between the buyer’s agent (representing the buyer) and the seller’s agent (representing the seller). As a result, each party typically receives around 2.5% at the time of closing.

Who Usually Pays the Realtor Fees?

Traditionally, the seller is responsible for paying the total commission, which is then divided between both agents. This long-standing industry practice aims to simplify the process for buyers and make properties more attractive to their agents. As a seller, you may be wondering, “Why do I need to appeal to the buyer’s agents? Isn’t this what the NAR settlement was all about?”

While the NAR lawsuit has brought about changes in the real estate industry nationally, in Washington State, some of these practices were already in place before the settlement. Commissions have always been negotiable and will continue to be. The key difference now is increased transparency for both buyers and sellers.

In Washington, sellers are required to receive a net selling sheet. This document provides a breakdown of how much the seller owes on the mortgage, broker commissions, taxes, HOA fees, etc., and it estimates the net proceeds the seller will receive based on the selling price.

Why Do Sellers Typically Pay the Fees?

Many articles suggest that covering the commission fees “attracts more buyers and agents.” However, there’s more to it.

While some sellers may think that avoiding these costs will increase their net proceeds, it may not. Let’s break down why it’s usually in their best interest for the seller to pay all the Realtor fees.

1. Attracts More Buyers and Agents:

Purchasing a home involves substantial upfront costs, including earnest money, down payment, closing costs, HOA fee transfers, inspection fees, and more.

In the Seattle market, these expenses can add up to over $100,000, which buyers must have ready before submitting an offer. If a seller does not offer a buyer’s agent commission, buyers may need to come up with an additional $20,000 or more on top of these costs, making the property less attractive. This can reduce the pool of potential buyers and, ultimately, lead to lower net proceeds for the seller due to a lack of competition and fewer offers.

2. Simplifies the Transaction:

Having the seller cover all commissions simplifies the transaction by streamlining the financial aspects.

Real estate transactions can be complex, often representing the largest purchase of a person’s life. With so much emotional investment in the process, simplifying the financial arrangements can make the experience smoother for everyone involved. Aligning with industry standards helps ensure a more efficient process, reducing potential stress and complications.

Should Sellers Pay All Realtor Fees?

In my professional opinion, absolutely yes—the seller should pay all Realtor fees whenever possible.

Why?

Doing so increases the likelihood of selling the home faster and potentially receiving offers above the listing price, which means more money in the seller’s pocket. Additionally, it opens the door for strong offers and minimizes the need for back-and-forth negotiations with buyers.

In today’s market, it’s crucial to price your home correctly to avoid it sitting on the market for months. The longer a home sits unsold, the more buyers may suspect something is wrong with it. The goal is to get your home under contract within the first few weeks of listing. Offering a buyer’s commission significantly increases this opportunity.

There are some cons to paying all of the realtor fees, but remember, commissions are negotiable. You can negotiate a lower rate with your agent, especially if the property is expected to sell quickly. Another option is to ask the buyer to share some costs—though this is uncommon, it’s still a possibility. However, this may limit your pool of interested buyers. The best approach is to find an agent who will work with your financial goals and help you succeed.

Consult with Your Realtor

As mentioned earlier, it’s important to have these conversations with your realtor. While it might feel uncomfortable at first, your real estate professional has the market knowledge and experience to help you decide on a strategy that aligns with your selling goals.

Once you sign a contract with a real estate professional, they have a fiduciary duty to act in your best interest. They will provide valuable insights into the potential benefits and drawbacks of paying all the fees.

Final Thoughts

While it has long been the industry standard for home sellers to cover all realtor fees, there are options depending on your goals, timeline, and the current market conditions. Understanding the pros and cons of each scenario will help you make an informed decision. Remember, the best strategy is the one that aligns with your specific circumstances and goals.

If you’re considering selling your home and want personalized advice on realtor fees and overall selling strategy, reach out. We’re here to help you navigate the complexities of real estate and ensure a smooth, successful transaction.