If you ask your real estate agent who pays his commission (or just google it) you will likely get the answer that the seller does. But that is not true. All payments originate with the buyer and his mortgage company.
This should be obvious, since you do not have to have any money to sell a house. What actually happens is the buyer and his mortgage company pay escrow, and escrow pays the seller, the seller's mortgage company, the agent(s), and other costs. The buyer never gets money that he then pays to the seller. And it's hard to imagine an agent willing to work without escrow.
One reason people might think this is to assume the sales price is a magical number that the buyer pays the seller.
Here's another reason:
- Before there's a buyer, the seller and seller's agent sign an exclusive agency contract.
- Once the deal is set, the seller and buyer would like to cheat and deal directly to avoid the commission.
- To prevent this, the agency contract says the seller's agent has to be paid, even if the seller cheats.
- Since the buyer is not part of the agency contract the contract has to say that the seller is the one who owes the fee, otherwise it will not be collectable in court.
- The contract might say: "The seller has agreed to pay the agent a flat commission of ... percent of the final sale price"
- People read that and think the seller is actually making some kind of payment to the agent. That never actually happens. It's only in there so the agent can sue later.
