I’ll bet if I asked 100 realtors that question, at least 99 of them would tell me “the seller pays the commission…for both agents.” While that is the generally accepted answer, it’s just not so…and for good reason.
Where does the ‘money’ come from to pay the commissions? Sure, eventually it comes from the Seller’s proceeds, but first it must come from the BUYER. Without the buyer’s funds, there are no proceeds.
Was it added to the price of the home? Probably not, but it was factored into the price. Had the seller not signed an agreement to pay 5-8% commissions, he/she would have likely offered the property at a lower price…so effectively, yes, it is ‘built in.’ Since most of the properties sold are done so through a Broker, in can be said that prices are artificially inflated due to the inclusion of commission fees. It’s the old, “everyone else is doing it, so I might as well” mentality. The seller has determined a price he/she is willing to sell for, based on the fact that they will give back 5-8%.
If a buyer needs credits for closing costs, etc., and pads the price but then asks the seller for a credit, who is paying those funds? The BUYER is. The seller is simply agreeing to allow the buyer to finance them.
It’s no different for commissions.
While I’m certain that many will disagree with me, their reasons just don’t hold water. Consider the following. Why would the seller want to pay for the buyer’s agent? Why would the buyer want their agent to be paid by the seller…the opposing party? If the buyer’s agent is being compensated by the seller, who is that agent loyal to? If you were on trial for murder, would you want the DA to pay for your counsel? While the example is a bit extreme, the point to be made is this…the industry has conditioned people to think that this is the standard, but it violates all rules of common sense and good business.
In my opinion, buyers should pay for their own representation, as should sellers. It eliminates any possible conflict of interest, and is just good business.
That said, the industry says otherwise…but it’s your property. You do what you feel is best for you.