New Commission Rules for Real Estate Agents
Scott Lawson 8/15/2024
No, you do not have to pay your real estate agent when buying a home—unless you want to
The news media has completely blown the new realtor compensation rules out of proportion and in some cases have printed outright misinformation. Here’s the real dirt…
You, as a prospective home buyer, must now sign a buyer/broker agreement before your agent can show you a home. This rule applies to all agents and if you happen to stumble upon an agent that operates outside of the new rules, you need to find another agent. If they’re showing you a house and you’ve signed nothing, they are operating outside of the law.
This agreement simply guarantees that your real estate representative is going to get paid the amount of money that is listed in the agreement. This can be a flat fee, or a % of the purchase price.
When it comes time to start making offers on properties that you are interested in purchasing, your agent must become a top-level negotiator. He or she will offer a purchase price that the two of you agree to and ask for a seller credit for closing costs—a component of which will be the buyer’s agent commission. The seller may accept, reject, or counter your offer (most likely)—which isn’t any different than it has been for decades. If no deal is struck, you pay nothing. If countered, you must agree to the terms before you are bound to any costs whatsoever.
Payment can come from different sources:
- From the seller
- From the listing agent
- From your lender
- From you
- A combination of the above
From the seller:
As discussed above.
From the listing agent:
As a portion of their commission. An example would be that the listing agent secured a 5% commission from the seller and is offering 2% out of their commission to a buyer’s agent to procure a qualified buyer.
From your lender
A lender credit is always an option. Your interest rate and monthly payment will be a bit higher, but this is an option that can help with the commission cost.
From you
You come to close with the funds to pay your down payment and closing costs. Included in the closing costs will be your agent’s commission. This is the least favorable option to the buyer.
A combination of the above
Any or all of the above mixed together can do the trick as well.
The point is that your buyer’s agent’s commission can still be paid by the seller—it’s really going to come down to how adept your agent is at negotiating. Some agents will be excellent negotiators, and many will not.
When interviewing an agent to hire, be looking for an individual that can explain how they negotiate on your behalf. You may or may not like their answer…
Source: National Association of Realtors Settlement FAQ updated 8/8/2024.