Who typically pays the commission in a real estate transaction?

In a real estate transaction, it is customary for the seller to pay the commission. This practice is rooted in the way listing agreements are structured, where the seller agrees to pay a commission to the listing agent upon the successful sale of the property. The commission is often expressed as a percentage of the sale price and is typically split between the listing agent and the buyer's agent. This arrangement incentivizes the agents to work diligently to sell the property, knowing they will receive compensation from the seller's proceeds once the transaction closes.

Buyers generally do not pay the commission directly, although they may feel the effect of the commission through the overall cost of the property. The real estate agent would not pay the commission, as their earnings come from the commission set up in the agreement with the seller. While some transactions may involve both parties discussing shared costs, the standard framework is that the seller handles the commission, making it a vital aspect of real estate transactions.