Please ensure Javascript is enabled for purposes of website accessibility

Realities of Real Estate: Who agents represent and how they get paid

How agents can represent someone varies from state to state, and depending which real estate company you employ, specific buyer or listing agent agreements can also vary. In the past, agents only represented the seller, and that was it. Today, it’s very different.

According to the Maryland Real Estate Commission, there are actually five different forms of representation that can exist between an agent and their client. They include seller’s agent, cooperating agent, presumed buyer’s agent, buyer’s agent and a mysterious thing called dual agency. Plus, in some cases, an agent can actually be more than one of these things at a time. Confused? Don’t worry; there are even some real estate agents who are a little shaky on the subject.

We could go on from here and explain the details behind what makes a presumed buyer’s agent versus a cooperating agent, and how a buyer’s agent or a seller’s agent could also be a dual agent. But, unless you’re a lawyer, you’ll either fall asleep or quickly abandon today’s column and flip the page to see what’s on sale at Best Buy. So, we’ll spare you the excruciating details. Even for agents, this topic can make your head swim. Nevertheless, it’s an important issue, and there’s some fundamental information you should know.

At your first scheduled meeting with an agent, they are required to give you a form called Understanding Whom Real Estate Agents Represent. This form is NOT a contract. Signing it will not obligate you to that agent or anyone else. It is a notice, required by the Real Estate Commission, to help you understand how agency representation works. Read it, and if you don’t understand what it says, ask the agent. And, if you get the feeling the agent doesn’t understand, then get a new agent.

A positive change in agency is that buyers now have a right to representation. Buyer agency isn’t all that new; however for many people, the last time they purchased a home, buyer agency may not have existed. In the old days, buyers often thought the agent driving them around was working on their behalf. But actually, that agent’s sole responsibility was to represent the seller. It was truly an age of “buyer beware.” So, if you haven’t bought a home for a while, buyer agency could be new to you. Today, a buyer can benefit from the tremendous knowledge of an agent; while in most cases, it will cost you little or nothing, since the seller has usually contracted to pay the buyer’s agent a commission.

That brings us to the next subject; exactly how do agents get paid? When you list your house with an agent, you make an agreement to pay the agent’s broker a commission. All brokers independently set their own commission rates, so there is no set amount, and it can also depend on the type of services that real estate firm provides. For illustration purposes only, let’s say you agree to pay a 6 percent commission on the sale your house. On a $400,000 property, that comes to $24,000. But, don’t think for a minute that the listing agent is going to get paid $24,000. In most cases, the commission will be divided four ways.

First, the listing broker will share that 6 percent commission with the buyer’s broker. Then, each broker will split their portion of the commission again with the agents. As a result, once the $24,000 is fully allocated, the agent you hired to sell the house might end up with a paycheck of something around $7,200. To carry our example forward, let’s examine what the agents are likely to do for their piece of the pie.

Although conditions are improving, selling a house is still no easy thing. An agent may work for many months with no guarantee of success, and it doesn’t take long to plough through $7,200 worth of advertising and effort. Agents aren’t getting paid any kind of salary from the broker. Plus, there are many ongoing expenses, things like association dues, business and medical insurance, office expenses, and so on.

Like any business, there are large fixed costs that must be absorbed, even if the agent doesn’t sell a single house. Agents work entirely on commission; and furthermore, the agents will pay out of their own pocket for all of the advertising and marketing materials associated with selling your home. If your house doesn’t sell, the agent will get nothing, nor will they be reimbursed for their time and investment. Being a real estate agent is clearly risky business. So, don’t make an impulsive decision about selling your house. The agent will be making a substantial commitment on your behalf, in terms of both time and money; be confident about your decision to sell.

For the buyer’s agent, there is also a tremendous investment associated with getting to the settlement table. Sometimes, buyers will want to see a lot of homes before making a purchase decision. There have been times when we’ve shown clients well over a hundred properties, only to have them end up deciding not to buy. As with the listing agent, the buyer’s agent will also receive no compensation, unless the buyer actually buys a house. Plus, much of a buyer’s agent work really comes after the contract is signed.

There are home inspections, coordination with the title and mortgage companies and a whole lot of hand-holding that is necessary to actually get the sale to settlement. The vast majority of “for sale by owner” transactions never get to settlement, often because there aren’t any agents present to help navigate the many issues that must be resolved for a successful sale.

Time is money, and you’d probably be quite surprised at how much time both listing and buyer’s agents must devote to each deal. Additionally, agents tend to work at the convenience of their clients. So, it isn’t a 9 to 5 kind of job; it’s more like an always on call kind of job.

Finally, the worth of an agent isn’t just measured in terms of time or the money. There’s also great value in an individual agent’s knowledge and expertise. On the listing side, you might think that the commission’s a whole lot of money. There’s no doubt it is, but a good agent can more than recoup that for you with their marketing savvy, the proper pricing of your house and an ability to expose your property to a vast number of buyers. On the buyer’s side, the seller has usually already agreed to pay the buyer’s agent a commission.

So, you as a buyer can take advantage of a buyer agent’s knowledge, without really having to dig into your own pocket. And, when it comes to an agent’s knowledge, remember that not all agents are alike. Some possess a fairly deep and broad range of real estate experience. Others might prefer to specialize in a specific type of property, or more narrowly defined geographic area in terms of where they do business. Beyond being a good fit from a personality perspective, also make sure that the agent you select is equipped with the know-how necessary to get the job done.

In sum, an experienced agent can be an invaluable resource in the process of buying or selling a house. Just be clear about who’s representing who, how everyone’s going to get paid, as well as the agent’s ability to assist with your individual needs.

Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is