Understanding the cost of buying or selling a home in Salt Lake City Utah can be confusing especially when it comes to how a Real Estate agent is paid. There's no question a good real estate agent can be a valuable resource when it comes to buying or selling a home in Utah. A good real estate agent in Salt Lake City will help guide and protect your decisions on most likely your largest financial asset through listening, analysis, managing and coordinating skills.  But how much is that help going to cost you?

First, if you're the one buying the home, it isn't going to cost you anything for representation. The agent's commission comes out of the selling price once the home is sold. That means it's deducted from the amount the seller receives, not added onto the amount the buyer pays. It can be argued that as a buyer you are indirectly paying the commission by virtue of the fact that it's included in the price. If that was always the case, all homes for sale by owner should cost less than those being sold through an experienced agent, and that certainly isn't always the case.

Second, if you are the seller, you don't have to pay a Salt Lake City real estate agent anything up-front to market and sell your home. A real estate agent normally doesn't receive any commission until closing, at which time they will receive the amount stipulated in their contract -- typically somewhere between five and eight percent. But chances are your agent is going to have to work very hard to earn that commission by investing a lot of time, effort and money into marketing your home, especially in today's market.  They are going to have to give a cut of that commission to both their brokerage firm and the buyer's agent (unless they represent both the buyer and the seller, which is its own discussion).

Here is a breakdown as to how the commission system in Salt Lake City Utah real estate works.

The average commission paid on a home purchase.
The average commission rate is about 6 percent on the purchase price of the home, although the range is 5-7 in Utah real estate.

Who pays the commission?
The seller generally pays the agent's commission in Utah real estate. It is paid out of funds received from the sale of the home, so no one gets paid until the ownership of the home changes hands.

Who does the commission get paid to?
The broker whose firm lists the house sets the commission rate. The listing broker then offers part of the agreed upon commission -- often 50 percent -- to the brokerage whose firm represents the buyer of the home. Both brokers then share their portion of commission with the agents who work with the seller and buyer. The agents' share may be as little as 50 percent or as much as 90 percent, depending on their arrangement with the broker. If either brokerage is part of a franchise, it may also pay part of the commission as a franchise fee.

Can real estate commission be negotiated?
A Salt Lake City real estate agent may be willing to negotiate his or her commission in order to get your business. Remember that you do get what you pay for and real estate agents that offer their services for nothing often do not have the marketing tools or skills to put together a professional and smooth transaction.

Will I pay less if I buy a house without using a real estate agent?
You might be able to negotiate a reduced price with the listing agent and their client. Since the listing broker won't have to share the commission with another agent and broker, he may agree to a reduced commission and pass the savings on to you. This may also be possible if you use the same agent as the seller -- for example, if you toured an open house and retained the listing agent. This is called dual agency, and is legal in most states, although it may be subject to special laws and regulations. The question does come up though, as to does the agent represent both clients fairly.

Will a real estate agent push me to buy a more expensive home so they can make a higher commission?
 There isn't a big incentive for an agent to push you to buy a more expensive home because of the way commissions are divided. Your agent may be entitled to 65 percent of his broker's share of the commission -- perhaps 3 percent of the sale price. Under that scenario, if you were to buy a home for $260,000, rather than $250,000, your agent would earn only an additional $195.
Any other commissions that home buyers don't see?
Sometimes a seller, listing real estate agent or a builder may offer the buyer's agent a cash bonus or other incentive to help sell the house. The buyer's agent should disclose these fees if you ask.  

What about paying a lower fee by using a discount broker?
A discount broker may offer you lower fees, or a deal in which you pay only for the services you receive. However, discount brokers may be more suitable for those with a good knowledge of real estate, since they may not offer a full range of services. Again, you often get what you pay for....

For more information about Salt Lake City Real Estate check out the Salt Lake Homes Resource Center