Who Pays Buyer's Agent Fees?

Most buyers use licensed real estate agents to navigate the market, with 89% working with agents in 2024. These professionals assist with every step, but buyers often wonder who covers the agent fees. This question is increasingly relevant after a recent NAR settlement promoting transparent commission discussions. This guide provides insights on who pays these fees, typical costs, and how to make informed decisions when hiring a Realtor.

What Are Buyer’s Agent Fees?

Real estate agents earn commission only after a sale closes, so pay varies with each transaction. Agents may earn less for smaller properties and work varying hours, depending on how long a buyer’s search takes. However, the level of service should remain consistent, with agents supporting clients through showings, inspections, and appraisals, regardless of the time involved.

Examples of Buyer’s Agent Commission Fees:

Before the recent NAR settlement, buyer’s agents typically earned a 3% commission, paid by the seller. For example, a $500,000 home sale might result in $15,000, while a $200,000 sale could yield $6,000. Some buyers find homes quickly, allowing agents to earn more per month, while others take longer, lowering monthly income. Agents manage multiple clients to balance earnings, though brokerage fees and marketing costs further impact profits.

Who Typically Pays the Buyer’s Agent Fees?

In most cases, the seller pays the buyer’s agent fees as part of the overall commission paid to both the listing agent and the buyer’s agent. If the seller’s agent agrees to list the house for a 3% commission and the buyer’s agent is set to accept a 3% commission, then the seller will pay a 6% commission rate total. In the example above, the seller of the $500,000 house would pay $30,000 in commission fees using the 6% rate.

This structure benefits buyers by allowing them to work with a professional agent without having to cover their fees out-of-pocket. Many buyers spend several months (if not years) saving for a down payment so they can afford a home. If they had to pay their agents a commission on top of it, many people would be pushed out of the real estate market entirely.

For example, the average down payment in Q1 2024 was 8% of the home’s value. This comes out to about $26,700 according to Bankrate. If the median home price is $333,750 at the time, then a 3% commission fee would be around $10,000. Saving that extra money could lower the down payment that buyers have to work with or cause them to push back buying for another year while they save.

It makes more sense for a homeowner to budget Realtor fees into their sales estimate. They don’t have to save any money as the agent commissions are pulled from the profits of the sale. This process also incentivizes sellers’ agents to get the highest sales price for their clients. The more a house sells for, the more everyone gets paid.

How Do Sellers Afford Real Estate Agent Fees?

Before listing a property, sellers should calculate potential profits after covering agent commissions and moving costs. Agent fees are typically a portion of the sale price, not the seller’s profit, so verifying profitability is essential. For example, high mortgages can leave sellers with little cash after a sale. Exploring commission options, like negotiating rates or choosing flat-fee agents, may help sellers retain more earnings. Calculating costs upfront helps ensure a smooth, financially sound sale.

Is It Possible to Negotiate Agent Fees?

In real estate, buyers and sellers typically use agents for guidance through the transaction. Sellers usually cover both the listing and buyer’s agent fees, often around 6% total, split equally. This structure allows buyers to save on upfront costs, keeping homebuying accessible. Sellers may negotiate these fees, but if buyers or sellers request lower rates, agents may counter or decline. Understanding these fees helps buyers and sellers budget effectively and make informed decisions.

Does the Buyer’s Agent Get Paid If the Deal Falls Through?

In most cases, a buyer’s agent gets paid only if a deal is successfully closed. If a deal falls through, such as the seller unexpectedly withdrawing, the buyer and agent typically start the process again. If the agreement ends before the buyer finds a home, the agent usually does not get paid for their time and efforts. Some agents may include clauses in their contracts requiring payment for specific services, even if the sale doesn’t happen. These fees could be a flat rate or cover specific expenses like professional photos. Buyers should carefully read and understand the buyer’s agreement to avoid unexpected fees from failed transactions.

How Does the NAR Settlement Change Fee Structures?

The 2024 NAR Settlement focuses on increasing transparency in real estate transactions. Contrary to some claims, buyers won't need to start paying agent commissions. Key changes include:

- **Buyer Agreements**: Real estate agents are encouraged to sign agreements with buyers before showing homes, clarifying expectations and potential flat fee costs if a deal falls through.

- **MLS Restrictions**: Listing agents cannot include compensation offers in the MLS, preventing buyer agents from steering clients towards higher commission homes.

- **Negotiable Commissions**: Buyers can negotiate an agent's commission rate, although agents are not obligated to accept unfair counteroffers.

- **Fair Practices**: Buyers and sellers should not feel compelled to accept specific terms or be misled to benefit the agents financially.

The settlement aims to foster clearer, fairer transactions without unexpected costs for buyers.

Know the Commission Expectations of Your Real Estate Agent:

Real estate agents' fees are typically covered by the seller, and this is not expected to change. The NAR settlement has increased transparency for both buyers and sellers, reinforcing the practice of sellers covering commission costs. This arrangement benefits buyers, who don't need to save for their agent's commission, and sellers, as the fees are included in the overall home sale. When ready to buy a house, buyers should interview Realtors to find a trustworthy agent that suits their personality and needs. There are many buyer's agents available, so finding a good fit is essential.

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