Real Estate Commission Utah

Real estate commissions in Utah can be confusing to home buyers and sellers.  Here are the answers to the most common questions agents receive about Realtor fees.

Fully understanding real estate commissions in Utah can be a very confusing process. If you're anything like me, you are doing plenty of research before deciding which agent fits you. As a homeowner and full-time discount real estate agent, I'm providing you with the answers to the most common questions about Realtor fees.

You will learn about discount agents, real estate agent commission rebates, brokerage splits, who pays the commission, and more.

After reading this article, you will be prepared to ask any agent, associate broker, or broker you interview the right questions about Realtor fees.

How Much Are Real Estate Agent Commissions In Utah?

Real estate agent commissions vary from brokerage to brokerage. Each Utah real estate brokerage has a specific business model determining its commissions. However, most brokerages still charge a 6% commission to sell a home on one of Utah's Multiple Listing Services (MLS). 

Real estate commissions in Utah are 100% negotiable. 

What percentage do real estate agents charge?

No way exists since the listing agent commission is private information. However, Utah's average real estate commission is believed to be between 5-6% of the sale price.

Who sets the commission fees? Agent or Brokerage?

Ultimately the brokerage determines the commission (Brokerage Fee) structure. The brokers can dictate the percentage an agent can charge to buy or sell a home. The agent must have their broker's approval to offer commissions below company policy.

However, modern brokerages understand that real estate agents have more options today than they did in the past. Therefore, not allowing an agent the freedom to create their business pricing model will likely result in the agent moving to a brokerage that offers more flexibility to provide alternative commission structures.

Who Pays The Agent Commissions? 

The seller pays the commissions (the "Brokerage Fee") as agreed upon in the Exclusive Listing Agreement.  

Let's assume the seller agrees to pay a 6% commission. Let's also assume the listing agreement dictates the six percent commission will be split evenly between the listing agent and the buyer's agent. The listing agent would earn a 3% commission and share the other 3% with a buyer's agent.  

Why Are Realtor Commissions So High? 

That depends on which Realtor you work with. We only charge 1.5% to buy or sell a home which is half what most agents charge.

Commissions are high for many reasons.  

One reason is that it has been industry standard for brokerages to charge between 5-6% of the home's sales price, and brokerages are reluctant to give up any of their profits.  

Agents also have more expenses than most people realize. It is common for an agent's brokerage to take 30% of their earnings off the top. Utah agents pay about $1500 annually to the Board of Realtors and the Multiple Listing Service(MLS). Take out taxes and marketing expenses; Realtors make less money than most believe.

Regardless of an agent's cost of doing business, real estate fees are way too high, which is why we work for 50% less than typical agents. 

What Realtors Do To Earn The Commission 

The listing agent will find comparable home sales, prepare a listing presentation, sign listing agreement, install a key box and yard sign, order photos, market the home across the MLS, local agent websites, and national websites like Zillow, schedule showings, negotiate offers, negotiate inspection repairs and appraisal issues, review the final Settlement Statement, schedule closing, update the status on the MLS to "Sold," remove the lock box and yard sign from home, and submit a complete transaction packet to their Broker.  These are just a few things an agent must do to earn their commission.

The buyer's agent starts the process by scheduling a meeting with the potential Utah home buyer to set realistic expectations in the current market, work closely with the buyer's Loan Officer, educate the buyer on the home buying process, show the buyer homes, negotiate an offer, collect the buyer's earnest money deposit, schedule the home inspection, negotiate repairs, schedule the final walk-through inspections, review final Settlement Statement, attend closing (not a state of Utah requirement, but a good idea), meet the buyer at home to give them keys to their new home, submit a complete transaction packet to their Broker. This is just a short list of tasks a buyer's agent must complete before earning their commission.

Are Utah Real Estate Agent's Commissions Negotiable? 

All real estate commissions are 100% negotiable.

When Are Commissions Paid? 

The seller pays the listing agent and the buyer's agent commission from their equity, if any, at closing. If the seller does not have enough equity to cover the commissions, they must wire the total commission amounts to the title company.  

The commissions are listed as seller debit on the Settlement Statement.

How Does An Agent Get Paid After Closing? 

First, the title company distributes all the money required for a final payoff to the lender for the current mortgage, property taxes, homeowners association (HOA) dues, Realtor commission, and title fees on the sold property.

Once the real estate transaction has closed, the title company will pay the Realtor commission owed to the listing brokerage and the buyer's brokerage.

Once the brokerage has received the commission, they will require the agent to submit a complete transaction packet (purchase contract, copy of commission checks, seller's disclosures, etc...) before taking the brokerage split and paying the agent their share of the commission.

Real estate agents must work for a brokerage, and brokerage commission splits differ depending on the business model. 

Let's assume an agent decides to work with a large international brokerage. It is common for inexperienced newer agents to pay 30% of their commissions to the brokerage. A 70%-30% brokerage commission split is normal for newer agents. For example, say an agent represents a buyer who purchased a $600,000 home in Salt Lake City, UT. We'll assume the buyer's agent commission was 3%. So a 3% BAC equals $18,000 commission. However, the brokerage will take 30% or $5,400 before paying the agent the remaining $12,600.

 

Real Estate Agent Commission Rebates

A rebate is the legal sharing of a buyer's agent's commission. The buyer's agent receives a commission from the seller for bringing them a qualified home buyer. In addition, the agent agrees to share a portion of their buyer's agent commission (BAC) with the buyer at settlement or after closing.

Can agents share the commissions with their clients?

This is a trick question. The short answer is yes. Agents can share their commissions with a home buyer.

No laws in Utah prohibit agents from offering inducements to their clients. However, there are laws against the agent directly sharing the commission with their client. The commission rebate MUST come from the brokerage, not the agent that works for the brokerage. 

Few brokerages will allow their agents to discount in the form of buyer's agent's commission rebates.

Commission Rebates Are Subject To Lender Approval

Real estate agents must also follow lending guidelines for the buyer's loan. If an underwriter denies the commission rebate, then the real estate agent can not give the buyer a gift from their commission.  

Can real estate agents rebate their commission towards the buyer's closing cost?

Yes, the buyer's agent can help their client by applying some or all of their commission towards the buyer's closing cost on the Settlement Statement. 

Can an agent rebate their commission towards the buyer's down payment?

No, the buyer can only be gifted funds for their down payment from family, in-laws, domestic partners, or fiance.  

Discount Real Estate Agents In Utah

Traditional Brokerage Commissions

Before we discuss discount agents, let's briefly discuss how traditional Utah real estate brokerage commissions work. Traditional brokerages charge six percent of the home's sale price. This means the commission they charge changes based on price. So a $300k home costs $18k to work with an agent, while a $2m home costs the homeowner $60k in commissions. So why does it cost the seller of a two-million-dollar home $48,000 more than the $300,000 homeowner? 

We've never understood this, so we charge half the traditional commissions.

Can real estate agents discount their commissions?

Absolutely. An agent can charge as much or as little as their Principal Broker will allow. All commissions are negotiable, so the "discount" is any commission below company policy.

Flat Fee 

A flat fee brokerage usually doesn't charge a percentage of the home sale to list on the MLS. Instead, they charge a flat dollar amount. The flat fee commission varies from brokerage to brokerage.

It's also important to understand that while a flat fee listing brokerage may charge lower fees, they are only a great option for some people. For example, flat fee brokers are suitable for experienced home sellers and investors but may lack the individual attention less experienced clients need. 

Commission Rebate Agents

Utah commission rebate real estate agents gift a portion of the commission they earn back to the buyer on the Settlement Statement or outside of closing. The rebate amount varies depending on the brokerage.  

For example, we rebate about 50% of the commission to our home buyers after closing. So if we represent a buyer in a $500,000 transaction, the home buyer commission rebate will be about $7,000.

A La Carte Real Estate Services (a.k.a Fee For Service)

Some brokerages take a more pay-for-what-you-need approach. Instead of charging a specific percentage or dollar amount, they allow sellers to pay for each service.  

For example, a listing on the MLS could be $500, but it doesn't include a sign or a Realtor approved lockbox. Want a yard sign? They charge extra for that. Want the agent to hold an open house? Yep, you guessed it, they charge for that too. Most a la carte real estate services charge the seller for the service upfront. This means that the seller pays the brokerage regardless of whether the home sells.  

A la carte real estate services are more suitable for experienced sellers and buyers.

Are Agent Commissions Fixed At 6%?

No. If agents collectively fixed commissions at an agreed-upon percentage, that would be price fixing, and participants would be violating anti-trust laws. Realtors must compete for potential clients fairly based on price and quality of service. 

Does Law set Commissions?

As a full-time discount Realtor, I'm surprised how often a client will say they thought 6% commissions were set by lay.

Real estate commissions in Utah and any other state in the US are 100% negotiable.  This doesn't mean a brokerage must negotiate the commissions they charge. Brokerages can charge any percentage of commission they choose.

Direct To The Listing Agent To Save On Realtor Fees

How much will an agent earn representing the seller and the buyer?  

The agent will earn 100% of the commission agreed to in the listing agreement.

Many buyers believe the seller will not be required to pay the full commission if they negotiate directly with the listing agent. That is not true. The listing agreement explicitly states the commission owed regardless of whether a buyer's agent is involved in the transaction.

If the listing agreement is for 6% and the home sells for $500,000, the listing agent will earn the entire $30,000 commission.  

If a buyer wants to save some of the commission, they should hire an agent to rebate a portion.  We rebate up to 50% of the commission to Utah home buyers we represent. 

Can An Unrepresented Buyer Earn The Buyer's Agent Commission (BAC)?

No, the buyer can request the home price be reduced by the same amount as the buyer's agent commission, but they can not be paid a commission. Commissions are only offered to Utah Multiple Listing Services (MLS) participants. In addition, you must be a licensed real estate agent to earn a commission.

Do Higher Commissions Equal A Higher Level Of Service?

Not necessarily.  

Many traditional agents (six percent commissions) offer high service and expertise. But unfortunately, these agents are the exception in the industry, not the rule. 

The problem is that most new agents join these well know brokerages because they want brand recognition and need lots of training, marketing, and contract support. Training new agents cost money, which means higher commissions to the brokerage. In this scenario, the commission cost does not reflect the level of service or experience you're receiving.

What is the highest realtor commission an agent can charge?

An agent can legally charge any percentage commission their client agrees to in writing. Most of the time, the total commission will be between 5-6%.

Do Brokerages Charge Other Fees Besides The Real Estate Commissions?

In addition to the commission, many brokerages charge an additional brokerage fee. A brokerage fee is usually between $300-$500.  

We don't agree with these additional real estate broker fees and recommend that home buyers and sellers negotiate to remove these junk fees from the listing or buyer-broker agreement.

Buyer’s Agent Vs. Listing Agent Commissions

What is a BAC?

BAC stands for Buyer's Agent Commission. This is the commission advertised on the Multiple Listing Service (MLS) to all buyer's agents to be paid for by the seller.  

What is a LAC?

LAC is the Listing Agent Commission. This is the commission the seller has agreed to pay the listing agent to represent them and market the home on the MLS.

Are BACs public information?

Many real estate websites, including the public website for Utah's MLS, UtahRealEstate.com, and third-party websites like Zillow and Realtor.com, disclose the buyer's agent commission. This is great for transparency since most people need help understanding how much their agent is compensated and who pays Realtor fees.  

Are LACs public information?

Listing agent commissions are not public information. Therefore, the amount the seller compensates their agent to sell their home isn't even visible to other agents on the MLS.

Is a higher LAC or BAC more beneficial to the seller?

A higher buyer's agent commission(BAC) will be more beneficial to the seller than the listing agent commission(LAC). Since the buyer's agent is already working with qualified home buyers, we believe the seller should offer a higher commission to the buyer's agent to incentivize one of Utah's 10,000+ agents to show the home to a qualified home buyer.

Do I owe an agent commission if I don't buy or sell?

It depends on the type of real estate brokerage the seller or buyer is working with. Traditional brokerages only get paid if they make a sale.

On the other hand, flat fees and a la carte brokerages usually charge their clients upfront.

Can a buyer or a seller pay the commission directly to their Realtor?

No. The agent's brokerage must pay all agent commissions. Home buyers and sellers often want to pay agents a bonus outside of the commission. Any compensation must be included in the commission paid out by the agent's brokerage. Clients can increase the agent's commission with an addendum to the listing agreement or the buyer-broker agreement if they feel the agent deserves to make more money than initially agreed upon. Believe it or not, this does happen.  

Agent Commission Forms

What Realtor form determines the amount of commission paid?

In the Exclusive Listing Agreement, the seller and the listing brokerage agree to the commission amount. The seller also decides how the commission will be shared between the listing brokerage and the buyer's brokerage. The most common is splitting the commission evenly between the listing agent and the buyer's brokerage.

The Real Estate Brokerage Commissions - Escrow Instructions Form will be used if the commissions advertised on the MLS differ from what the agent is paid. Why would commissions change in the middle of a transaction? It is common practice for agents to agree to reduce their commission to keep a deal together, pay for repairs, or replace appliances.

How Much Commission Do FSBOs Pay?

The short answer is zero.

For sale by owners (FSBO) are attempting to sell their homes without an agent to avoid paying the commissions. This can work well in a hot real estate market but is usually much more difficult in a down market where homes take longer to sell.  

FSBO sellers should remember that the unrepresented buyer who makes a purchase offer without an agent is also trying to avoid Realtor fees. This strategy tends to result in offers of six percent (typical commission) below the asking price. The buyer and the seller can't both save on the commission.

Suppose the FSBO decides to cooperate with a Utah real estate agent. In that case, the agent will require the seller to sign a For Sale By Owner Commission Agreement agreeing to the commission owed to the agent's brokerage. 

Does the seller owe the agent a commission after the listing agreement expires?

That depends on the listing agreement. The Protection Period in the listing agreement varies from brokerage to brokerage. Most brokerages include a 3-6 month Protection Period.

The protection period says the seller agrees to pay the listing brokerage if they sell the property to a buyer after the expiration of the listing agreement but during the Protection Period if the buyer was introduced to the property during the listing period. 

Does the seller owe the agent a commission if they reject a full-price offer?

Yes. If the seller rejects a full-price purchase offer that meets ALL their terms, the listing brokerage is owed the listing commission agreed to in the Exclusive Right To Sell Listing Agreement.

Different Types Of Agent Commissions

Gross vs. Net commission.

Gross commission means the agent commission will be calculated on the final sale price.

Net commission means the agent commissions will be calculated on the final sale price minus any closing cost paid by the seller.

Dual or variable rate commissions agreement.

A dual or variable rate commission agreement is when the seller agrees to pay a specific commission if the listing agent sells the home without the assistance of a buyer's agent and a different commission amount if the house is sold with a buyer's agent. 

It can also mean the seller agrees to pay a specific commission if the listing agent sells the home and a different commission if the seller locates the home buyer. 

Are commissions a percentage of the sale price or a fixed dollar amount?

Most brokerages require a percentage of the sale, but some will agree to a fixed dollar amount regardless of the final sales price. 

Exclusive Right to Sell(ERS) listing vs. Exclusive Agency Listing(EAL) 

Exclusive Right to Sell Listing (ERS), the seller agrees to pay the Listing Broker a commission regardless of who finds the home buyer. The seller can list certain buyers as exempt in the Listing Agreement. If one of the exempt parties purchases the home, the seller doesn't owe the Listing Broker a commission.

Exclusive Agency Listing (EAL) means the Listing Broker only earns the commission if the home is sold through the efforts of the listing agent. The Listing Broker is not owed a commission if the house is sold through the homeowner's efforts.

Do Buyers Pay Realtor Fees In Utah?

Not usually, but there are some scenarios in which the home buyer would be responsible for their agent's commission.

As long as sellers offer a buyer's agent commission equal to or more than the commission in the buyer-broker agreement, the buyer will owe their agent nothing. Instead, the seller will pay the buyer's agent at closing. 

Let's talk about when buyers are responsible for paying their agents a commission. The buyer-broker agreement determines the amount of commission the agent will earn. 

Suppose the buyer purchases a home listed with another agent on the MLS, and the buyer's agent commission is less than the commission agreed to in the buyer-broker agreement. In that case, the home buyer will be responsible for paying the difference at closing.

Suppose the buyer purchases a home directly from a For Sale By Owner (FSBO) without paying the agent commission. In that case, the buyer will be responsible for the entire commission agreed to in the buyer-broker agreement.

If the buyer purchases a home after the agent agreement expires but during the Protection Period and the agent showed them the house while the buyer-broker agreement was valid, the buyer will be responsible for the real estate agent commission.

This post was about real estate agent commissions in Utah to help home buyers and sellers be as financially prepared as possible when buying or selling Utah real estate.