Who Really Pays the Real Estate Fees? The question of who pays real estate fees is a "chicken-n-egg" debate. The seller could argue that he pays the fees because they are disbursed from the purchase price at the closing and thus he nets less. The buyer could argue the same by saying that the fees inflate the purchase price and are paid from the money she brings to the table. In truth, real estate fees are transaction costs which impact both buyers and sellers. Because real estate fees equate to large sums, they are almost always financed as part of the purchase price.

Most buyer agents define their fee and method of payment by a written representation agreement with their buyer clients. This is similar to the representation agreement (listing agreement) a listing agent has with his/her sellers.

There are several ways to build-in the buyer agent's fee as part of the purchase price. The easiest method is to use the traditional way in which agents have always been paid - disburse the fee from the purchase price. This method maintains accurate records for accounting and tax purposes.

Keep in mind that the source of the agent's fee does not determine whom the agent represents. A buyer's agent can be paid by a "co-fee" from the listing broker, or by a disbursement directly from the settlement funds with the expense being assigned to the buyer or the seller. Expensing the fee on the purchase agreement and the closing statement is merely an accounting procedure. The important issue is representation. Represented buyers should have a clearly defined representation agreement with their agent. That agreement should state which party the agent represents, how much his/her fee will be and how that fee will be paid.

A large majority of listing agents offer a co-fee to all agents regardless of whether those agents are cooperating subagents (who work for sellers) or cooperating buyer agents. Most listing agents know that professional buyer agents have serious, pre-approved buyers under contract who have made a commitment to purchase. Reputable listing agents encourage cooperation with buyer agents because it is in their sellers best interest to do so.

A buyer should make sure that his/her representation agreement clearly defines the amount of the buyer broker's fee and method of payment. In most cases, it is in the buyer's best interest to require that the buyer agent's fee be paid by way of a disbursement from the settlement funds. The buyer representation agreement should also state that if the buyer agent accepts a fee from a listing agent or seller, that such fee will be a credit against the buyer's fee obligation.

Consumer advocates strongly recommend that buyers hire their own agents. They further argue that a co-fee has already been built-in to the purchase price, and therefore, there is no need for the buyer or seller to incur additional fees when the cooperating agent represents the buyer.