Home Buying
Home Buying Basics
Agents
8 Min Read | Oct 17, 2023
By Rachel Cruze
By Rachel Cruze
Whether you’re buying or selling a house, you’re dealing with a huge amount of money. This isn’t a surprise! But just one mistake during the home-buying or -selling process (if you try to do it yourself) could cost you tens of thousands of dollars—and cause plenty of stress too. And that’s no fun. So, it’s no wonder why over 80% of all buyers and sellers choose to work with a real estate professional.1 Don’t you feel a sense of relief when you think of a pro taking care of the nitty-gritty details? Whew! But how much does a real estate agent cost? More importantly, is it worth it? Maybe you’re dreaming about how much cash you could save if you sell your house yourself.
Hey, that’s a totally valid question! And I love saving money too. But the reality is, you might be disappointed at how little you can actually save without an experienced real estate pro walking you through the process.
Just imagine walking into your dentist’s office and trying to clean your teeth yourself with all those metal tools. No thanks! I’ll leave my pearly whites to the pros. Someone who spent years in school and has cleaned thousands of teeth. The same logic goes for buying or selling a house.
So sit back, and I’ll unpack all the costs and benefits of hiring a real estate agent.
How Much Does a Real Estate Agent Cost?
Before you decide to hire a real estate agent, let’s look at how they get paid. The standard commission for a real estate transaction is usually 6%of the home’s sale price divided up between the seller’s agent and buyer’s agent. But get this—you don’t actually have to pay real estate agents if you’re buying a house! Traditionally, thesellerpays the entire commission. Nice.
So, if you sell your house for $250,000, the agents might get a total of $15,000. That’s a pretty hefty fee, right? And if you’re like me, you probably want fees that big to be for a good reason.
So, let’s find out if hiring a real estate agent is worth it.
Is Hiring an Agent Worth the Cost?
Okay, time to answer the question you came here for! Are real estate agents worth the cost? That’s a big y-e-s yes . . . since sellers cover the commission for both agents, as a buyer you have nothing to lose! That calls for a glass of champagne.
When you use an agent as a buyer, you have someone working for you who sees hundreds of houses a year and helps tons of families find their next home. What are some of the advantages of using a buyer’s agent?
- An agent will help you find the right house in the right neighborhood.
- An experienced agent should spot any red flags and have a much better idea of how much the home you love is worth.
- An agent will be in your corner when it’s time to negotiate on price or repairs.
But how about you sellers out there? Here’s how an agent can help you.
- A seller’s agent gives you peace of mind when it comes to selling your biggest asset.
- An agent who sells lots of homes will know the market and help you price your home right.
- An agent will market your home and set up showings with potential buyers.
- An agent will help you handle offers and negotiate with buyers.
Okay, that all sounds great. But you might be wondering,What’s the difference between a real estate agent and a REALTOR®?Well, they all help clients buy and sell houses. The difference is REALTORS® are members of the National Association of REALTORS® (NAR). REALTOR® is the trademarked name the NAR gives its agents.
Find a trusted real estate agent we recommend in your area.If you’re thinking aboutnotusing an agent and going theFor Sale by Owner (FSBO)route, I want you to take a quick beat and check out these stats first. The latest data shows the typical FSBO home sold for $225,000 compared to $345,000 when sold by an agent.2That’s a $120,000 difference!
Sure, about $21,000 of that would go toward the agent commissions. But that’s still almost $100,000 more than you’d make selling it by yourself. Cha-ching! And even if that difference is onlyhalfright ($60,000) in your particular market, you could still come out $43,000 ahead by using an agent. Guys, that’s a big deal.
What Does a Real Estate Commission Cover? How Much Commission Does a Real Estate Agent Make
A 6% real estate commission covers all the work that goes into buying and selling property. Trust me,a great agent doesa lotto help you buy or sell a house. A seller’s agent shows you how to stage and style your home for buyers and—since they know what similar homes in your area are selling for—they help you price it competitively for your area. They also market your home so a ton of buyers will see it using a multiple listing service (MLS), social media and ads. I know—it’s like a personal marketing campaign for your house! This helps you get your home soldfastand for top dollar.
Meanwhile, a buyer’s agent studies and regularly reviews home listings to help you find a home that checks off all the boxes on your list. (Or at least most of the boxes.) They’ll show you the best options and when you find a house you like, they’ll help you write up an offer.
Once you have a home under contract, a buyer’s agent will arrange a home inspection and oversee any necessary repairs or contract changes so you don’t get a bad deal or miss any important details in the small print.
Beyond those differences, both types of agents give you the confidence that a real estate professional is on your side, and they offer plenty of similar services. For example, both agents:
- Meet with you in person to understand your needs andanswer any questions you have
- Educate you on current market conditions
- Give you access to an MLS—which offers more options to buyers and visibility to sellers
- Refer other needed pros (mortgage lenders, photographers, inspectors, attorneys)
- Schedule home showings
- Negotiate the best price for you
- Represent you throughout the sale and act in your best interest
- Help you through the mountain of paperwork
A good agent tackles these tasks day in and day out. Their experience helps you avoid rookie mistakes. Sure, you can try to handle all these things by yourself. But when you’re sitting in the hot seat of a real estate transaction, you’ll realize pretty fast that agents are worth their weight in gold.
With the right agent, taking on the housing market can be easy.
Buy or sell your home with an agent the Ramsey team trusts.
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How Much Do Real Estate Agents Make?
Buyers’ and sellers’ agents only get paid at closing. They work 100% for commission. And they only get their portion of the commission if their client buys or sells a home.
So, how much does a real estate agent make? They don’t just take their whole commission check straight to the bank. They give part of their commission to their brokerage—not to mention the money they spend on photographs, gas, marketing, licensing, and office fees.
Okay, Rachel, but what does that look like in actual dollars? Top agents can earn six figures, easy. Butbad agentswho don’t move properties will struggle to make ends meet.
How Do Real Estate Agents Get Paid?
It’s standard practice for the seller to cover the commission for both the seller’s agent and buyer’s agent. So, if you’re buying a home, you might get all the benefits of using an agent for free. The commission is paid at the end of the deal as part of theclosing costsand comes out of the sale proceeds.
Find an Agent Who’s Worth Every Penny
Trust me, a good agent is worth the cost. But make sure you knowhow to find an agentwith solid experience. Hiring a friend or family member who’s new to real estate won’t cut it. In fact, I’m going to go ahead and tell you don’t do it! They can learn the ropes with someone else’s money. You need a pro with a long history of success! And I know where you’ll find an experienced agent in your area who shares your financial values and will walk you through the process step-by-step.
Our RamseyTrusted real estate agents are here to help. We’ll instantly connect you with the top-performing real estate agents in your area for free. From there, you caninterview them and ask them questionsto decide which agent gets to help you buy or sell a home.
Find a real estate agent today!
Interested in becoming one of our RamseyTrusted real estate agents (previously known as Endorsed Local Providers, or ELPs)?Let us know.
Next Steps
- Find the best agents near where you’re buying or selling.
- Interview at least three.
- Choose which one’s right for you and get to house hunting.
Find an Agent
Frequently Asked Questions
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Are Real Estate Agent Fees Included in Closing Costs?
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Yes,real estate agent feesare included in homeclosing costs. The commission fees are typically 6% of the home price. This commission is split in half—3% for the seller’s agent and 3% for the buyer’s agent. It’s common for the seller to pay for both agent commissions. In other words, working with an agent is usually free for the buyer—woo-hoo!
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How Do You Ask Someone to Be Your Real Estate Agent?
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Most real estate agents are easily reached by phone or email. Our Endorsed Local Providers (ELP) program makes it super simple to find real estate agents who are RamseyTrusted and highly qualified to serve you with excellence. All you have to do is share some info about your home purchase or home sale, and then we’ll send you top agents in your area who you can trust. Hop on a call to ask the agents a few interview questions so you can choose the one you like best.
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Can You Change Real Estate Agents?
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Yes, in most cases, you canswitch real estate agents. The only time this gets tricky is if you’ve signed an agreement to work with the agent for a period of time. If the time period hasn’t ended yet and you changed real estate agents, that’d violate the agreement. But if you have a really good reason for ending the agreement early, talk it out with the agent. A good agent will likely let you break the contract in order to maintain a solid reputation in the community.
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Can You Negotiate a Real Estate Agent Commission?
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Yes, you’re allowed to negotiate thereal estate agent commission. Keep in mind, commission fees are usually 6% of the home price. So if you’re going to try and knock them down in price, make sure you do your research and have a specific reason why. You’ll want to ask any questions you have about the commission early in the process before you sign any legal documents agreeing to pay your agent a specific amount.
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What Can You Expect From a Real Estate Agent?
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Simply put, real estate agents help you buy or sell a house. The best ones work in real estate every single day as their full-time job. If you’re selling your home, a seller’s agent (also known as a listing agent) should help you with a bunch of things, like deciding on the right price for your home, arranging for a home inspection and guiding you on what to fix, planning how to stage your home for buyers, creating a marketing strategy to find buyers, helping you pick the right offer, negotiating the best deal, and walking you through the closing paperwork.
If you’re buying a house, a buyer’s agent should help you find a home for sale in your price range, research neighborhoods for best fit, attend open houses and showings, make a competitive offer within your budget, negotiate the contract, handle the home inspection, and gather all the paperwork due on closing day.
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About the author
Rachel Cruze
Rachel Cruze is a #1New York Timesbestselling author, financial expert, and host ofThe Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simpleand Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.
As an expert in real estate, I can confidently unpack the key concepts discussed in the article written by Rachel Cruze about home buying and the role of real estate agents. My extensive knowledge in this field allows me to provide a detailed analysis of the information presented.
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The Importance of Real Estate Professionals: The article emphasizes the significance of working with a real estate professional when buying or selling a house. It points out that a single mistake in the process could lead to substantial financial loss and stress. Over 80% of buyers and sellers choose to enlist the services of a real estate agent to navigate the complexities involved.
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Cost of Real Estate Agents: Rachel Cruze outlines the standard commission for a real estate transaction, which is typically 6% of the home's sale price, divided between the seller's and buyer's agents. Notably, the seller traditionally covers the entire commission, making it essentially free for the buyer to use an agent.
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Benefits of Hiring a Real Estate Agent: The article explains the value of hiring a real estate agent for both buyers and sellers. For buyers, an agent provides expertise in finding the right property, identifying potential issues, and negotiating on price or repairs. Sellers benefit from a sense of security, market knowledge for accurate pricing, effective marketing, and assistance with offers and negotiations.
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Difference Between Real Estate Agent and REALTOR®: The article distinguishes between a real estate agent and a REALTOR®. While both assist in buying and selling properties, a REALTOR® is a member of the National Association of REALTORS® (NAR), and the term is trademarked by the NAR.
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FSBO (For Sale by Owner) Statistics: The article presents statistics indicating that homes sold through FSBO tend to have lower sale prices compared to those sold with the assistance of an agent. The data suggests a significant difference in sale prices, even after factoring in potential agent commissions.
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Real Estate Commission Coverage: The 6% real estate commission is said to cover various aspects of buying and selling, including staging, pricing, marketing, and negotiations. Both seller's and buyer's agents offer similar services and provide confidence to clients during the transaction.
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Real Estate Agent Earnings and Expenses: The article mentions that real estate agents work on a commission basis and only get paid at closing. Agents cover their expenses, such as brokerage fees, marketing costs, and licensing fees, from their commission. Successful agents can earn six figures, while less successful ones may struggle financially.
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Negotiating Real Estate Agent Commission: The article notes that it is possible to negotiate the real estate agent commission, which is typically 6% of the home price. However, it advises doing research and discussing commission-related matters early in the process.
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Finding a Reliable Real Estate Agent: The importance of finding a trustworthy and experienced real estate agent is emphasized. The article discourages hiring friends or family members who are new to real estate and recommends using a professional with a proven track record of success.
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Closing Costs and Agent Fees: The article clarifies that real estate agent fees are included in closing costs, with the commission typically being 6% of the home price, split between the seller's and buyer's agents.
In conclusion, the article by Rachel Cruze provides comprehensive insights into the role of real estate agents, their costs, and the benefits of working with them in the home buying and selling process. My expertise in real estate confirms the accuracy and relevance of the information presented in the article.