Planning to buy or sell a home with the help of a real estate agent? It’s important to understand how real estate commission fees work so that you can make informed decisions when hiring the right NJ Realtor. Here’s what you need to know.
WHAT ARE REAL ESTATE COMMISSION FEES?
Real estate commission fees are a percentage of the final sale price that the real estate agents receive when a deal closes. It can range from 5% to 6%, which is split between the buyer’s agent, the seller’s agent, and their respective brokerages. For example, as of May 2023, the median listing price of Morris County homes is $585,000, which means that around $29,250 to $35,100 of that amount is allotted for the real estate agents’ commission fees.
Take note that you might find some agents who offer flat fees for certain services or brokers who pay agents an annual salary, but this is not as common as commission payments. Dual agency – in which one agent represents both the buyer and the seller – is also allowed in New Jersey, but this setup must be disclosed in writing to both parties who must consent to it.
WHO PAYS THE COMMISSION FEES?
In Morris County, it is typically the seller who pays for the entire real estate commission at the close of the sale. While the buyer is technically not responsible for paying this fee, the cost of the commission is usually factored into the asking price during negotiations, which means that the buyer indirectly pays for a part of the commission.
There may also be some situations where the seller only covers a portion of the buyer-agent’s commission, leaving the buyer to make up the difference. This is usually seen with bank-owned properties, and the buyer’s agent can still opt out of additional payment from their client.
WHAT DO COMMISSION FEES COVER?
A real estate agent’s commission fee covers the wide range of services they provide to their clients. For home sellers, it can include pricing analysis and guidance, marketing, listing, and negotiation. For home buyers, it includes searching for properties, scheduling and attending home showings, preparing and submitting offers, and facilitating home inspections.
The details of their services and commission fees are usually outlined in the agreement that you sign with your agent, so make sure to review your contract carefully.
CAN YOU NEGOTIATE YOUR REAL ESTATE COMMISSION FEES?
Technically yes, since there are no laws that prohibit the negotiation of real estate commission fees. While it doesn’t hurt to ask for a lower rate, real estate agents are also not obligated to reduce their commission rates. A lower commission might also mean reduced services, such as less marketing and advertising for your property.
Instead of negotiating your agent’s commission rates, it’s easier and wiser to shop around and interview several agents and brokerages who offer varying services, specializations, and commission rates. You can opt for a transactional agreement, as well, where an agent will help you only with certain parts of the home-buying or selling process – like setting an asking price or writing an offer – for a lower commission or flat fee.
It’s important to remember that buying and selling a home is a significant financial transaction so it’s crucial to choose an agent you trust to do an excellent job, rather than solely focusing on the price.
Make wise investment decisions by working with the right NJ Realtor. I’m Frank DeZao, and I would be happy to answer any questions or concerns you may have about purchasing or listing homes in Morris County. Call 201.953.9376 or send me a message here.