April 16, 2018 | Alan Donald
 Do you ever wonder if you need to pay your real estate agent when you buy a home? If not, then how do they make money? Or, do you know they get paid somehow...but just aren't sure how? Well, you're not alone. Lots of people aren't sure how that all works.

The short answer

To answer the question as plainly as possible... When you buy a house, you (usually) don't have to pay your buyer's agent. At least not in the sense of you writing out a check to the real estate agent or their company. However, he or she will get paid.

The thorough answer

It's kind of confusing, right? If you're not paying your agent, who is? The seller is...kind of. (We'll elaborate more on this later). So the question becomes: Why would they work with you, for you, and with your best interests in mind, if you aren't paying them? Because that's their responsibility. It wasn't always that way, though. It used to be that all agents were essentially working for the seller, trying to get the highest price they could for the house. That's changed...actually quite a while back. But the way agents get paid has not. The seller still pays the commissions, even though the buyer's agent is representing the buyer's interest, not theirs. So that sounds just as weird for a seller, right? Not really. It actually makes sense (and if not, it should in a minute).

The money comes from the equity

In order to sell a house, the owner needs to have equity. In other words, they have enough money to sell the house for a certain price, pay off any existing loans, and other costs (like real estate commissions), and still walk away with money in their pocket. (Yes, they can sell even without equity, but we're not getting into that here. Those are short sales. And, yes, even then the buyer's agent gets paid by the seller, even though there's no equity.) It's the buyer's responsibility to come up with a down-payment. It would be tough for most buyers to also have to pay a buyer's agent out-of-pocket. So, it makes sense that even though buyers' agents represent the buyers' interests, that the commission still comes out of the equity of the house.

Look at it this way...

You are actually paying your buyer's agent. If you, and your down-payment, and loan did not pay the seller the agreed upon amount, the seller wouldn't have the money to pay the agents. It's your money, too, even though it looks and feels like the money is being paid by the seller.

Bottom line? Do your homework

A lot of home buyers don't give an awful lot of thought to the agent they choose to help them buy a house. Perhaps it's because there often isn't a single moment of "hiring" the agent. Maybe it's because of the confusion and concern about committing to a buyer's agent must mean you'd have to agree to pay them directly. Whatever the reason is, many people just sort of bounce around to open houses, or go see houses with any old agent they come across, or go directly to the listing agent. Don't do any of that. Seek out, find, and hire the best real estate agent you can find, because whomever you choose will get paid the commission offered by the seller. So, choose well. You're paying for that agent, as much as the seller is...just not directly by writing out a check to the agent.



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