Feb 5, 2019
Isn't using an agent free when you buy? Well, this is one of the most common questions we get from new homebuyers:
"My Realtor friend told me that it's free to use their services. Is that true?"
In this article, we'll debunk this homebuying myth and explore who actually pays the buyer's agent commission.
(spoiler alert: it’s you - the home buyer)
As a buyer, your agent and the seller’s agent split a commission fee -- typically 5-6% of the purchase price of the home. And while this fee is technically paid by the seller, it’s factored in to how much sellers list their home for.
Since these fees get baked into a home’s listing price, and you’re the only one who has to pay money at closing, the buyer's agent commission gets passed onto you when you buy a home. In other words, it comes from your mortgage/loan on the home.
Here’s what honest real estate agents had to say in articles on Realtor.com, HGTV, and The Balance about who pays the seller's and buyer's agent commissions:
Standard practice is that the seller pays the real estate commission of both the listing agent and the buyer's agent, according to Ruth Johnson, a Realtor® in Austin, TX. But she also points out that "while sellers pay the fees, they usually wrap them into the price of the home. In that sense, you could say the buyer pays the fees."
Sellers factor in the cost of commissions when they price their homes. Typically, the listing agent and the buyer's agent split the commission from the transaction. ‘The funds come off the seller’s side, creating the illusion that the seller pays,’ says Jay Reifert of the Excel Exclusive Buyer’s Agency in Madison, Wis. "But you are the only one bringing money to the closing table."
It can be argued and, quite rightfully so, that the buyer always pays the commission. Why? Because it's typically part of the sales price. If the seller did not sign an agreement to pay a commission, the sales price might have been lowered. - Elizabeth Weintraub, Broker-Associate at Lyon Real Estate
Since real estate agent commissions are rolled into a home’s asking price, as a buyer, you’re essentially footing the bill when it comes time to close on your home.
Before the internet, buyer's agents had to pull home listings for their clients, drive them around on home tours, price every home based on comps, and handle all of the offer and closing paperwork manually.
While today’s buyers often prefer to house hunt on their own, traditional real estate agents may still spend 80% of their time driving potential clients around who may never make a deal and marketing themselves to find new clients.
The 2.5 - 3% buyer's agent commission you pay mostly helps to cover these sunk costs rather than the time they spend actually helping get your offer accepted and getting you into your new home.
In short, buyer's agents work has evolved, but their fees haven’t.
It’s simple: because we’ve focused on making the homebuying process more efficient, which means we can pass the savings onto you. There truly are not many hard costs in shopping for a home, which is why it's silly to pay an agent thousands of dollars to simply unlock a few doors and create a offer.
How we’re different
Buying a home is slow, frustrating, and expensive. Yet, it hasn’t changed in almost 100 years. So, we’re inventing the modern way to buy.
At SimpleShowing, our mission is to make buying a home simple and more affordable by giving everyone the confidence to own their future.
So far, we’ve helped thousands of folks buy hundreds of homes in the Southeast and saved homebuyers nearly $1 million in unnecessary fees.