Understanding How Real Estate Agents Get Paid: A Guide for Homebuyers

Buying a home is one of the most significant financial decisions you’ll ever make, and it’s essential to understand how real estate agents are compensated. This knowledge can help you make more informed decisions throughout your home-buying journey.

How Real Estate Agents Are Compensated

When you hire a real estate agent, you are not just getting someone to show you houses; you’re getting a professional who will guide you through the complex process of purchasing a home. Real estate agents are typically paid in one of three ways:

1. Fixed Fees: This means you pay a set amount for the agent's services, regardless of the home's price. This can be beneficial if you prefer knowing exactly what you will pay upfront.
2. Commission-Based Fees: This is the most common payment method. The agent earns a percentage of the home’s sale price, which is typically paid by the seller, but ultimately impacts the overall cost to the buyer as well.
3. Seller Concessions: Sometimes, sellers agree to cover certain costs for the buyer, such as part of the closing costs or the agent’s fee, which can ease the upfront financial burden on the buyer.

Recent Changes in Real Estate Practices

There have been some recent updates to how these compensation agreements must be handled, especially for those working with REALTORS®. Starting soon, if you’re working with an agent who is a member of the National Association of REALTORS® (NAR), your agreement with them must clearly outline how they are paid before you start touring homes. This could be in the form of a fixed fee or a commission, but it must be stated clearly in writing, so there are no surprises later on.

What This Means for You

These changes aim to bring more transparency to the homebuying process, ensuring that you are fully aware of any costs or fees involved. It’s essential to understand that commissions are always negotiable. You have the right to discuss and agree on the fee structure that makes the most sense for you and your budget.

Offers of Compensation: What You Need to Know

While agents representing sellers can still offer compensation to agents representing buyers, this information will no longer be visible on Multiple Listing Services (MLS). Instead, these offers can be communicated through direct marketing efforts, such as emails or flyers. This change could affect how agents negotiate on your behalf, so it’s essential to have an open conversation with your agent about their compensation from the beginning.

Seller Concessions and How They Can Help You

Seller concessions are an important aspect of the negotiation process. These concessions can be used to cover various costs, such as your closing costs, loan origination fees, or even repairs needed on the property. Understanding these concessions and negotiating them effectively can save you money and make your dream of homeownership more attainable.

Preparing for Your Homebuying Journey

As you move forward, remember that transparency and clear communication with your agent are key. At TMPG, we believe that understanding every aspect of the homebuying process, including agent compensation, empowers you to make the best decisions for your family’s future.

For any questions or guidance, reach out to our team. We’re here to support you every step of the way and ensure that you enter homeownership with confidence and clarity.