The only way real estate agents make money is by finding buyers for homes that are listed on the real estate market. Each time this happens, the agents handling the deal will earn a commission, but have you wondered what would happen if you decided to buy a house that was listed for sale by owner (FSBO)? If you are house hunting and end up deciding on a house that is FSBO, here are a few things you should know about the commission your agent will earn on the deal.
Sellers pay the agent in normal situations
If you compare the way commissions work when houses sell through real estate agencies to the way this works through FSBO deals, there is a big difference. Homeowners that sell houses through agencies pay the agencies once the deals close, and this is typically done in the form of a commission. The average commission rate is around 5% to 6%, and paying this is the seller's responsibility.
The person shopping for a home is the homebuyer, and this person generally is not responsible for paying real estate commissions. The agent working with the buyer knows this and relies on receiving a commission from the seller of the house the buyer chooses.
Sellers of FSBO homes will often agree to pay a commission
In a lot of cases, people that sell FSBO will agree to pay a commission to an agent if the agent closes on the deal. If this happens, it is likely that the seller would offer a commission rate that is around half of the normal rate. In other words, the seller might offer to pay 2.5% to 3% commission instead of paying the full rate. People selling their homes on their own are not legally required to pay this commission, though, and that is important to know.
You should pay if seller will not
If the seller of the home refuses to pay a commission to your agent, you should consider paying the commission yourself, and you could choose to pay roughly half of it just like sellers often do. If you do not do this, your agent will have spent a lot of time and effort working with you and receiving nothing for it.
Shopping for the right house can take time and effort, but it's important to take your time in the process to make sure you choose the best home for what you are looking for. If you would like to begin your search, you can contact a real estate agency in your city to find out how to do this.