Who Pays a Real Estate Agent When Buying a Home?

When buying a home, hiring a real estate agent is a critical strategy to help ensure a successful transaction. However, buyers should be aware of the costs and payment responsibilities associated with your real estate agent’s fee.

Do Buyers Pay the Agent When Buying a Home?

If you’re a first-time buyer, you might be surprised to learn that, typically, the seller is the one who pays the agent fees. But how does that work?

Let’s take a deeper look at how real estate agents get paid for assisting a client who is buying a home.

Most Transactions Involve Two Agents

It’s important to point out that a real estate transaction generally involves two agents, one representing each party. The buyer’s agent is the one who works closely alongside the buyer to help them throughout the process of buying a home. Buyer agent responsibilities include:

• Helping the buyer find the right property
• Helping the buyer write a strong, competitive, and feasible offer
• Negotiating on behalf of the buyer during the escrow process
  

The agent that assists the seller is called the seller’s agent or listing agent, because this is the agent who created the listing for the seller’s home and officially posted the property on the market. Listing agent responsibilities include:

• Advising the seller on any pre-listing home improvement
• Creating a strong listing for the property
• Marketing the listing
• Vetting out the different offers from interested buyers
• Negotiating on behalf of the seller throughout escrow
  

Both the listing agent and the buyer’s agent work closely together once the seller has accepted the offer and the transaction has moved into the escrow phase. The two agents ensure that their client’s interests are protected, and that the process of selling or buying a home runs as smoothly as possible.

Who Pays the Agents?

The seller is usually responsible for paying the agent fees. The seller pays both the listing agent and the buyer agent fees at the closing meeting. Agent fees are bundled into the closing costs of the seller.

This means that the buyer is not responsible for the agent fees in most cases. However, this can change depending on the exact terms agreed upon during negotiations and outlined in the contract.

For example, a buyer making an offer on a home in a particularly competitive market may opt to pay a portion of, or the total cost of, the agent fees in order to appeal to the seller.

How Do Agents Charge Their Fees?

The two agents involved in a transaction both get paid a commission on the sale. Real estate agents do not have a salary, and instead make their living off of commissions and fees charged on every transaction they complete.

The commission rate is typically 5% to 6% of the final purchasing price of the home. This sum gets split between the two agents, who usually take 50% each of the total commission earned.

That means that the buyer’s agent generally walks away with between 2.5% and 3% of the total purchasing price of the home, and the seller’s agent earns between 2.5% and 3% of the total selling price for each transaction they complete.

Real estate agents charge their fee at closing, meaning they do not typically receive any income or pay before closing occurs. In some cases, an agent may charge a small signing fee at the beginning of the transaction. However, this is not always the case.

It’s important to keep in mind that there is no official commission rate for real estate agents. Most agents set their own rate that falls somewhere between the industry’s average of 2.5% and 3%.

When searching for an agent to hire to assist with an upcoming real estate transaction, you should always keep their commission rate in mind to help you choose the best agent for your budget. This is especially important for sellers, who are usually responsible for paying both agents.

Breaking Down the Numbers

According to the National Association of REALTORS®, the average selling price for existing homes was $407,600 in May 2022.

• A 3% commission on a sale of $407,600 totals $12,228.
• A 2.5% commission charged on the same transaction totals $10,190.
  

On a 3% rate per agent and 6% total commission charge, the total price paid to both agents would be $24,456.

On a 2.5% commission per agent and a 5% total commission fee on the transaction, the total price paid out to both agents equals $20,380.

Find a Top Agent in Your Market

To streamline the process of selling or buying a home, work with a top agent in your market. Find your perfect agent with ease on RealEstateAgents.com.