Who Pays Realtor Fees in Indiana and Michigan?
One of the most common questions I get from both buyers and sellers in South Bend and the surrounding Michiana area is: who pays the realtor fees? The answer has always been nuanced, and recent industry changes have made it even more important to understand how commissions work.
The traditional model
Historically, the seller paid both the listing agent's commission and the buyer's agent commission out of the proceeds at closing. The total commission was typically 5-6% of the sale price, split between the two agents. For example, on a $250,000 home with a 6% commission, the seller would pay $15,000 total, with $7,500 going to each side.
This model made it appear that buyers were getting agent representation for "free," but in reality, the commission was built into the sale price.
What changed with the NAR settlement
The 2024 National Association of Realtors settlement introduced significant changes to how buyer agent compensation works:
- Buyers must now sign a written agreement with their agent before touring homes
- Buyer agent compensation is no longer advertised on the MLS
- Sellers can still offer to pay the buyer's agent commission, but it is not automatic
- Buyers may need to negotiate commission payment as part of the offer
How it works in Indiana
In Indiana, realtor commissions are negotiable. The seller and listing agent agree on the listing commission in the listing agreement. If the seller agrees to pay the buyer's agent, that amount is disclosed in the purchase agreement. Indiana does not set or regulate commission rates - they are entirely negotiable between the parties.
For closing costs, Indiana typically runs 2-4% of the purchase price, which is separate from realtor commissions.
How it works in Michigan
Michigan follows the same general framework. Commissions are negotiable, and the seller traditionally pays both sides from the sale proceeds. The NAR settlement changes apply equally in Michigan. For buyers considering Michigan communities like Niles or Edwardsburg, the process is the same as buying in Indiana.
What buyers should know
If you are buying a home in South Bend, Mishawaka, or Granger, here is what you need to know:
- You need a buyer's agent agreement - Before touring homes, you will sign an agreement that outlines your agent's compensation
- The seller may still pay - Many sellers in Michiana still agree to cover the buyer's agent commission, but it is now a negotiation point
- You can ask the seller to pay - Your agent can request that the seller pays your agent's commission as part of the offer
- Budget for the possibility - In case the seller does not agree to pay, be prepared to cover your agent's fee at closing
What sellers should know
If you are selling a home in Michiana:
- You set the listing commission - You and your listing agent agree on the commission in the listing agreement
- You decide whether to offer buyer agent compensation - Offering to pay the buyer's agent can attract more buyers, but it is your choice
- It is negotiable - Everything is negotiable. The buyer may ask you to pay, and you can accept, decline, or counter
- Consider the market - In a buyer's market, offering buyer agent compensation can help your home sell faster. In a seller's market, you may have more flexibility
The bottom line
Realtor fees in Indiana and Michigan are negotiable, and the traditional model where the seller pays both sides is still common in Michiana. However, the NAR settlement has made the process more transparent and given buyers and sellers more control over how commissions are structured.
If you have questions about buying or selling in South Bend, Mishawaka, or anywhere in the Michiana region, call or text me at 574-240-WORM. I can walk you through the current process and help you understand exactly what to expect.