Buyer's Agent Fees: Commission and Compensation Explained

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By Steve Nicastro Updated March 18, 2024


The buyer's agent fee is part of the total cost of a real estate agent's commission and is paid for securing a buyer for a property. The buyer's agent fee costs an average of 2.66% nationwide, based on Clever's survey of over 600 realtors. This amount varies by location, property type, and home value. Considering a median home price of about $418,000 translates to fees of over $11,000 for a buyer's agent per sale.

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] This agreement required listing brokers to compensate buyer's brokers, fostering a system where buyer's agents were guaranteed payment for their services.

Yet, in 2023, a pivotal lawsuit against NAR challenged this established norm, leading to a groundbreaking settlement in March 2024. This settlement introduces a significant shift, offering enhanced flexibility around agent fees and altering traditional compensation structures. It reflects a move toward greater autonomy and choice in sellers' and buyers' real estate transactions.

No immediate changes are expected (the changes will go into effect in mid-July 2024), so paying the buyer's agent fee remains standard practice. Sellers can still save on listing fees through Clever, which offers reduced commission rates of 1.5% compared to the usual 2.5-3%.

For home buyers, some agents and real estate companies offer buyer rebates or cash back to attract buyers. Clever Real Estate, for example, will match you with a top local buyer's agent and you could qualify for cash back.

💰Find a top agent & earn cash back

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Buyer's agency commission: Why sellers pay

For decades, it's been 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 has become widespread.[2]

Supporters of this system argue that paying the buyer’s agent commission motivates agents to show properties, leading to quicker, more profitable sales. When sellers offer a low (or zero) buyer’s agent commission, the property will likely stay on the market longer.

But, there's criticism, often from sellers, who see this model as outdated and expensive. It contributes to total agent fees reaching 6% of the home's sale price, which is higher than other countries.[3]

The current arrangement may also create a conflict of interest since the buyer's agent, paid by the seller, owes a fiduciary duty to the buyer only.[4]

🏠 Unraveling Real Estate Misconceptions 

Survey statistics from Clever reveal mixed perceptions and misunderstandings about commission payments. It highlights that many Americans aren't aware of who pays the buyer’s agent’s commission and how it affects the cost of real estate transactions.

Approximately 55% of sellers believe they should not have to pay for the buyer's agent, while 62% of Americans mistakenly think the buyers pay their agents. 

This misconception may contribute to 65% of Americans incorrectly believing that avoiding a real estate agent can lead to cost savings in the buying process.

» Read more: Clever's 2024 Housing Market Statistics and Survey Research

Do buyers ever have to pay their own agent?

Buyers rarely have to pay their agents out of pocket. The money is usually paid by the sellers, and gets deducted 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.

In For Sale by Owner (FSBO) situations, sellers might not want to pay the buyer's agent a broker fee. But 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 in purchasing a new construction property, the builder usually covers the agent's commission.

Changes to realtor commission coming soon?

Historically, sellers have paid the commissions for both listing and buyer's agents. A lawsuit in November 2023 challenged this, suggesting changes that could shift some financial responsibilities.

NAR has now settled, agreeing to pay $418 million over four years without admitting any wrongdoing. This settlement aims to keep cooperative compensation flexible for buyers and sellers.

While the full impact of the settlement is yet to be determined, experts believe that the change will eventually lead to lower buyer’s agent commissions and give buyers the ability to negotiate realtor commissions based on the services they need.

The terms of the settlement are scheduled to take effect in mid-July 2024. But, the settlement hasn’t been officially approved yet, and it could be delayed or changed by objections. Stay tuned for updates on how this could impact your next home sale or purchase.

» READ MORE:  NAR Reaches Agreement to Resolve Nationwide Claims Brought by Home Seller

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. But 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 property 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 some 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 with a top agent, earn cash back!

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.

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. 

Related links

Article Sources

[1] National Association of Realtors – "Participation Agreement".
[2] National Association of Realtors – "Quick Real Estate Statistics".
[4] Law Offices of Stimmel, Stimmel, and Roeser – "The Fiduciary Duty the Real Estate Agent Owes a Client".

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