How Do Real Estate Agents Get Paid? Who Pays the Buyer's Agent?
How Do Real Estate Agents Get Paid, and Who Pays the Buyer's Agent?
Buying or selling a home is a major financial decision, and understanding real estate agent commissions is an important part of the process. One question that often comes up is: If I hire a real estate agent, who actually pays them?
Traditionally, many homebuyers were accustomed to having the seller cover the compensation for both the listing agent and the buyer's agent. However, changes to real estate industry practices in 2024 brought more attention to how agent compensation is negotiated and paid.
Today, buyers and sellers have more flexibility in negotiating these arrangements. But that also means it's important to understand what you're agreeing to before signing a contract.
If you're buying or selling a home in Atlanta or anywhere in Georgia, here's what you need to know about how real estate agents get paid.
How Do Real Estate Agents Get Paid?
Real estate agents typically earn compensation when a transaction closes. Their compensation is negotiated with the client or through an arrangement with another party involved in the transaction.
There are several ways an agent may be compensated:
- Percentage of the sale price: Compensation is calculated as an agreed percentage of the property's purchase price.
- Flat fee: The agent or brokerage receives a predetermined dollar amount for the services provided.
- Hourly fee: In some arrangements, an agent may charge for services based on time spent.
The most familiar arrangement in residential real estate is percentage-based compensation. However, there is no universally required commission rate.
For example, if a property sells for $400,000 and an agent's agreed compensation is 2%, the compensation would be $8,000.
That is simply an illustration—not a standard or required rate. The amount depends on the agreement between the parties.
It's also important to understand that the agent's compensation is generally paid to their brokerage, which then pays the agent according to their individual commission or compensation arrangement. The agent does not necessarily keep the entire amount.
Who Pays the Buyer's Agent?
This is where things have changed in recent years.
In many traditional real estate transactions, the seller paid a commission to their listing brokerage, which could then share a portion with the brokerage representing the buyer.
Today, a seller may still agree to pay some or all of the buyer agent's compensation, but it is no longer something buyers should automatically assume.
There are generally three ways a buyer's agent can be paid:
1. The Seller Pays the Buyer's Agent
A seller may agree to pay some or all of the compensation owed to the buyer's brokerage.
This can be negotiated as part of the purchase transaction. For example, a buyer may submit an offer requesting that the seller contribute $8,000 toward the buyer agent's agreed compensation.
The seller can accept, reject, or negotiate that request along with the other terms of the offer.
2. The Buyer Pays the Buyer's Agent
If the seller does not agree to pay the buyer agent's compensation, the buyer may be responsible for paying according to the written agreement they signed with their agent.
This is why buyers should understand the compensation terms before beginning the home search.
For example, imagine a buyer signs an agreement specifying $8,000 in compensation for their agent. If the seller agrees to contribute $5,000, the remaining $3,000 may be the buyer's responsibility under that agreement.
The actual amount owed depends on the agreement and any applicable amendments or negotiated terms.
3. The Listing Brokerage Pays the Buyer's Agent
In some transactions, the seller's listing brokerage may agree to share a portion of its compensation with the buyer's brokerage.
This is another possible arrangement, provided the parties negotiate and document it appropriately.
Ultimately, the important point is that the buyer's agent's compensation can come from different sources.
The buyer and agent should agree on the compensation terms in advance, including how payments from other parties will be handled.
What Changed With Real Estate Commissions in 2024?
In August 2024, new industry practice changes connected to the National Association of REALTORS® (NAR) settlement took effect for participating MLSs and real estate professionals.
The changes were designed to make agent compensation more transparent and give consumers a more direct role in negotiating how their agents are paid.
Here are two important changes buyers and sellers should understand:
1. Offers of buyer-agent compensation can no longer be displayed on the MLS.
Sellers can still offer to compensate a buyer's agent, and brokerages can still negotiate compensation arrangements. However, offers of compensation cannot be communicated through the MLS in the way they traditionally were.
These arrangements can still be discussed and negotiated outside the MLS.
2. Written buyer agreements are required before many property tours.
Real estate professionals participating in covered MLSs must generally have a written agreement with a buyer before touring a home together, whether in person or through a live virtual tour.
The agreement outlines the services the agent will provide and how the agent will be compensated.
These changes do not mean buyer agents work for free or that sellers are prohibited from paying buyer-agent compensation. They mean the arrangement must be discussed and negotiated more directly.
What Is a Buyer Representation Agreement?
A buyer representation agreement is a written contract between a homebuyer and a real estate brokerage.
It explains the relationship between the buyer and the agent, including the services provided, the duration of the agreement, and the compensation arrangement.
Before signing, buyers should pay attention to:
- Compensation: Is the agent paid a percentage, flat fee, or another agreed amount?
- Agreement length: How long does the agreement remain in effect?
- Scope of services: What services will the agent provide throughout the transaction?
- Geographic area or property type: Does the agreement cover a specific area or type of property?
- Termination terms: How can either party end or change the agreement?
- Payment responsibility: If the seller does not contribute toward the buyer agent's compensation, what amount could the buyer owe?
In covered MLS transactions, compensation in the written agreement must be clearly defined and objectively ascertainable. It cannot simply say the agent will receive whatever the seller happens to offer.
Buyers should take the time to review the agreement, ask questions, and negotiate terms they are comfortable with before signing.
Does the Seller Still Pay the Real Estate Commission?
Yes, a seller can still agree to pay compensation to both their listing brokerage and the buyer's brokerage. However, the seller is not automatically required to pay the buyer's agent.
When selling a home, the seller typically negotiates compensation with their listing brokerage through a listing agreement.
The seller and listing brokerage can also discuss whether to offer compensation to a buyer's brokerage as part of the overall marketing and negotiation strategy.
For example, a seller listing a home for $450,000 might negotiate one compensation arrangement with their listing brokerage and separately consider a request from a buyer for assistance with their agent's compensation.
These are separate negotiable arrangements, not a mandatory combined commission.
Sellers should evaluate any proposed compensation alongside the purchase price, financing terms, contingencies, closing timeline, and other conditions of the offer.
A higher offer is not always the strongest offer, and a request for seller-paid buyer-agent compensation should be considered as part of the transaction's overall financial picture.
What Does This Mean for Atlanta and Georgia Homebuyers?
For buyers in Atlanta and throughout Metro Atlanta, the biggest takeaway is to discuss agent compensation early—before touring properties and especially before submitting an offer.
If you're looking at homes in areas such as Marietta, Alpharetta, Roswell, Smyrna, Decatur, or Woodstock, the same general compensation principles apply.
Here are a few practical steps:
- Ask your agent how compensation works. Understand the amount or rate being proposed and what services are included.
- Review your buyer representation agreement. Make sure you understand your potential financial responsibility.
- Discuss seller-paid compensation. Your agent can help you determine whether requesting a seller contribution makes sense for a particular property.
- Consider your overall budget. Account for the possibility that you may need to pay some or all of your agent's compensation, in addition to your down payment and closing costs.
- Review the purchase offer carefully. Confirm that any agreement for the seller or listing brokerage to contribute toward buyer-agent compensation is properly documented.
Georgia REALTORS® contract forms also address buyer-broker compensation and the possibility of payment by the seller or seller's brokerage. Under the relevant buyer agreement language, amounts paid by those parties reduce the buyer's obligation dollar for dollar, and the buyer may remain responsible for any unpaid balance.
The exact agreement and transaction documents matter, so buyers should ask their agent to explain the terms before signing.
Understand the Numbers Before You Make Your Move
Whether you're buying your first home, upgrading to a larger property, or preparing to sell in Metro Atlanta, understanding real estate commissions can help you make more informed financial decisions.
The most important thing to remember is that real estate agent compensation is negotiable, and the buyer does not automatically have to pay the buyer's agent out of pocket.
Sellers can still contribute, but the arrangement needs to be discussed and agreed upon.
Before signing an agreement or making an offer, ask questions, review the terms, and make sure you understand who is responsible for paying what.
Thinking about buying or selling a home in Atlanta?
Connect with a local real estate professional who can walk you through the process, explain your options, and help you understand the financial details before you move forward.
