How Do Buyer’s Agents Get Paid?

by Ben Handler

May 15, 2024

 

If you are curious about becoming a buyer’s agent in real estate and are wondering about how buyer’s agents get paid, this blog is for you. Buyer’s agents (known also as buyer’s advocates) are an increasingly in-demand profession. This is because many people want to purchase a home or investment property but simply do not have the knowledge or time to do this themselves. Or it just makes them feel overwhelmed. So, they depend on the buyer’s agent to research, evaluate and cull the information and ultimately negotiate for them.

To step into this profession, it is important that you know and understand the structure of buyer’s agent fees. This ensures transparency and clarity in financial arrangements. It also empowers your future clients to make informed decisions that allow them to manage their budget effectively throughout their property purchasing process.

This blog will examine the three buyer’s agent compensation models more closely.

 

Who Pays The Buyer’s Agent Fees?

Although traditionally, the buyer pays the buyer’s agent fee, this varies depending on the agreement between the buyer and the agent. The fee is usually negotiated as part of the agreement. Who pays the buyer’s agent commission depends on the terms of the agreement. It is either paid directly by the buyer or included in the overall purchase transaction—that is, the fee may be split between the buyer and the seller. Alternatively, it can be negotiated to be paid by one party but reimbursed by the other party.

 

[Note: We can, in future, create an in-depth article about the above & create internal links]

 

Exploring Buyer’s Agent Compensation Models: Commission-Based vs Fixed Fee Structures

1.  Commission-Based Buyer’s Agent Compensation – Percentage-Based Model Of Property Value

With a commission-based model, the buyer’s agent’s commission is calculated as a percentage of the property’s final purchase price. This percentage varies subject to the scope of the services offered by the buyer’s agent. Agents generally charge between 1–3% of the property purchase price. Full-service appointments attract higher percentage commissions.

This model may sometimes be seen as problematic—as a conflict of interest—as buyer’s agents have a greater incentive to obtain more expensive properties. However, if this buyer-agent fee structure is set within budget parameters and with pre-arranged agreements that set out clear expectations and contingencies, it can work well for both parties. This may include slightly higher commission rates if the property is secured for a lower price than originally budgeted for, so it is still compensating the buyer’s agent.

 

2. The Fixed Fee

On the other hand, you may consider charging a fixed fee for your buyer’s agent services. This can vary greatly depending on the extent of the services you are offering. For instance, you may offer an in-depth consultation about real estate buying in a particular location. Or you may offer a full-service engagement where you provide the full spectrum of your services to secure the purchase. The rates can vary considerably, ranging from $1000 to above $100,000 (for more time-intensive, high-end property purchasing services). 

The biggest benefit of this compensation model is the ability to be upfront about your buyer agent fee. This way, the buyer knows the exact cost (and service parameters) of the service being received, ensuring it is within their allocated property search budget.

A well-structured upfront agreement can help prevent ‘encroachment’ of your time and services by laying out the agreed-upon level of services included in the fixed price. There can still be scope for upgrading the level of service (and therefore cost to the buyer) if the buyer chooses it.

 

3. A Tiered Fixed Rate

The tiered fixed-rate compensation model is an alternative version of the fixed fee model that buyer’s agents can use. Here, the fee is dependent on the property purchase price. That is, the fixed fee applies in accordance with the price parameters agreed to at the outset.

This way, you can take advantage of purchasing a property that is below the initial anticipated budget of the buyers. This is a boon for your clients without penalising you with lower commission rates. It also allows for some flexibility in direction if the client changes their mind part way through about what they are willing to spend. This may be due to actual property-buying opportunities or other reasons.

The way the tiered fixed rate is determined and calculated varies among different buyer’s agents.

 

Exploring Buyer’s Agent Courses & Certifications

If you are an aspiring buyer’s agent, the way to jump-start your new role is to receive proper leading-edge training and certification.

At Buyer’s Agent Institute, we help you accelerate your career by teaching you the essentials of becoming a successful buyer’s agent. Our seven-week Accelerator Program includes a comprehensive curriculum taught by industry-leading experts. You will be guided, step by step, through the skills required to service the buyers (including checklists and negotiation skills), as well as ways to deal with prospects, gain referrals, and effectively market your services.

Even after the seven-week program is complete, we offer weekly live coaching clinics where you can ask questions and join in conversations about property buying. And as a student of the Accelerator Program, you will also receive access to expert coaches for the first 12 months.

As a buyer’s agent, you have low set-up costs and can work conveniently from home in your spare time. Tap into a high-demand, low-competition line of work with huge profit potential. 

Join the many students who have benefited enormously from our program. Other great ways Buyer’s Agent Institute can keep you updated with industry regulations, trends and insights is through our blogs and videos.

Sign up today for our 6 months Accelerator Program to kickstart a rewarding career as a buyer’s agent, even without any prior experience. 

We can show you how to begin and potentially close your first $10 – $30K deal in the first 90 days.

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