What does an investor-friendly agent actually cost, when buyers aren't supposed to pay agents?

Question

This question sits adjacent to note investing, but it comes up whenever evaluating a small rental to understand the asset side, and the commission picture has gotten confusing. Older material generally says the seller pays both agents and the buyer's agent is effectively free to the buyer. More recent material says that changed and buyers now sign agreements to pay their own agent directly. Other accounts say practically nothing changed and the seller still pays in most transactions. In a normal deal today, buyer agent compensation is negotiated and disclosed up front rather than assumed, and it remains common for the seller to offer to cover it as part of the offer terms, though that is now a negotiated point rather than a given. Hiring an agent specifically for investor analysis does not typically change what a buyer pays in commission, since that number is set by the buyer representation agreement rather than by the agent's specialty. The honest range for buyer-side commission runs from around 2 to 3 percent of price in most markets, not a flat dollar figure, so a 500 dollar number and a 15,000 dollar number can both be correct depending on price point.

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, @aaron_fitz10'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 a buyer signs an agreement that sets what their agent gets paid. Then when writing an offer, the buyer can ask the seller to cover it. Whether the seller does depends on the deal. On a distressed property with three offers, asking the seller to cover 2.5% makes that offer worse by 2.5%, and that's worth knowing before writing 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, when buyers aren't supposed to pay agents?

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