Homebuyers

Working with a Real Estate Agent: What Homebuyers Should Understand

Working with a real estate agent can help you to find the right home, avoid potential pitfalls, and submit a competitive offer.

In the wake of the National Association of Realtors (NAR) settlement in 2024, sellers are no longer required to compensate the buyer’s real estate agent. Buyers now need to come to an agreement with their agents on what services the agent will provide and how much the agent will be paid.

Typically, buyer’s agents are paid 1% to 3% of the sale price of a home. With so much money on the line, buyers will want to get the best deal possible. That’s why it’s important to negotiate your contract with your real estate agent.

The agent you hire can make all the difference in helping you find the right home (and avoid the wrong ones), put together a competitive offer, and navigate the closing process.

“[Agents] can help with finding off-market properties and guiding the buyer to [get] the most for their money,” said Tammy Schneider, a real estate agent at S&D Real Estate Services in Lakeland, Fla.

Why it’s important to have a written real estate agent contract

One of the main changes following the NAR settlement is that buyers must sign a written agreement with a real estate agent before they start looking at homes together.

The agreement spells out the agent’s responsibilities, how long they will work with the buyer, and the compensation they will receive for their work. This is key because many sellers are no longer covering the fees for the buyer’s agent.

Buyers need to agree upon how much they will pay the agent if the seller doesn’t pick up the tab. This can be a percentage of the sale price, a flat fee, or another compensation structure.

Often, it’s a good thing as there is no room for confusion as the homebuying process progresses.

The buyer benefits because the agent "gets to know [them] and what their goals are for their homebuying journey," said Schneider.

Buyers can negotiate with real estate agents

The agreement must work for both you and your agent, so don’t hesitate to negotiate. Some real estate agents may come down on their fees, especially if they offer fewer services or are working with buyers for shorter periods of time.

"The buyer gets to help make the decisions of what's in the contract as far as the length of the contract, what type of home they will be looking for, and the amount the realtor will get paid," said Schneider.

Plus, while the agreement specifies how much the agent will earn, that doesn't mean you have to pay them directly. You may be able to persuade the seller to cover some, or even all, of your agent's fees.

Buyers in slower markets where there isn’t as much competition for properties or those purchasing homes that have been sitting on the market for a while may have an easier time convincing the seller to pick up the cost.

Regarding the length of the agreement, don't be afraid to push for a short-term, non-exclusive arrangement so that you’re not tied to one agent.

You're entitled to get a feel for how an agent works before committing to do business with them. Plus, if you're looking at homes in multiple areas, partnering with more than one real estate professional may make sense.

What’s included in the written buyer agreement

Your agreement may vary slightly, but you can generally expect the document to cover:

• Responsibilities of each party: This is key as you want to understand the services you will be getting. For instance, you may agree that the agent will show you properties within a certain area, structure your offers, and represent you throughout the process.
• Contract length: The agreement may last for a single property showing, a week, a month, or any other term both parties agree on. The contract may be exclusive (you can only work with that agent) or non-exclusive (you can work with other agents).
• Agent compensation: The agreement must clearly state how much the agent will be paid for their services (commission or other fees) and when they will receive compensation. The contract must specify if the agent will receive an hourly rate, a flat fee, a percentage of the purchase price, or some combination of these. It should also include numbers, such as a $5,000 flat fee or a 3% commission on the sale price.

• Cancellation procedure: Generally, the contract will end after an agreed-upon time, unless it automatically renews.

However, if either party wants to end the agreement early, there must be a straightforward process for doing so. This may include a provision stating buyers will provide written notice to their agents.

What to watch out for in your agreement

While most agreements will be on the up-and-up, you should keep an eye out for potential red flags. These include:

• Lengthy duration: Don't let the agent push you into a long-term arrangement that makes you uncomfortable.
• References to non-negotiable commissions: The agreement must make it clear that agent compensation is negotiable. However, an agent has a right to tell you what their minimum acceptable rate is to work with you.
• Vague wording: Imprecise language, such as how to end the working relationship, can cause confusion and other problems.

"A buyer should have an agent that can explain everything on any of the contracts that they are about to sign,” said Schneider. “If the buyer does not have a clear understanding, they should ask questions.”