Who Pays Realtor Fees on Sale by Owner?

When buying or selling property, it's always a good idea to identify any potential costs associated with the transaction. The purchase contract often states who is responsible for each fee. Yet, the purchase contract does not typically address who is responsible for paying real estate agent fees, if they are part of the transaction.

A Realtor is a member of the National Association of Realtors, which is an association for real estate professionals. Not every licensed real estate agent is a Realtor. Consumers often apply the term “Realtor” generically to all licensed real estate professionals, which is an incorrect use of the term.

When consumers discuss “Realtor fees” they are typically referring to the commissions or fees paid to a real estate professional for representing the buyer or seller in a transaction. If that professional were not a member of the National Association of Realtors, calling that fee a Realtor fee would be inaccurate. Yet, practices involving paying fees to a Realtor or non-Realtor licensee are typically the same.

When a property owner lists his property for sale with a real estate professional, he agrees to pay the agent for his services. A common way to pay a real estate agent is by agreeing to pay them a percentage of the sale price at the close of escrow. If the property does not sell, the property owner owes nothing. In these types of listings, the listing agent then offers a percentage of the commission to the buyer’s agent, as compensation for bringing in a buyer. Some listing contracts charge fees to the seller for specific services performed, and the seller pays the agent even if the property does not sell.

When a property owner hires a Realtor, they enter into a listing or employment contract, where the seller spells out what she intends to pay the agent. If the property owner does not enter into an employment contract with a Realtor, she is not obligated to pay the agent a fee if the Realtor brings a buyer.

If a buyer is working with a Realtor, and wants to look at a property listed by the owner, the Realtor only receives payment if the buyer or seller agrees to pay a commission or fee. Some buyers enter into a buyer-broker agreement with the Realtor, where they agree to pay the agent a commission. The Realtor can also go to the home seller, and ask them to pay a fee to the agent for bringing in a buyer.