How Do Real Estate Agents Get Paid?

As a future home buyer, are you aware of the big change in the real estate industry that occurred in 2024?   It had to do with how agents, especially buyer agents, get paid.   Many homebuyers, especially first-time buyers, are not aware of how real estate agents get paid for the services they provide. 

Prior to the big change that was part of a settlement between the federal Department of Justice (DOJ) and the National Association of Realtors (NAR), home sellers typically paid both the selling and buying agents commissions.  The commissions came out of the sellers proceeds at closing.   The commission that the seller used to offer to buyers’ agents used to be published to other agents in the Multiple Listing Service (MLS).  This is the service real estate agents use to list and search for homes for their clients.  Also, the MLS is used to obtain housing data and information so they can be up to date on their local markets.  Note that:  all commissions are negotiable. 

Here are the key takeaways from the settlement with the government:

• Sellers’ agents can no longer publish the commission offered to buyers’ agents in the MLS.    This is to prevent buyer agents taking their buyers only to homes offering higher commissions. 
  
  
• Buyers’ agents must enter into a buyer representation agreement (a contract) with their buyer before looking at houses.  This can be when a buyer just wants to look at one home or many houses.  This is meant to provide buyers with more transparency regarding commissions. 
  
  
• Buyers’ agents are now to be paid by their buyers, but they can request seller pay for their commission in the offer that they submit.  This can be in the form of a concession or a credit from the seller.  A concession is when part of the sellers’ proceeds can go towards the buyer to help pay for their closing costs, which can include buyer commissions, but the sale price of the home stays the same.  A credit is an amount that a seller can set aside for a specific item typically paid by the buyer and the sale price can stay the same or be reduced by the credit amount.  The intent here is to allow buyers and their agents to negotiate their fees and commission during the offer submission stage.  Once there is an agreement, it will be stipulated on the contract to buy the home. 
  
  
• Buyer agents commission can be a percentage of the sale price (which is more common) or a flat fee.  Either way is acceptable and must be stipulated in the buyer agreement. 
  
  
• Sellers do have the option to offer compensation to buyers’ agents, and it can be published on individual and customized listing agent websites, in social media posts, in emails, texts, phone calls but not in the MLS and not in national websites that get their data from the MLS, such as Zillow, Realtor.com, Trulia, and main brokerage websites. 
  
  

And there you have it – a summary of the major takeaway from the settlement.  They came about due to several large lawsuits in other parts of the country.  Keep in mind that the items listed above are subject to change because there are still more cases going through the courts.  But for now, these are the changes that have gone into effect for the time being.

Bottom line, buyers will now have more clarity and understanding of how agents get paid right at the initial consultation so they can determine how compensation can be worked out for their specific budget and still receive top notch service, guidance and counseling for the purchase of their dream home!

If you want to find out more about buying your dream home or know someone that is, feel free to email me ccr@ccrsellsrealestate.com or click below to get started.  Let’s explore this option and see if it is right for you!  😉