The buyer's agent fee or buyer agency compensation is part of the total real estate agent's commission and averages 2.58% nationwide, according to Clever's survey of over 600 realtors. This fee varies based on location, property type, and home value, with a median-priced home of $418,000 resulting in over $11,000 in buyer's agent fees.
Traditionally, home sellers have been responsible for covering the buyer's agent fee at the close of a sale, a practice rooted in the National Association of Realtors (NAR) Participation Agreement.[1] However, the recent NAR lawsuit and settlement have brought significant changes.
Fortunately, some agents and real estate companies offer buyer rebates or cash back to help reduce upfront costs. For example, Clever Real Estate can match you with a top local buyer's agent, potentially qualifying you for cash back.
💰Simply fill out this form to match with top-rated buyers agents in your area.
Buyer's agency compensation: Why sellers have paid
For decades, it was the standard for sellers to pay the buyer's agent commission due to a rule by NAR.
This rule, part of the Participation Agreement, mandates that listing brokers offer compensation to buyer brokers as a condition for listing on Realtor-affiliated MLS platforms. Given that most (86%) of homes sell via the MLS, this practice was widespread.[2]
Supporters of this system argued that paying the buyer’s agent commission motivated agents to show properties, leading to quicker, more profitable sales. When sellers offered a low (or zero) buyer’s agent commission, the property will likely stay on the market longer.
However, sellers viewed this model as outdated and expensive. It contributed to total agent fees reaching 6% of the home's sale price, which is higher than in other countries.[3]
This former system also arguably created a conflict of interest since the buyer's agent, paid by the seller, only owes a fiduciary duty only to the buyer.[4]
Do buyers ever have to pay their own agent?
Historically, buyers have rarely paid their agents out of pocket. Sellers have often covered the cost and deducted it from the home's sales price.
The buyer's agency agreement typically includes a clause ensuring the agent is compensated, even if the seller declines to pay. This clause stipulates that while the buyer may be responsible for the payment under certain circumstances, the agent should first attempt to get the fee from the seller. Usually, sellers can't refuse to pay a buyer's agent if it's been agreed upon in a contract or a separate compensation agreement.
In For Sale by Owner (FSBO) situations, sellers might not want to pay the buyer's agent a broker fee. However, experienced real estate agents are often skilled in dealing with FSBO situations and can usually find ways to ensure they receive their commission for bringing a buyer to the sale.
For new construction homes sold by builders, it's typical for builders to compensate the buyer's agents. This means when home buyers are represented by their own agents when purchasing a new construction property, the builder usually covers the agent's commission.
NAR lawsuit: Changes to realtor commission are here!
After losing a lawsuit over their practices in 2024, the National Association of Realtors agreed to change how real estate professionals do business.
As of August 2024, buyer's agents are required to sign an "agency agreement" before providing services to a buyer. This agreement has to specify what services the agent will provide, and how much they will get paid.
Real estate agents are no longer allowed to split commissions with one another. In the past, it was common for a listing agent to collect a 6% fee from the seller, and then split this fee with a buyer's agent who brought a buyer. Going forward, buyer's agents will have to negotiate their fee directly with the buyer they represent.
Learn more about how the lawsuit will impact buyers and sellers.
🏠 NAR settlement: Consumer and agent perspectives
The recent NAR settlement has revealed a significant divide between consumers and real estate agents.
While 67% of the general public supports the upcoming commission changes, viewing them as a way to reduce costs and increase transparency, 70% of agents strongly oppose them, fearing income loss and added financial burdens on home buyers (especially first-timers).
The survey also revealed that only 36% of the public knows about the NAR settlement and its significance on the industry.
» Read more: Realtors and Public Sharply Split Over Real Estate Commission Changes
Is buyer agency compensation even worth it?
The value of buyer agency compensation varies depending on the buyer's needs and the agent's contribution to their home search. An agent's services are often valuable for first-time buyers needing comprehensive guidance.
Buyers find agents helpful for understanding the process, spotting house issues, providing location insights, negotiating terms, and shortening the home search.
For seasoned buyers or those comfortable with the home-buying process, paying a commission to a buyer's agent might not seem justifiable. These buyers might opt to buy a home without an agent, aiming to negotiate a lower price directly with the seller, as no buyer's agent commission is involved.
For sellers, a buyer agent's value depends on the need for MLS visibility and attracting qualified buyers. However, it may be less necessary if the seller already has potential unrepresented buyers.
What work does a buyer’s agent do for a client?
A buyer’s agent assists a client in several home purchasing stages. They help search for properties through the local MLS, arrange showings, and gather important property details.
During property showings, buyer's agents:
- Highlight key features and recent improvements in homes.
- Assist in understanding the layout and spatial arrangement.
- Identify potential areas of concern.
During the offer stage, buyer's agents:
- Analyze comparable properties with a CMA report to determine fair market value.
- Suggest a potential offer price.
- Help draft offer letters.
- Lead negotiations for optimal terms.
Finally, at closing, the agents:
- Maintain open communication with key parties (listing agent, lender, underwriters, attorneys, title company, etc.)
- Oversee the contract and ensure all terms are met.
- Attend the closing meeting to address final details and sign documents.
The agent's compensation is then paid out after the closing.
How to save on buyer's agency commission
To reduce buyer's agency commission expenses, consider these strategies.
Get a commission rebate
A home buyer rebate is the simplest and most effective strategy buyers can use to get extra money in the home-buying process. After the closing and ownership transfer, your agent pays you a part of the commission as a rebate.
However, also keep in mind that this practice is prohibited in some states (a restriction some experts may view as anti-competitive and unfavorable to consumers).
An alternative is to work with a realtor who offers buyer rebates or cash back. For instance, eligible buyers matched with an agent through Clever can receive cash back on their home purchase, providing a straightforward way to save on commission costs.
Buy your dream home with a top local realtor from a trusted brand like Keller Williams or RE/MAX. Keep more money in your pocket by earning cash back on eligible purchases.
Enter your zip code to request hand-picked agent matches in minutes. Compare your options until you find the perfect fit, or walk away with no obligation. Try Clever's free service today!
Skip the agent
Choosing to skip hiring a buyer's agent can be an option if you feel confident handling the homebuying process independently. However, it's essential to be aware of the associated risks.
In this scenario, the seller's agent, typically an experienced negotiator, may negotiate the deal in the seller's favor, potentially resulting in less favorable terms for you as the buyer. Additionally, you'll be solely responsible for navigating the complexities of the transaction.
If you decide to pursue this route, consider hiring a real estate attorney. Their expertise can help protect your interests throughout the process, providing guidance and legal support.
» How much a real estate lawyer costs
Consider dual agency (with caution)
Opting for dual agency, where the seller's agent represents both the buyer and the seller, can potentially lead to cost savings. In this scenario, the agent stands to earn a double commission and may be more inclined to reduce their fees.
However, it's crucial to approach this option with caution. The seller's agent's primary loyalty remains with the seller, and they may not prioritize your best interests. While cost savings can be enticing, we generally don't recommend this option due to the potential conflict of interest. Dual agency is also currently illegal in eight states.
Become a real estate agent
If you have the time and a genuine interest in the real estate industry, obtaining a real estate license could be an option. As your own agent, you'll be entitled to receive half of the commission at closing.
However, becoming a licensed real estate agent is a significant commitment, typically taking 3-6 months of your time, effort, and financial resources. It may not be the most efficient choice if your primary goal is to save a few thousand dollars at closing.