When most people begin their home search, they typically enlist the assistance of a real estate agent. With everything an agent does for the buyer, many buyers ask how do I pay my agent? Typically, the seller pays agent’s commission as it comes out of the sales prices of the home.
A real estate agent does many things for their buyers on new construction homes, including explaining and negotiating the contract, attending the selections appointment and construction orientations, communicating with the Builder on the progress of the home and attending closing. They can also suggest mortgage lenders and home insurance companies. So with everything they do to benefit you, the buyer, it’s important to understand their commission.
The seller makes an agreement with the listing agent on what the commission will be. That amount is added into the sales price of the home. A typical commission can be between 5%-6%. If the seller is offering a total of 6%, the list side will get 3%, and the listing side will offer the buyer’s agent 3% commission to bring a buyer to their listing. If the list agent brings a buyer to their listing directly without a buyer’s agent bringing the buyer, it is called dual agency, the list agent will now get paid a 6% commission as they are representing both the seller and buyer.
The home you’re purchasing is $200,000 and the commission rate is 6%. ($200,000 house price X 0.06 = $12,000) The agent split can vary, it could be 60% to the agent and 40% to the firm, or it could be 50/50, 60/40, 70/30 or whatever the firm and agent agreed upon. In a 60/40 split, the commission breakdowns would be:
Dual Agent Example
- Agent: $7,200 (office fees are taken out of this commission)
- List Firm: $4,800
Buyer Agent and List Agent Example
- Buyer Agent: $3,600 (plus office fees)
- Buyer Agent Firm: $2,400
- List Agent: $3,600 (plus office fees)
- List Agent Firm: $2,400
Real estate agents make their money from the commission of the sale. So you, the buyer, won’t have any upfront fees while working with your agent.