How do Real Estate Agents Make Money?

Many people have heard about a lawsuit involving the National Association of Realtors. Because of this lawsuit rumors about what will happen have ranged from, "No more buyer commission," to "buyers have to pay agent out of pocket."

In essence the buyers have always paid the commission. Whomever brings the actual money to the table is where this money comes from and this has always been the buyer and will always be the buyer.

Now, using complex contracts and legal jargon the current state of the process shows the commission, both buyer brokerage and listing brokerage, being paid out of the seller proceeds. This is done to allow for the buyer (the people bringing the money to the table) to be able to finance the cost with traditional loan types.

Guess what folks, this is still going to happen. The words will be different. The forms will be different. The world will continue on the same as it has. Luxury brokerages will charge 6% and discount brokerages will not. This changes nothing but the process.

Sellers: Yes, you need to pay commission to both sides.

Buyers: You now have to negotiate with your agent before you can even look at a house what the agents expects to charge whether it is $10,000 flat fee or a percentage of the gross contract. However, there will be verbiage the effectively CAPS the buyer agent fee. You can always pay less. The agent/brokerage will seek payment from the listing brokerage first.

Again, not much will change.

Stay calm, buy a house.