When you buy a house, how does your real estate agent get paid for everything they have done to close the transaction? Do you receive an invoice and then write your agent a check? Is a portion of the money from the house sale automatically paid to your real estate agent? If you're looking to purchase your first home, understanding how your agent gets paid is essential, and it may change soon.
Do you know how your real estate agent gets paid when you buy a home?
When you buy a home, your real estate agent doesn't get paid an hourly rate. It's standard for the homebuyer's real estate agent to be paid by the seller's agent. A percentage of the home's sale price, typically 5-6%, serves as the commission split between the buyer's and seller's agents. The agent who found you a house to buy doesn't get paid if the commission doesn't exist. Various lawsuits challenge that commission structure, and the homebuyers' agents may be left out of the compensation equation.
The Moehrl lawsuit is one example of a class action lawsuit that may change how buyer's agents get paid when a house sells. The lawsuit challenges NAR's (National Association of RealtorsⓇ) Buyer Broker Commission Rule that requires the buyer's agent to be compensated for their services by the home seller when a property sells. The lawsuit states that home sellers are being forced to pay homebuyers' agents, and the plaintiffs want it stopped. In addition, the case says that the buyer has no option to negotiate the commission.
- Commission overpayment
- Seller's agents paying buyer's agents commissions
- Buyers don't have the option to negotiate commission
The Moehrl lawsuit also states that home sellers have been paying an excessive amount to buyer's agents. Does this translate to the seller's agent doing more of the work than the buyer's agent and, therefore, should receive more compensation? Part of this claim is supported by the fact that many buyers search independently for homes online before retaining the services of a buyer's agent. This translates to less work being performed by the buyer's agent than in past years and, therefore, should result in lower financial compensation.
Low and middle-income first-time homebuyers will be affected the most if the Moehrl lawsuit stops their agents from getting paid part of the commission from the sale of the home. It's challenging to come up with a down payment and closing fees, and now these home buyers may be forced to come up with additional cash to compensate their real estate agent.
If the plaintiffs in the Moehrl lawsuit win, then the work your real estate agent provides to you as a home buyer might go unpaid. Would you be willing to include a financial bonus for your real estate agent who represents you in purchasing a home? Let us know in the comments.