Buyers' agents are paid based on commission; they do not receive a monthly or weekly paycheck, they only get paid when the client closes on the home. That means that, while they invest their time, resources, and expertise in helping you find your dream home and helping you navigate the home buying process, they wait until you close on your home to get paid. Hiring and retaining a great agent, one who will be dedicated to the success of your home purchase is important as they will advise, counsel, advocate for and represent your best interest in the transaction to ensure the successful purchase of your dream home. Click here to read more on the importance of working with an agent.
So how do they get paid or where does their payment come from? There are a few ways in which your buyer's agents get paid. Some of these ways could be by the listing company, by the seller, by retainership , by fee-for-service. We'll focus on the first two as these are the most common and often occurring situations.
Payment by the listing company
Here’s how:
For most home sales, there are often two real estate agents involved in the transaction: one that represents the seller and another who represents the buyer.
Real estate agents who represent sellers charge the seller a fee to list their properties and market their property to get it sold. Marketing may include advertising expenses such as radio spots, print ads, television, internet ads, etc. The property also gets placed in the local multiple listing service (MLS), where other agents in the area (and nationally) would be able to search for and find homes for their buyers. When homes are placed on the MLS, the listing broker agrees to credit a buyer's agent for bringing a buyer to the table. Therefore, when the home is sold, the listing broker's company splits the fee charged to the seller for the sale of the home, with the buyer's agent company who in turn pays the buyer's agent. Very often, this is how the buyer's agent gets paid.
By the seller:
Here's how:
When a home is for-sale-by-owner, it means they have no listing broker (company) representing them so their home is often not listed on the MLS. Although their home is not listed on the MLS, they are often willing to pay the buyer's broker for bringing them a buyer. The buyer's agent will reach out to the seller to negotiate the brokerage fee into the offer so the buyer doesn't have to pay their brokerage fee out of pocket. If the seller is unwilling to pay the brokerage fee (which rarely happens), this responsibility then falls on the buyer to pay the brokerage fee. This can also be negotiated as part of the offer as well or the buyer can pay out of pocket. This, in practice, is a rare occurrence.
At other times, depending on the type of service, the buyer or seller may pay a retainer fee. The last two are often very rare scenarios in everyday practice.