We get it..., you just want to see the house!

 However, please understand the first step is understanding how real estate agents showing buyer's get paid and what is the reason you're choosing to not work with an agent?:

If you're choosing to not work with an agent and have them represent you because you don't want to pay out of pocket expenses, you're really not seeing the whole pictures.  Agents get paid, regardless if you want them too or not.  It's baked into the transaction, like it or not.  Please keep reading this entire page to get a better understanding.

Real estate agents play a crucial role in the home buying process, acting as intermediaries between buyers and sellers. Understanding how these agents are compensated is essential for anyone looking to purchase property.

In 2024, the National Association of Realtors (NAR) reached a significant $418 million settlement regarding antitrust lawsuits that claimed inflated commissions. This landmark agreement will fundamentally alter real estate regulations, with new policies took effect on August 17, 2024. These changes will mandate written agreements between buyers and agents, along with upfront disclosures of commissions. This marks the end of the traditional practice where sellers compensated buyer agents through the Multiple Listing Service (MLS), paving the way for negotiable and transparent fees.

Commission-Based Compensation

The primary way real estate agents representing buyers get paid is through a commission. This commission is typically a percentage of the property's sale price and is agreed upon before the property is listed. There is no standard commission rate, but in the end after everything is said and done, it often ranges between 5% and 6% of the sale price, though this can vary based on location, market conditions, and the specific agreement between the seller, the buyer, the buyer's agent, and the listing agent.   There is no standard % rate or $ amount.

Real estate agents representing buyers are often paid directly through their broker, from the seller.   Since the lawsuit settlement and new contract paperwork from Texas Real Estate Commission (TREC), they get paid directly from the seller, which often confuses most buyers in the payment process, because in the past prior to the settlement, it was often paid through the listing broker, who is representing the seller.

Payment Process

Seller's Agreement: When a homeowner decides to sell their property, they enter into a listing agreement with a real estate agent or broker. This agreement outlines the commission rate and any additional fees that the seller will pay upon the successful sale of the property.  

Additionally, they may or may not agree to pay the listing agent an additional $ fee or % of the sale to handle buyers who are not working with another agent.   There are no standards, but typically seller's agree to pay their agent for working both sides.  

In other words, if the buyer doesn't have an agent representing them, the listing agent would typically get paid for both sides of the transaction.  There's no universal formula that says a unrepresented buyer automatically receives the buyer agent portion as a discount...

The seller will choose a real estate broker who typically operates in one of these two methods:

1.  First Method:  Seller agrees to pay X % of the sales price or $, to the listing broker, and additionally and optionally -also offers to pay X% of the sales price or $ to the buyers agent, if two agents are involved.  In the first method, the seller and listing broker also agree to what is known as intermediary without appointments, if a buyer does not have representation.  Meaning, they do not have an agent representing them, only the seller does.  That's only one agent...

There is no standard % rate or $ amount of fees charged and what parties are charged those fees...   Keep reading, please.

Here is an example of a transaction with two agents involved:

If the Seller isn't willing to pay the Buyer's Agent:

Intermediary without appointments, what is it?   

What this means is even though the seller hired the listing agent to represent them, they also agreed to intermediary without appointments.  Meaning, the agent would assist the buyer in viewing the home, presenting the buyer's offer to the seller, but in reality the agent isn't allowed to give any advice to the seller or the buyer.  Yes, no advice to either party, even though the seller is the person that hired the agent...

If another agent is representing the buyer, the agent will put their fee into the offer, which would be paid out directly from the seller.

Closing the Sale: Once the sale is finalized and the transaction is completed at closing, the seller’s agent and the buyer's agent both receive the agreed on commission directly from the seller. 

1. 1. ***Important*** If the buyer goes directly to the listing agent and chooses to not be represented by their own buyer's agent, again this is typically known as intermediary without appointments.  When the non-represented buyer is shown the home by the Seller's agent, they will be told if the potential transaction, will or will not become intermediary without appointments.  This concept is specific to Texas real estate law and allows a single agent to facilitate a transaction, representing both the buyer and the seller in a limited capacity AND typically get paid for both sides for doing so, while giving no advice to either the seller or the buyer.

Key Features

1. 1. 1. 1. 1. Neutral Role: The agent must maintain a neutral stance, providing only factual information and facilitating the transaction without influencing either party's decisions.

            2. Disclosure: The agent must disclose this intermediary status to both the buyer and the seller, ensuring that both parties understand the limitations of the agent’s role and the lack of fiduciary duties typically owed to clients.

            3. Written Consent: Both the buyer and seller need to provide written consent to the intermediary relationship, acknowledging that the agent will not be able to advocate for either side.

            4. Limited Assistance: The agent can assist with paperwork, explain general real estate processes, and show the property, but cannot offer specific advice on price negotiations or contract terms.

Considerations for Buyers

• Lack of Representation: Buyers should be aware that they are not receiving dedicated advocacy or advice that a buyer’s agent would typically provide.

• Negotiation Challenges: Without a buyer's agent, the buyer may have to rely on their own knowledge or seek external counsel for advice on negotiating terms or understanding the complexities of the transaction.

• Potential Conflicts: Since the listing agent originally represents the seller, there may be inherent biases, despite the agent's legal obligation to remain neutral.

Intermediary without appointments means ZERO advice for the Seller and ZERO advice for the Buyer.  The agent is suppose to act as a paper pusher, but often gets paid equally for both sides of the transaction.

2. Second Method : Seller does not agree to do Intermediary without appointments.

If there are two agents involved in the transaction, the end sum of the commission paid out is typically the same as in the very first model at the very top of the page - showing two agents, but not always.  However, there is often a big difference if there is no buyer's agent involved.

1. 1. If the buyer chooses to not be represented in this model, the listing agent representing the seller will often get paid an additional % or $ for taking on the additional work of working the transaction for the unrepresented buyer, however in this model there are a few critical differences from the first model above:

      1. The listing agent fully represents the seller and is the seller's advocate, which is not the case if intermediary without appointments are created, like in the above model in the first example.

      2. To be clear, the listing agent is not an intermediary in this model.

      3. The listing agent will 100% NOT give any advice to the buyer.

      4. The listing agent will 100% give advice to the seller.

      5. The listing agent will make the buyer sign a document that explains that they do not represent the buyer and that they do represent the seller.

      6. When initially showing the home to the buyer, the agent will have the buyer sign a showing agreement, which explains that the agent only represents the seller.  

The biggest difference, is the Listing agent fully represents  the seller 100%, which isn't the case in the first example.  So the listing agent is able to give advice and direction to the seller, but not the buyer.

Most brokers will agree to work in a limited capacity by using Intermediary Without Appointments, Orchard does not...

What happens if an unrepresented buyer wants to see more homes after they have seen the one home that the agent is representing the seller?

Due to the NAR Settlement, if a buyer wants to see any additional homes, the buyer will have to sign a buyer representation agreement, which spells out how much the agent will get paid and that if the seller isn't willing to pay the agent, that the buyer will.  

The days of looking a multiple homes without being represented are mostly a thing of the past, due to the settlement.

Buyers need to understand that if they don't want to use an agent, that they will be doing a ton of work coordinating showings with each Seller agent directly, and also, that each seller's agent will likely still get paid for doing the work of boths sides of the transaction, and or for working with both the seller and buyer.  Additionally, if there is only the seller's agent and either the Seller does or does not agree to do intermediary without appointments, the buyer will get zero advice, absolutely nothing...     

Nada, zip, zilch, the big goose egg, in terms of advice.

Agent's Share: 

Within the brokerage, the buyer’s agent receives a portion of the commission. The exact percentage depends on the agent's agreement with their brokerage, which can be a wide range from a 50/50 split to a higher percentage for the agent or to the broker as well.

Alternative Compensation Models

While commission-based compensation is the norm, there are alternative models that some agents might use:

Flat Fee: Some agents might offer their services for a flat fee, regardless of the property's sale price. This fee is agreed upon in advance and can be appealing in certain market conditions.

Hourly Rate: Though less common, some agents might charge an hourly rate for their services, especially for consulting or providing specific expertise.

If the Seller's agent has another agent show you the home, as an unrepresented buyer

If the Seller's agent is unable to show you the home as an unrepresented buyer, please know that it's highly likely that they are paying $ out of their own pocket to another agent, so you can see the home.  This is a common practice for agents that are too busy or are just unable to show property.  The amount paid out ranges from $35-$60 or more, per house shown, depending on drivetime and time spent in each home.   Keep in mind, agents in general only get paid, if they sell a home, not for their time spent driving to each home and showing time for each property.

Conclusion

Understanding how real estate agents representing buyers get paid can help buyers enter the home purchasing process with clarity. It ensures that buyers are aware of the financial dynamics and can make informed decisions when selecting an agent. Whether through traditional commission structures or alternative payment models, these agents provide valuable services that can make navigating the real estate market much smoother.

If you're choosing not to hire an agent, as a buyer, what is the real reason?

If it's to save money, that's likely not going to happen, due to everything stated above...

Understand, that an agent's pay, is baked into every transaction.  Real estate agents don't work for free...

NAR Settlement

On March 15, 2024, the National Association of REALTORS® (NAR) reached a settlement with plaintiffs, which conclude litigation related to home seller claims concerning broker commissions. This settlement introduces several modifications to real estate transactions, while ensuring that consumers retain choices regarding real estate services. The following changes have taken place since August 17, 2024:

• Real estate agents listing properties on a Multiple Listing Service (MLS) must establish written agreements with buyers prior to home tours. These agreements must include:

  • A clear disclosure of the compensation amount or rate the agent will receive, or how this amount will be determined.

  • Objective compensation terms (e.g., $0, a flat fee, a percentage, or an hourly rate) that are not open-ended (e.g., agents cannot state “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”).

  • A clause that prevents the agent from receiving compensation for brokerage services from any source exceeding the agreed amount or rate in the buyer's agreement.

  • A clear statement indicating that broker fees and commissions are fully negotiable and not mandated by law.

NAR has long advocated for written agreements with buyers to help consumers understand the services provided, roles, responsibilities, and costs involved. Consequently, several states already require buyer agreements, however now they are mandatory.

Additionally, there are modifications regarding how real estate professionals communicate offers of compensation to one another. Such offers are no longer permitted on MLS platforms, although sellers can still provide compensation outside of MLS listings. Sellers can also propose buyer concessions on an MLS, such as assistance with closing costs, but not offer how much, if any, commissions are offered.

Important Information for Home Buyers and Sellers:

• If you are a buyer and your agent is using an MLS, a written agreement must be signed before touring a home to clarify the services provided and their costs.

• Written agreements are necessary for both in-person and live virtual home tours.

• No written agreement is required if you are simply speaking with an agent at an open house or inquiring about their services.

• Agent compensation for both home buyers and sellers remains fully negotiable.

• When selecting an agent, be sure to ask questions about their services, compensation, and these written agreements.

• Offerings of $ or % of commissions paid to buyers brokers and agents are no longer allowed in the Multiple Listing Service (MLS).