Who Pays the Real Estate Agent?

This is a frequently asked question in any consultation between client and agent. The seller selects an agent to list their home and is often surprised to hear the estimate of fees for this process, including a commission for both the listing agent and the agent who brings the buyer.

The listing broker is paid commission from the seller proceeds at closing and out of that compensates the agent who brings the buyer, also known as the “cooperating agent.”  This is how it has worked for decades, but changes are coming as a result of a class action suit filed against many major real estate corporations, the multiple listing service providers and the National Association of Realtors. The complaint centered around transparency on who is paying the commission in a real estate transaction. The National Association of Realtors is voluntarily rolling out some changes to increase transparency in commissions paid for real estate services.

What is the Problem?

Buyers do not pay their own agent commission, so buyers often view their agent’s services of showing the property, contract negotiation and transaction consulting services as “free.” Sellers do not want to pay the buyer’s agent for essentially negotiating against them.

Who Really Pays the Commission?

All commissions and fees come out of the funds the buyer pays the seller for the home. Sellers consider this amount in the price they ask for the home so an argument can be made that the buyer pays the commission when they pay at or near the list price of the home.

What if I Skip the Agent?

Consumers have been encouraged to visit various real estate portals and search for homes. The driver for the consumer is to get real estate information without having to speak to an agent until they are ready. What happens behind the scenes is the real estate information portal sells the consumer’s information to a real estate licensee who then follows up and often becomes the agent for the client. The agent then splits up to half of the commission with the real estate portal that provided the consumer info as a sales lead. This is how portals make their income to continue developing their sites and providing information to consumers.

What’s New in 2022?

The trend is moving toward buyers paying their own agent commission at close of escrow. This could be an issue for a cash-strapped first-time homebuyer who is among those who most need the services of a real estate agent. Agents working with buyers will be asking for signed employment and compensation agreements to ensure they are fairly compensated for their time advocating on behalf of the buyer.

Starting in January 2022, commissions are now viewable by buyers and sellers on real estate portals. Buyers can see what their agent will be paid if they purchase a home that they view online. It helps to know in advance if the commission offered the buyer’s agent will cover the entire fee charged or if the buyer will have to kick in at closing to ensure their agent is paid. Sellers will know if the listing agent is offering a fair incentive to the agent who brings the buyer.

Buyers should expect to sign an agreement with a savvy buyer’s agent. A great buyer’s agent is priceless if they lead your search for the right property and advocate on your behalf while keeping you informed throughout the transaction. The first test for a consumer could be to see if the agent is savvy and negotiating on their own behalf to ensure they will be paid and can invest the time into you and your property search. QCBN

By Leslie Guiley

For more information, please visit our office or call 928-443-8800 or bloomtreerealty.com.  Leslie Guiley is chief operating officer at Better Homes and Gardens Real Estate | BloomTree Realty, which includes BHGRE Commercial and she is an area ambassador with Inman News.