Who Pays the Real Estate Agent
How Realtor Commissions Work
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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A realtor is there to help guide you throughout the real estate transaction, and they can be a wealth of knowledge that is valuable for both buyers and sellers trying to navigate through the real estate process.
If you’re about to start your home-buying journey, then you’re likely thinking about hiring a real estate agent. It’s important that you’re very clear about closing costs and what you are responsible for versus what the seller is responsible for, so here’s what you need to know about real estate agent commissions in British Columbia:
What is a real estate commission/realtor fee?
The real estate commission or realtor fee is a fee that is paid by the seller to cover real estate commissions for the listing agent (seller’s agent) and buyer’s agent. It is typically a percentage of the sale price, rather than a fixed dollar amount, and thus the specific amount depends on how much your home sells for.
The real estate commission is stipulated on the listing contract, signed between the seller, the seller’s agent, and the seller’s agent’s brokerage. This is not something that the buyer gets to negotiate as a part of their offer.
Who Pays The Real Estate Agent When Purchasing?
Standard practice is for the seller to pay for all of the commissions for both the listing agent and the buyer’s agent helping you purchase your home.
Ultimately, if you’re buying a home then you’re probably off the hook for paying any commission to your realtor. The seller usually picks up this payment, and that means that hiring a realtor to help you throughout the real estate process is a free service for you.
Related Article: If you’re wondering about what a realtor does to help when purchasing a home then check out our blog on “What Does the Buyer’s Agent Do & Why Should I Hire One?”
How Real Estate Commissions Work
- Real estate agents work for a brokerage, also known as a real estate broker. Broker examples are: Remax, Sutton West Coast, Macdonald, or Keller Williams.
- All fees paid to real estate agents passes through the broker. The broker then pays the agent.
- Only a real estate broker can pay a real estate commission and sign a listing agreement with a seller, the commission that is paid to the realtors involved is not determined by the buyer.
Therefore, in most cases (read the next heading for an example of an exception) the seller pays the commissions for both of the realtor’s involved in the transaction.
As a buyer, your expectation should be that when purchasing a property and having a real estate agent represent you in your purchase that you should not have to pay any real estate commission.
What happens if the seller cuts the buyer’s agent’s commission?
Most buyers that are working with a realtor will be under a buyer’s agency contract, in which they agree that they have a realtor working solely for them and in their best interests. In this agreement, there is a stipulation that the buyer’s agent will receive a commission from the seller based on the industry expectation.
If the seller chooses representation by a discount brokerage, this discount brokerage typically offers a significantly lower co-operating commission than the industry expectation. In this situation, should a buyer choose to write an offer on that property, they will have to compensate their agent’s brokerage for the agreed upon fee less the amount paid by the seller. Because the expectation of most buyers is that they do not have to pay a commission, this can be a reason why discount broker represented houses consistently stay on the market for longer than average days on market.
What happens if one agent represents both the seller and the buyer? How does the commission work then?
As of June 15, 2018, the act of one agent representing both the seller and the buyer (aka dual agency) has, for the most part, been banned. The Real Estate Council has stated that agents are not allowed to perform dual agency unless all of the following requirements are met at the discretion & approval of the council:
- The property is in a remote location.
- That location is under-served by real estate professionals.
- It would be impracticable (i.e. not possible) for the parties to have different real estate professionals.
Ultimately, the council has made it clear that dual agency is banned – and that there is no way of getting around dual agency in a market like Vancouver.
Related Article: Dual Agency Banned in Most Cases in BC
In the case of dual agency, the agent representing both parties gets to keep the entire commission because they are doing more work by representing both sides. One of the reasons for banning dual agency is that, on top of the fact that each party involved has different goals, that collecting a double commission is a conflict of interest that skews some agent’s judgement in terms of what is truly best for their client.
If you’re thinking about buying or selling in the future and are looking for a realtor to help guide you throughout the process then give us a call at 604-765-0376. Prefer text? 604-319-0200. or email [email protected] to start a conversation. We’re happy to help.
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