Home Buying a Home Do Buyers Pay Real Estate Agent Commissions?

Do Buyers Pay Real Estate Agent Commissions?

by Eric Rothman
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In bringing a fresh approach to the business of buying and selling houses, we often hear traditional real estate agents argue back about the incredible “value” they offer their clients.

At the same time, these agents tell buyers not to worry about the 2.5-3% commission they typically charge because the seller will pay the cost on their behalf (this is on top of the 3% a seller already pays to their listing agent, for a total commission of 6% of the sales price).

It is true that agent fees for both buyers and sellers come out of the seller’s side of the transaction, but it isn’t true that the buyer doesn’t get hit.

The 6% Commission Problem: Buyers Pay More Over Time

That’s because the fees are typically baked into the listing price of the house, meaning the seller knows how much they need to get order to pay out that 6% commission and still make a profit. The commission then gets passed onto the buyer in the form of a higher asking price, rather than listed out separately as an add-on to the home purchase.

But, if you think about it, that higher sales price ends up being a really big deal over time, especially when it gets bundled into the loan for a house.

How Agent Commissions Add Up

Let’s walk through it.

Let’s say you buy a $500,000 home. The typical commission would be 6%, or $30,000, split between the buyer’s and seller’s agent. If you took away the 3% due to the buyer’s agent, your new home would cost $485,000.

That $15,000 difference equates to $42 a month across a 30-year mortgage. Tacking on a typical interest rate, that $15,000 turns into $27,000 over the life of the loan. Your agent’s the commission boosts your monthly payment by about $75. That’s money that could otherwise be used to purchase a car, take vacations, or a put a child through college. Ouch.

Still think you aren’t paying for your buyer’s agent?

Maybe a better question would be: how would you feel if you had to cut a $75 check to your real estate agent every month for the next thirty years?

That’s more than double the monthly cost of Netflix or Spotify for the whole family, and those services will probably bring you a lot more enjoyment.

REX gives you cash back when you buy a home. Learn more.

If You’re Confused about Real Estate Agent Commissions, You’re Not Alone

If you were a little unclear about how traditional agent commissions work, you weren’t alone. A recent survey of potential home sellers found that nearly 45% didn’t know that their fee included the buyer’s agent fee.

And 6% of the total home cost? C’mon. Those are by far the highest residential real estate commissions in the world.

On top of that, a recent class-action lawsuit filed against, among others, the National Association of Realtors, accuses the organization of “implementing rules that prevent home sellers, home purchasers, and real estate brokers from negotiating over the commissions that home sellers pay. “

This scenario is one of the many reasons we started REX.

There’s a Better Way to Buy and Sell a Home

REX is the first brokerage built from the ground up to be customer focused, not agent focused. By organizing ourselves differently, using technology to create a smarter process, and removing the need to for buyers to work with an outside agent, REX is able to charge a flat 2-2.5% fee to sell your home.

By removing the obligation to pay two commissions for a single transaction, we save our customers an average of $10,000 off their home sales – while also helping them find additional savings on mortgage, escrow, title, and insurance. And, we work hard to give you a better experience while helping you hold on to that money. 

With REX, you don’t just hire an agent. Your agent is backed by an entire team of experts working prep and market your home, opens doors for buyers, and help you sell more efficiently with one dashboard to track your listing, tours, offers, paperwork, and all the steps to complete the transaction. 

As a salaried employee, a REX agent’s performance is measured by how many people they make happy–not the commission they bring in. If you are looking for a more cost-effective, efficient and customer-focused way to buy or sell your home, we are here for you. 

Have questions? We would love to help! Give us a call at 855-342-4739.

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