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Written by
Allison Martin
Allison Martin is a contributor to Bankrate covering personal finance, including mortgages, auto loans and small business loans. Martin’s work began over 10 years ago as a digital content strategist, and she’s since been published in several leading outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and Credit.com. Martin, a Certified Financial Education Instructor (CFE), also shares her passion for financial literacy and entrepreneurship with others through interactive workshops and programs.
Edited by
Michele Petry
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Are you hoping to purchase a home soon? There’s a lot to think about, especially in today’s shifting market, and finding a perfect house that you can afford can be like finding a needle in a haystack.
Luckily, you don’t have to navigate the process on your own. A local real estate agent who specializes in helping buyers find the right home, often referred to as a buyer’s agent, can be a crucial help for any house-hunter. However, thanks to a federal lawsuit, new rules around real estate commissions will go into effect this summer that may make the way these agents get paid slightly more complicated. Here’s a closer look at buyer’s agents, what they do and whether you need one.
Typically, real estate transactions involve two different agents: one who represents the seller and one who represents the buyer. The role of a buyer’s agent is to act as the homebuyer’s guide on their real estate journey. Their primary responsibility is to help house-hunters find the home that best suits their needs and budget, ticking as many boxes as possible on their wish list. A buyer’s agent performs several other duties as well, including:
If you see the initials ABR after a Realtor’s name, that stands for Accredited Buyer’s Representative — a special certification designated by the National Association of Realtors (NAR). You don’t necessarily need an agent with the ABR designation to buy a house, but those who have it have received special training in being an advocate for homebuyers.
While a buyer’s agent represents the buyer, listing agents work on the other side of the real estate transaction. They represent the seller and are responsible for listing the property for sale (hence the name) and positioning it to attract top dollar. Listing agents also host open houses, help sellers sift through offers and negotiate on the seller’s behalf.
Somewhat confusingly, the seller’s agent or listing agent is not the same thing as what’s often called a selling agent. In fact, quite the opposite: Once a property goes into contract, the buyer’s agent may now be referred to as the “selling agent.” Regardless of terminology, though, your agent is still yours, and still working on your behalf.
You are not legally required to hire a real estate agent in order to buy a house. You always have the option to find a home and negotiate the terms of the purchase on your own. However, it’s not the preferred method for most homebuyers. According to NAR data, an overwhelming 89 percent of buyers chose to hire a real estate agent to assist with the homebuying process in 2023.
It’s in your best interest to do so for several reasons. For starters, a real estate agent with extensive knowledge about your local area can give you a competitive advantage in finding and bidding on homes. This is especially true in areas where inventory is extremely limited, as is the case in many markets around the country.
Having an expert on your side also provides assistance with the purchase agreement. Clauses, disclosures and contingencies can be confusing, and you’ll want someone who understands them to make sure they work in your favor. An agent can also help you negotiate potential seller concessions if the inspection reveals issues with the home. Most importantly, you’ll receive professional advice and answers to any questions you may have.
When you decide on a buyer’s agent to work with, they will most likely ask you to sign a contract, or exclusivity agreement, acknowledging that they are representing you for a stipulated amount of time. This is normal, so don’t be put off by it. But before signing on the dotted line to make the partnership official, review the entire contract. Ask them to address anything that’s unclear to ensure you are both on the same page. Finding a home could take some time, but the contract term typically won’t exceed six months. Once that timeframe expires, if you still haven’t found a home, you’ll be free to explore other agents.
Real estate commissions have historically amounted to between 5 and 6 percent of a home’s sale price, split evenly between both agents involved in the transaction. On a $400,000 home sale, 5 percent comes to $20,000, or $10,000 for each agent. Compensation for both agents has long been paid by the seller, out of their sale proceeds, meaning the buyer does not pay their agent out-of-pocket (though the expense may be “baked into” the home’s sale price).
However, this structure is poised to change as a result of the settlement of a large federal lawsuit. Starting in July 2024, home sellers will no longer automatically be responsible for compensating the buyer’s agent in their transaction. This means each party, buyer and seller, will be responsible for paying their own agent, unless negotiated otherwise.
There are a lot of real estate agents out there — NAR has more than 1.5 million members. How to find an agent who’s right for you? Asking around for recommendations is a great place to start. “Speak to friends, ask local business owners and look out for signs on the street,” says Dennis Shirshikov, head of content at real estate site Awning. If you see “sold” signs in your desired neighborhoods, reach out to the agents who brokered those sales. You can also search online for agents who’ve successfully closed transactions where you’re looking to buy.
Once you have a list of names, narrow it down by doing some online research. Then pick three or four to interview, asking plenty of questions to determine how each one works and how they would help you find what you’re looking for. You want someone you click with and can work well with. “Look for responsiveness and communication skills,” Shirshikov says. “If communication skills are poor, and you keep missing each other on calls and emails, you’re unlikely to buy a property [together].”
It’s also important to ensure they can handle any potential issues that may arise. “Ask the agents you are interviewing to discuss some difficult situations they faced with past clients,” Shirshikov says. “If the agent responds in a positive way and puts the client first in disputes, that’s an agent to stick with. If they have never encountered tough situations or have handled them poorly, look for someone else.”
Buyer’s agents play an essential role in the homebuying process, especially for a novice or first-time buyer. An experienced local agent can help make finding a home, submitting offers, negotiating favorable terms and getting to the closing table a smoother experience.
