How Do Real Estate Brokers Get Paid?

Most people are familiar with realtors (note that there is no "i" in there) and what we do, but few actually know how we get paid. A lot of buyers come to me with the expectation that they will be paying for representation out-of-pocket, so when I tell them not to worry, I look like a hero. Here's a basic rundown of how real estate brokers get paid: -Seller's Agent: Before a property is listed and put on the MLS, the seller's agent and seller(s) will discuss compensation. There are instances when the seller's agent will charge a set fee, but more often it is a percentage of the eventual selling price. 99% of the time, the seller's agent will be giving some of this commission to the buyer's agent. The 1% of the time that they wouldn't, would be if the seller's agent procured the eventual buyer (double-ended the deal).

-Buyer's Agent (1): As mentioned, the buyer's agent is paid from the seller's agent's commission. The buyer's agent is not directly paid by the seller's agent, but rather the listing brokerage firm (the brokerage that the seller's agent works for). And for that matter, the buyer's agent is technically paid by their own brokerage. This scenario applies to properties listed for sale on the MLS (Multiple Listing Services require a listing broker, or seller's agent, to offer a cooperating broker compensation).

-Buyer's Agent (2): In the event that the buyer working with a buyer's agent decides to purchase a For Sale By Owner (or FSBO), the buyer's agent will need to negotiate a commission with the individual seller. This can be difficult and you can receive pushback, because the reason the FSBO is selling their house without an agent in the first place is probably because they don't want to pay a commission to realtors.

So, in a nutshell, home buyers do not have to pay for a realtor to represent them. Buyer's agents are paid by the seller (but we now know the money changes hands many times before it gets there).