If you’re a first-time home buyer, chances are you’ve asked yourself: How do real estate agents get paid—and do I have to pay them directly?
It’s a great question—and one that has become more important than ever as the real estate industry evolves.
In 2025, transparency around agent compensation is a hot topic, especially following several class-action lawsuits and changes in how buyer and seller roles are defined. Let’s walk through how agent commissions typically work, what’s changing, and what you need to know before you sign on the dotted line.
What Is a Real Estate Commission?
Real estate agents are most commonly paid through a commission—a fee that’s usually calculated as a percentage of the home’s final sale price. Sometimes, it’s agreed upon as a flat fee instead. This commission is negotiated ahead of time and is typically paid at closing.
Historically, the seller has paid the commission for both the listing agent (the one representing the seller) and the buyer’s agent (the one helping you). This practice made it easier for buyers to afford representation—especially when already budgeting for a down payment, inspections, closing costs, and other out-of-pocket expenses.
Who Pays the Buyer’s Agent?
In many cases, the seller still offers to cover part or all of the buyer’s agent commission—but it’s no longer assumed. Your agent will help you understand if the seller is offering a commission and whether it’s enough to cover your agreement with your agent.
If the seller doesn’t offer compensation—or doesn’t offer enough—you, as the buyer, may be asked to pay your agent directly or make up the difference at closing.
Important Tip: Real estate agents cannot legally say they work “for free.” Even if their fee is covered by the seller, that commission is built into the transaction and ultimately part of what you’re paying for the home.
What Do the Agents Do to Earn the Commission?
🏡 The Listing Agent (Seller’s Agent)
Represents the seller by:
Marketing the property
Coordinating showings
Reviewing offers and negotiating
Guiding the sale through closing
The listing agent’s commission is agreed upon in the listing agreement and often includes compensation for a buyer’s agent if one is involved.
🧭 The Buyer’s Agent
Represents you, the buyer, by:
Helping you find and tour homes
Advising you on fair market value
Writing and negotiating offers
Guiding you through inspections, appraisals, and closing
You’ll agree to a set commission with your agent in a buyer agency agreement, and this document will explain how the agent will be paid—either by the seller, by you, or a combination of both.
What About Dual Agency?
In some situations, one agent or brokerage might represent both the buyer and the seller. This is called dual agency, and it comes with special rules. If your agent is acting as a dual agent, they’re legally required to remain neutral in negotiations and disclose this setup to everyone involved.
Some listing contracts also include a variable commission clause, where the seller pays less commission if the listing agent also brings the buyer. This must be disclosed to all parties and cooperating agents.
Do Agents Keep the Full Commission?
No! Most real estate agents work under a brokerage, and they split the commission they earn with their brokerage according to a pre-set agreement.
For example, if your buyer’s agent earns a $100,000 commission, a portion of that—for example 20% to 50%—goes to the brokerage, and the rest goes to the agent. The agent then pays any expenses for doing business out of their portion including items like taxes, licensing fees, errors and omissions insurance, marketing expenses and so on.
Can I Negotiate the Commission?
Yes—all real estate commissions are negotiable. Agents cannot fix prices across brokerages, and they can’t imply there is a “standard” commission rate. You can discuss the terms of your agreement and choose a rate and structure that works for your needs and budget.
However, brokerages are allowed to set minimum fees for their agents. If you’re not comfortable with the terms offered, you’re always free to shop around and find an agent or brokerage that aligns with your preferences.
Final Thoughts: Know Before You Owe
As a first-time buyer, it’s crucial to have open and honest conversations about compensation before you start working with a real estate agent. Ask questions like:
Who will pay your commission?
How much is the commission?
What happens if the seller offers less than the agreed amount?
Are there any upfront costs?
Understanding how your agent is compensated gives you more control over your home buying experience and helps prevent surprises at closing.
If you have any questions, feel free to reach out to one of Hall & Nixon's real estate agents. They would be happy to assist you!
