In Massachusetts, buying or selling a home comes with a range of expenses, one of the significant ones is realtor fees. These fees often lead to questions like, “Who pays the realtor?” and “Are these fees negotiable?”
The Answer
In most real estate transactions, the seller pays the realtor fees. These fees are often paid out of the proceeds from the property sale. They’re usually a percentage of the sale price, split between the seller’s and buyer’s agents.
Key Takeaways
- Commissions are usually negotiable. Buyers can negotiate to pay some fees, particularly in buyer’s markets or unique circumstances.
- Details about a real estate agent’s fee should be in the agreement you sign when you hire an agent. It’s not awkward to ask how and when they’ll get paid, especially if you’re not experienced in real estate.
- The nationwide average realtor commission was 5.8% in 2022.
- The commission is part of the closing costs, but other closing costs are associated with selling or buying a home. Not including commissions, closing costs range from 3-4% of the home’s price for buyers and 1-3% for sellers.
What Are Realtor Estate Commissions?
Real estate agents typically work for a commission. Their commission is based on the percentage of money exchanged at closing. According to Homelight, the nationwide average realtor commission was 5.8% in 2022. Some agents may offer flat fees for individual services or the whole transaction. This is in-line with the average realtor commission in Massachusetts.
The real estate commission is typically taken from the sale proceeds by the escrow company. The seller’s agent will then split the commission with the buyer’s agent.
Who Pays Realtor Fees In Massachusetts?
In most Massachusetts real estate transactions, the seller pays the entire realtor commission. This commission is then split between the listing agent (seller’s agent) and the buyer’s agent. While the seller covers this expense, the cost is often accounted for in the final sale price, so the buyer indirectly contributes to these fees through their purchase.
Here’s a quick breakdown of how it typically works:
- Seller’s Agent Commission: The listing agent representing the seller receives a portion of the total commission, usually around 2-3% of the sale price.
- Buyer’s Agent Commission: The agent representing the buyer also receives a portion, around 2-3% of the sale price.
For example, in a $500,000 home sale, a 5% commission would result in $25,000 in total realtor fees, with $12,500 going to each agent.
Are they negotiable?
No federal or state laws dictate the commission percentage, so you can freely negotiate. It’s important to note that these practices can vary by region and the specifics of each real estate transaction. The only law is that the free market must set what each commission an agent charges. The Sherman Antitrust Act forbids price-fixing. This is when competing agents agree to set a standard sales commission or fee price.
In some cases, buyers may negotiate to pay a portion of the fees, particularly in buyer’s markets or unique circumstances.
Massachusetts does not cap or set minimum realtor fees, so it’s entirely dependent on the agreement between the seller and the agents involved.
Word Of Caution: You Get What You Pay For
You can ask your agent to reduce their commission, but they’ll likely say no. If they do, you have to accept that it could affect the effort they put into helping you buy or sell your home. As with any profession, not all realtors are created equal. That said, most realtors are professionals who find their greatest pride in helping their clients win.
My point? Find a realtor with a track record of completing transactions, communicate what you want, and follow their lead.
New England Home Buyers can work without a realtor in our transactions because we’re seasoned investors with decades of real estate experience. We know exactly what pitfalls to look for and see things that most buyers and sellers will overlook. An experienced agent will see those same things.
You’ll Find Commission Info In Listing Agreement
Details about the real estate agent’s commission should be spelled out in your signed listing agreement. Among other things, the listing agreement will state that the realtor/brokerage has exclusive rights to sell your home and that you’ll pay them an agreed-upon commission once the property sells. Most listing agreements last 60 to 180 days from the day you sign.
Why Are Realtor Fees So High?
As the price of homes gets into the multiple hundreds of thousands, that means that commissions are creeping up and up. Is this a reason to negotiate a lower commission with your agent? Especially in San Francisco or Boston, where modest family homes sell for over a million dollars.
We say, “no”.
This is even more of a reason to pay your realtor a fair commission so they can get everything right in the transaction.
This advice goes to bother sellers and buyers.
And for all things holy, please don’t go the FSBO route unless you need to sell your house fast. If you have time to find the right seller at the right price, according to NAR, you’ll lose an average of $120,000 if you go the FSBO route.
When a seller agrees to pay the realtor’s fee, they are compensating the agent for a variety of services that facilitate the sale. In Massachusetts, these services generally include:
- Listing the Property: Agents market the home, which includes listing it on the Multiple Listing Service (MLS), taking professional photos, and creating virtual tours.
- Marketing: Many agents in Massachusetts, especially around Boston, use extensive marketing strategies, including digital ads, social media promotions, and direct mail campaigns.
- Showings and Open Houses: The agent organizes and conducts open houses and private showings to attract potential buyers.
- Negotiation: Realtors handle all negotiations between the buyer and seller, working to secure the best terms for their client.
- Guidance through Closing: Massachusetts has specific procedures for closing, and realtors assist in navigating the necessary inspections, paperwork, and legal requirements.
Realtor Commissions: The Bottom Line
The bottom line is that realtors are a huge asset to buyers and sellers. They help buyers find properties, find financing, help arrange inspections, and more. For sellers, they help list the property, market the property, screen buyers, and more.
If there’s a question if you should agree to a competitive fee with your realtor, the answer is “yes.” They should rarely factor in what realtor you choose to work with. If you’re in a situation where you need cash ASAP because of a tricky financial situation, you can work with a We Buy Houses company like New England Home Buyers to find a creative solution.
Otherwise, happy real estating! Is that even a phrase? I don’t know… Anyway, that’s it for now.
