Real Estate Commissions
Are you thinking of buying a home in 2024? If so, you may have heard about the recent settlement between the National Association of Realtors (NAR) and the Department of Justice regarding buyer agent fees. As a potential homebuyer, it's important to understand how this settlement will impact what real estate commissions you pay as well as the services you receive from a buyer's agent.
First, let's talk about what exactly a buyer's agent does. A good buyer's agent will guide you through the entire home buying process, from finding the right home to negotiating the best price and terms. Some of the key services they provide include:
- Helping you determine your budget and get pre-approved for a mortgage
- Searching the MLS to find homes that match your criteria
- Scheduling showings and attending open houses with you
- Answering your questions about properties, neighborhoods, schools, etc.
- Preparing and submitting offers on your behalf
- Negotiating with the seller's agent to get you the best deal
- Coordinating inspections, appraisals, and other due diligence
- Attending the closing and reviewing all the paperwork with you
We've created another cool AI chatgpt to help you sort out real estate commissions, services, and fees. Real Estate Commissions, Services and Fees. Try it out - free!
These services require significant time, expertise and resources on the part of the buyer's agent. And for many years, buyer's agents have been compensated through a "co-op commission" paid by the seller.
However, the recent NAR settlement is changing that. As of 2024, sellers and their listing agents are no longer required to offer a co-op fee to the buyer's agent. The commission is uncoupled, meaning the seller pays their listing agent and the buyer pays their own agent. Of course, you can DIY and not use an agent. We show, How to Buy a House Without a Realtor.
So what does that mean for you as a homebuyer? Essentially, you may need to pay your buyer's agent directly, either through an upfront retainer, an hourly fee, or a commission based on the purchase price.
The exact costs will vary depending on the agent and the services provided. But here are some industry benchmarks:
- Retainers typically range from $500 to $5,000
- ourly fees average around $100-250 per hour
- Commissions are often 2.5-3% of the purchase price
On a $400,000 home purchase, a 3% commission would equate to $12,000. However, even with retainer or hourly fees, the total cost may be less than a traditional commission.
Also keep in mind that these buyer agent fees are now eligible to be wrapped into your mortgage rather than paid out of pocket. And as more buyers start paying their agents directly, agent fees are likely to become more competitive and negotiable. Use Real Estate Commissions, Services and Fees to help sort your cost.
Ultimately, the value a good buyer's agent provides often exceeds the cost. Having expert guidance can help you find the right home faster, avoid overpaying, and navigate a complex transaction smoothly. According to top real estate coach Tom Ferry:
"A great buyer's agent is an advocate, an advisor, a negotiator, a problem-solver... they wear many hats. The reality is, their job is to help a buyer get into their dream home and make that process as easy as possible. There's certainly a lot of value in that."
When interviewing potential buyer's agents, ask them directly about their fee structure and what services are included. Don't necessarily go with the cheapest option, but the agent you feel will work hardest for you and get you the best overall outcome.
If you want to learn more about the home buying process, we recommend taking a quality home buyer's education course. For example, SmarterHouseBuyer.com offers an excellent online course that covers preparing to buy, getting a mortgage, searching for homes, making an offer, the escrow period, and closing on your new home.
The course includes short video lessons, engaging activities and downloadable checklists at an affordable one-time fee. Taking a course like this is a smart way to feel empowered and prepared for your home purchase.
Buying a home is a big decision and a major investment. Having the right team in your corner makes all the difference. Make sure you understand the value and cost of your buyer's agent, get educated as a buyer, and don't be afraid to negotiate for what you deserve.
