What does an investor-friendly agent actually cost me? I thought buyers didn't pay agents

Question

Mostly reading about notes so this is adjacent to my lane, but I'm looking at buying one small rental to understand the asset side, and I've hit something confusing.

Everything I read from a few years back says the seller pays both agents and the buyer's agent is free. Then I read something saying that changed and buyers now sign agreements to pay their own agent directly. Then someone on another forum said nothing really changed and the seller still pays in practice.

So which is it in a normal deal? And separately, if I'm hiring someone specifically because they do investor analysis, am I paying more than a regular buyer would? I have no sense of whether the number is 500 or 15,000.

Rena Guide · Accepted Answer

Here's the mechanism, and then the part about specialists.

A buyer's agent has to be paid by someone. What changed with the NAR settlement is that buyers now sign a written agreement with their agent, before touring, that states the compensation, and offers of compensation to buyer agents are no longer advertised on the MLS the way they were. The seller can still agree to pay your agent, and often does, but it's negotiated in the offer rather than assumed. So a real deal usually looks like this: you agree to pay your agent 2.5%, you ask the seller to cover it in your offer, and if the seller says no you owe the difference at closing. Confirm the exact wording of any agreement with your agent in writing, and note that the standard forms differ by state.

On the number, @kestrel's math is right. Percentage compensation on a 200,000 purchase at 2.5% is 5,000. Flat fees for a defined scope, roughly 1,000 to 3,000, exist and some investor-focused agents offer them for repeat clients who source their own deals.

Specialists generally don't charge above market rate. What they do is different work for the same rate. An agent who runs a rent roll, checks the actual condition of the roof against your repair budget, and tells you the numbers don't work is saving you a purchase, not adding a line item.

Since you're coming from notes, one thing that catches people: an agent's commission is a closing cost on your side of the settlement statement, so it affects your cash to close and your basis. Talk to your accountant about how it's treated, because that varies with how you hold the property.

nataliehsu · Answer

I'm trying to work out where I fit in this industry so I've been reading the same threads. My understanding is that the change was about who has to agree to what up front, and the money can still end up coming out of the seller's proceeds. But it's now a negotiated item instead of an assumption.

carlos_nunez · Answer

In practice you sign a buyer agreement that says what your agent gets paid. Then when you write an offer, you can ask the seller to cover it. Whether they do depends on the deal. On a distressed property with three offers, asking the seller to cover 2.5% makes your offer worse by 2.5% and you should know that when you write it.

aaron_fitz10 · Answer

The 500 to 15,000 range in your question is doing a lot of work. On a 200k house 2.5% is 5,000, so you're in the middle of your own range without meaning to be. Flat fee arrangements exist too, they're just less common.

What does an investor-friendly agent actually cost me? I thought buyers didn't pay agents

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