Who Pays Real Estate Agents?

Nothing in life is free. You’ve heard that before.

If you’ve thought about buying a home, you’ve also probably heard that it’s free to use an agent to buy a home! The seller pays for it!

Here’s the reality: Your mom is right (as usual). Nothing in life is free. Not even your buyer’s agent.

So who really pays real estate agents?

How Does a Listing Agent Get Paid?

This is the easier question to answer. The listing agent is paid by the person(s) who is selling their home. Traditionally, the listing agent charges a percentage; a typical percentage you’ll see is 6% of the home’s sale price. However, to bring buyers to the home, the listing agent typically splits their commission (3%) with a buyer’s agent. Here’s how that breaks down on a $350k home:

3% of 350k is $10,500

What Else Might the Seller Pay For?

It makes sense that you have to pay the person who is selling your home, but what else might you be responsible for?

Buyer’s Agent Commission

This is where the confusion lies with the old (mistaken) adage that a seller pays the buyer’s agent.

When you sell a home, you can choose to list a buyer’s agent commission, otherwise known as the BAC. (If you want to list on the MLS you have to list a BAC.) The average offer is traditionally around 3%. (Remember the split?)

Do you want 3% of your profit to go to the buyer’s agent? Of course not. You want to keep your equity. To accommodate this, some sellers may decide to raise the price of their home to cover that part of the expense.

Sometimes there’s not a separate buyer’s agent involved. The listing agent may have brought an unrepresented buyer to you.

In that case, the listing agent may collect both the buyer’s agent commission and their typical listing agent commission. That might look like this:

3% of 350 is $10,500

Do You Have to Pay Your Listing Agent 3%?

NO! Commissions are negotiable. You can work that out with your agent. Oftentimes, if the agent is a family member or friend they will give you a discount. That discount might be lowering the percentage taken or discounting the price of the services if you use them for more than one sale or buy.

There Are Other Options

If you’re looking to work with a pro to help you list your home, consider someone who charges a lower fee. When you list with Homie, you’ll pay a low fee when you close on your home sale.

How Does the Buyer’s Agent Get Paid?

Buckle up. We’re about to unveil a part of the commissions system that the traditional real estate world has tried to keep vague.

When a home is listed for sale, the listing agent usually consults with the seller to determine what BAC to offer to buyer’s agents who bring potential buyers.

It seems the sell side of the transaction is making a lot of decisions for someone who is representing the buyer, right?

Although the seller and their agent determine BAC, and the seller is the one who technically disburses the funds at closing, the money used to pay the Buyer Agent Commission still technically comes from the buyer. In many cases, a seller and their agent also raise the initial list price of the home to leave a little wiggle room to pay out the BAC. That means that you will probably end up financing more money for the home. Who’s paying the mortgage every month? Whose name is on the loan? Wait. That’s you!

In the end, you will probably end up financing that wiggle room for 30+ years. Feels bad.

OK, Literally How Does an Agent Get Paid?

Now that you know what they get paid and how it’s decided, how do agents literally get paid? Does it come out of your pocket?

The agents will get their payout when it comes to closing time. When you go in to sign all the paperwork and make the purchase or sale of your home official, there will be line items on all the paperwork dedicated to paying out the agents. It’s likely that, unless it’s a cash transaction, that you or your bank account will never see the money that you’re paying the agent.

Is There a Better Way?

High commissions got you feelin’ down?

We get it. Whenever we think about how much money many homeowners have lost in traditional real estate transactions, we shed a little tear.

Save your equity! List or buy your home with Homie.

When you sell your home with Homie, you pay a low fee. It doesn’t matter if your home is worth $100k or $1 mil. Now THAT’S the way real estate should be.

Want to learn more about how we save homeowners thousands? Read on, read on.

How Does Homie Work?
How Much Does Homie Cost?
Does Homie Have Real Estate Agents?