Agent Opinion: Should Home Buyers Pay their Realtor? 

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A realtor’s role in the home-buying and selling process is pivotal. Home buyers rely on their agent for guidance, negotiation, and, ultimately, to secure their desired home. As with any job, your real estate agent deserves compensation; however, the real estate industry has always debated whether home sellers or home buyers should pay Realtors. 

NAR Settlement Impacts Home Buyers

Furthermore, the National Association of Realtors (NAR) settlement has added fuel to the fire and the question of whether or not homebuyers should pay Realtors has gotten even more heated.

Historically, home buyers have not directly compensated their agents. It is the home seller compensates the both the listing agent and buying agent.  

However, the NAR settlement now requires home buyers to sign a contract that states the agent’s responsibilities and compensation. While the home seller may still pay for the buyer’s agent’s compensation, if they don’t, the home buyer should pay the Realtor.

As the dynamics change, home buyers and sellers are questioning the compensation process.

So, should homebuyers pay their Realtor? Or should the burden of payment be on the home seller?

Let’s take a look at the market models for paying a Realtor and determine what’s most beneficial for you.

The Traditional Model- Seller’s Pay 

In the traditional model, the seller pays the both agent’s commission, which is generally 5 to 6% of the home’s selling price. The commission is then split between the listing agent and the buyer’s agent. 

The traditional model has drawbacks. Some argue that since the seller is paying the agent’s commission, the buyer’s agent may not always have the buyer’s best interest at heart. There could be an incentive to close the deal quickly rather than negotiate the best price for the buyer. However, this may not always be the case. 

Benefits of the Home Buyer Paying their Realtor

If the home buyer pays their Realtor, the overall deal could be positively impacted. The Realtor may have a more positive perspective toward the buyer since the expectations and payment were already discussed. In addition, the higher level of transparency can make both parties more comfortable.

Transparency and Trust 

One of the strongest arguments supporting buyers directly compensating their agents is to maintain trust and transparency in the relationship.

As a Realtor that’s both sold and bought properties, my team is in strong agreement with this factor.

Having a direct, transparent conversation with the Realtor regarding expectations and payment is advantageous for the buyer as they know exactly how much they are paying for the services. This can foster clarity and reliance between both parties and make things more seamless. 

Customized Service

When buyers pay for their agent’s services, there may be opportunities to tailor these services to their benefit and customize the package.

Realtors can offer different levels of service depending on the buyer’s budget and requirements. Both the home buyer and Realtor can walk away happy with the service level and payment.

Impact on Market Dynamics 

Home buyers paying their Realtor directly could significantly impact market dynamics and could contribute to fairer market conditions.

Realtors will feel incentivized to differentiate themselves based on their services. This could improve the condition of the industry.

Additionally, in a hot market where homes may sell fast, some agents might not give their 100%. Direct payment from the buyer may allow them to provide consistently high levels of service. 

Arguments Against the Home Buyer Paying their Realtor

Some argue against home buyers paying the Realtors and focus on affordability issues and financial complications.

Increased Financial Burden

The most significant argument against home buyers paying their Realtor is the additional financial stress it adds.

There are costs in the form of down payment, closing costs, inspections, etc. Adding the Realtor’s commission could make it more financially difficult, especially for first-time buyers. 

Complicating the Transaction

Another argument against this process is how it could complicate the transaction.

Buyers typically focus on arranging finances for the purchase price and mortgage payments. Adding the Realtor’s fees to this equation would add complexity to this process.

Double Payment

If the home buyer is also selling, there is the potential for a double payment.

When selling the home, the individual could pay for their listing agent and the buyer’s agent.

Then when buying the next home, the individual could pay for their buying agent.

Ultimately, they’ve paid an extra commission. 

Alternative Models

Hybrid Model

Arguments are strong on both sides. But there is always a middle ground that is beneficial for all parties. a hybrid model would share the burden of the buyer’s agent’s payment.

This could be creatively worked out. The seller could offer to pay a percentage of the buyer’s agent’s commission. Or they could agree to a lower purchase price or a mortgage rate buydown.

This would help balance the financial burden between the parties while maintaining transparency. 

Performance-based Model

Another variation that we have seen gain popularity is performance-based compensation from the buyer’s end.

This may involve the buyer paying a bonus if the agent can bring in a lucrative deal within a set time frame.

This is just one example and can be negotiated between the buyer and the agent. This would also incentivize the agents to work more diligently. 

How Do Things Get Done? 

Buyers may not be entirely comfortable with the thought of additional fees, however there is always a way to approach the matter. As a buyer’s agent, you could do the following before signing them as a client: 

• Be clear with the buyer about the commission model.
• Agree on a percentage that is doable for the buyer and is acceptable to you. 
• Notify the seller about the agreement between the buyer and yourself to protect the buyer from potential double payment. 

Buyer’s Agreement/Disagreement 

What if the buyer does not agree to cover the Realtor’s commission?

If you haven’t started the home buying process, as a Realtor, you could choose to walk away. You cannot hold the buyer against their decision to not contribute to the commission.

The industry standard has been that the seller will pay the agents’ commission, and some people will want to stick to that.

If you choose to work with the buyer and hope the seller pays, work alongside the buyer to get them the best price and terms. During negotiations, make it clear that the buyer is expecting the seller to pay the commission.

Conclusion 

Real estate transactions are an intricate process with several parties involved. This process can get complicated if negotiations fall through or because of miscommunication between the parties over finances, choices, timelines, etc. Realtors are the glue that binds these transactions and helps maintain momentum. As such they must be compensated well for their time, effort, and expertise. 

Typically, the seller provides the agent’s commission. However, it makes more sense for the buyer to participate in the agent’s commission. This is a two-way benefit: buyers will pay for exact services, and the buyer’s agent will have more incentive to work harder than before. 

We have discussed both sides of buyers paying their agents. As an agent involved in many transactions, I believe home buyers should pay their Realtor or at least contribute to the payment. This is where the hybrid model comes into place, which just slightly alters the industry standard, thereby upgrading it for the benefit of parties involved.