One question that is universally considered in real estate transactions is “Who pays the real estate agent?”

In years long past, the seller always paid the real estate agent, whether the real estate professional had “both sides” (procuring both seller and buyer), or whether the real estate professional represented only the listing in the transaction while another agent brought the buyer to the transaction. For many decades after the great depression, the courts considered all agents as “sub”-agents of the seller. As such, the agent who brought the buyer to the transaction was actually working for the seller, even if it seemed as though the selling agent was representing the interests of the buyer.  Unfortunately, buyers’ best interests were not always well-represented.

With the advent of buyer agency in the 1980’s and 1990’s, sub-agent status began to disappear.  Many jurisdictions began to accept the concept that buyers could and should have their own agent representation.  The problem was that the buyers were expected to pay their agent separately from the sellers who paid only their seller’s representative.

This was an improvement for protecting buyers’ interests; however, for many buyers, compensating their agent-representative required a significant dip into the pocket.  For many buyers, this was an unreasonable burden.

The reasonable solution lay in the concept of the “transaction” paying all the compensation for both seller and buyer in the transaction.  After all, it is the transaction that is responsible for passing title and it is the transaction that is responsible for collecting proceeds.

The recent acceptance of the concept of the transaction paying compensation on behalf of both seller and buyer has given rise to the notion of “sides” in a real estate transaction.  The seller has a “side” and the buyer has a “side”. Thus, the agent representing the seller represents the seller’s “side”, as does the agent representing the buyer’s “side” of the transaction.  The transaction pays each side their pre-determined share, not the seller or buyer. This method has given rise to much greater transparency and fairness to real estate transactions

The answer to the question of “who pays the real estate agents their fees?” is now simple: the “transaction” pays the real estate agents their fees.