Allen Markel, REALTOR® · Texas Premier Realty

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How real estate agents get paid (and why it is negotiable)

Nobody hands you a price list for an agent. What an agent earns is agreed in writing, deal by deal, and you have more say in it than most people are ever told.

Real estate commissions are not set by law and are fully negotiable. This page is educational and is not legal advice.

Is a real estate agent's pay really negotiable?

Yes. Nothing about it is set by law, and no rulebook fixes an amount. There are actually two separate conversations, and they are easy to blur together.

The first is between a seller and the listing agent the seller hires. The second is between a buyer and the buyer's own agent. In addition, a seller may choose to offer something toward the buyer's agent's pay when an offer is made. That is a third negotiation, and it is also optional.

The Texas contract says the same thing in plain words: brokerage compensation is not set by law and is fully negotiable, and each party pays their own broker under a separate written agreement (Paragraph 12B of the TREC resale contract). If anyone tells you a number is simply how it works, ask them where it is written.

What do most buyers misunderstand about a buyer's agent?

That every buyer's agent does the same job. They do not. Some agreements amount to little more than unlocking doors: the agent shows you a house and that is where the service ends.

Full representation is a different job. It means writing your offer in your interest, negotiating the price and the terms, protecting you through inspections, the appraisal and the closing, and bringing you the title company, inspector and lender contacts that keep a deal from falling apart. Two agents can both say they will be your buyer's agent and be describing very different amounts of work.

So do not compare agents by what they charge until you know what each one actually does for it.

Why do I need my own agent instead of the listing agent?

Think about a courtroom. If you go to court over something major in your life, you do not use the same attorney as the other side. You get your own representation. A home purchase works the same way.

The listing agent was hired by the seller, is paid by the seller, and owes duties to the seller. If that agent worked against the seller, the seller could take action against their own agent. So if you negotiate directly with the listing agent, the person across the table is legally obligated to look out for the other side.

In Texas, an agent cannot show you homes until you have hired them, and you hire an agent by signing a buyer's representation agreement. Under Occupations Code 1101.563, that written agreement has to be in place before the agent shows you a home. It must state the services, when it ends, whether you may work with other agents, whether the agent represents you, and the amount or rate of compensation and how it is determined. It must also say, in conspicuous language, that broker compensation is not set by law and is fully negotiable. Open houses are excluded from the requirement.

What should I ask before I sign a buyer's representation agreement?

Read the whole agreement, and ask your agent to walk you through it. These six questions are a good start.

Questions to ask before you sign a buyer's representation agreement

  1. What services exactly? Will the agent write my offers, negotiate for me and guide me through inspection, appraisal and closing, or only show homes?
  2. What do I pay, and when? Is it a flat amount, a percentage, or something else, and at what point is it owed?
  3. Who pays first? Will the agent ask the seller to contribute, and what happens if the seller declines?
  4. What happens if the seller offers less than the agreement says? Do I owe the difference?
  5. Can I end the agreement? What are the steps, and is there any charge for doing so?
  6. How long does it last? What is the end date, and does it renew?

Why is the commission you hear about not what an agent takes home?

Because a lot of hands are in an agent's pocket before the agent is paid. Depending on the agent and how the client arrived, that can include a referral fee to whoever supplied the lead, the brokerage's split, MLS and association dues, insurance, marketing and taxes.

Referral fees deserve a closer look. Most of the big home-search websites, and many lenders, earn their money by selling your inquiry as a lead to an agent or lender who pays for it. Depending on the program, that fee can be a significant share of what the agent earns on the deal. Somebody has usually paid for the introduction, and it is worth knowing that before you decide whom to call.

None of this means an agent is overpaid or underpaid. It means the number on a contract is not the number in the agent's pocket, and that is one more reason the number is worth a conversation.

How does the buyer's agent get paid?

You and your agent agree on the compensation in your buyer's representation agreement. It is then commonly asked of the seller first, and that too is negotiated. If the seller agrees to contribute, the offer says so, and the contribution is paid at closing and applied toward what you owe your agent. If the seller does not contribute, you owe the amount in your own agreement.

Under the rules that followed the NAR settlement, offers of compensation to buyer's brokers can no longer appear in the MLS, so this conversation now happens openly, usually at the time an offer is made. Texas REALTORS also notes that a buyer's broker may not be paid more, from any source, than the amount or rate in the written buyer agreement.

Can I avoid paying my agent out of pocket?

I have an approach designed so my buyers are not asked to pay out of pocket. In 11 years as a REALTOR, none of my clients has ever paid me out of pocket for my compensation. Ask me how.

Schedule time with Allen Call (832) 709-2540

Past results do not guarantee a future outcome. Every deal, and every agreement, is different.

Quick answers

What else do people ask?

Do I have to sign something before a Texas agent shows me a house?
Yes. Under Texas Occupations Code Sec. 1101.563, a license holder must have a written agreement with the prospective buyer before showing residential property. Open houses are excluded.
Can the seller still pay my agent?
Yes, by negotiation. Paragraph 12B(1) of the TREC resale contract lets the seller pay a dollar amount or percentage toward the buyer's broker's compensation, applied to what you owe under your own buyer agreement.
Is a real estate commission set by law?
No. Brokerage compensation is not set by law and is fully negotiable. Your agreement with your agent and the seller's agreement with the listing agent are separate.
Why can't I see what the seller offers a buyer's agent in the MLS?
Offers of compensation to buyer's brokers may no longer appear on an MLS platform. Offers can still be made outside the MLS with the seller's authorization, so ask your agent what is on the table.

I am Allen Markel, a REALTOR with Texas Premier Realty (TREC #0658294). I wrote this to explain how the pay works, not to tell you what to pay anyone.

Real estate commissions are not set by law and are fully negotiable. This page is educational and is not legal advice.

Questions about How Agents Get Paid

Your own agent

  • Why not just use the seller's listing agent for my purchase?

    The listing agent was hired by the seller, and their agreement is with the seller. Your own agent works under a separate agreement with you and focuses on your offer, your negotiation and your inspection and closing. Each role has its own job. If you want to understand what duties a particular agent owes under a particular agreement, ask the agent to explain it and ask an attorney for a legal reading.

Buyer agreement

  • What goes into a Texas buyer's representation agreement?

    Expect it to cover the services, how long it lasts, whether you can work with other agents, and the amount or rate of compensation and how it is determined. It is a written agreement you sign with your agent, and the page explains that compensation is negotiable. Ask your agent to walk through every line before you sign, and ask an attorney if you want a legal review.

  • How did the NAR settlement change how buyer agent pay is handled?

    Offers of compensation to buyer's brokers no longer appear in our listing data, so the conversation about it now happens more openly, usually when an offer is made. That makes the written agreement with your own agent more important, because it is where your compensation terms live. Ask your agent how they handle it, and ask the agent or an attorney to explain how it applies to your purchase.

Your agent

  • What is a buyer's representation agreement?

    It is the written agreement between you and the agent you hire. It sets what services the agent provides, how long it lasts, and how the agent is compensated. It is negotiable before you sign. Read the whole document, ask your agent to walk you through it, and ask an attorney if you want a legal review of the terms.

  • Can I end a buyer agreement early?

    That depends on the wording of your agreement, so ask before you sign: how can it be ended, what are the steps, and is there any charge. We are a REALTOR and consultant, not attorneys, so for a legal reading of a document you already signed, ask an attorney. A clear answer up front prevents a hard conversation later.

  • Does paying an agent less mean getting less service?

    Not necessarily, and a higher amount does not guarantee more. The useful comparison is what each agent actually does: who writes and negotiates your offers, who guides you through inspection, the appraisal and closing, and what you owe and when. Compare the work first and the amount second, and ask each agent to put it in writing.

  • What does a listing agent do for a seller?

    A listing agent typically helps a seller price the home, prepare it, market it, handle showings and offers, negotiate, and keep the closing on track with the title company and buyer's side. What is included and what it costs is agreed in a written listing agreement. Ask each agent what is covered and what is extra before you sign.

  • Why do some agents offer different services for the same job?

    Because there is no standard package. One agent may only open doors and another may write offers, negotiate and manage the deal to closing. Ask who does what, who you will talk to, and how they are paid. Different structures exist, and the usual way is not always in your interest. Talk to us and we will walk you through our options.

Compensation

  • Can a REALTOR's pay be a flat amount instead of a percentage?

    Yes. What is agreed is negotiable, and it can be structured in different ways, such as a flat amount, a percentage or something else. The structure is written into the agreement before work starts. Ask each agent how they structure it and at what point it is owed, so you can compare real terms.

  • What is a referral fee and why does it matter to me?

    A referral fee is paid by an agent to whoever sent them the client. Many home-search websites and some lenders earn money by selling your inquiry as a lead, so someone has often paid for the introduction. That does not make anyone dishonest. It is simply worth knowing before you decide whom to call, and a fair question to ask any agent.

  • Who pays my agent if I buy a new-construction home?

    It depends on your own agreement and on what the builder agrees to, if anything. Builders have their own contracts and policies, so ask early, before you visit a sales office, and have your agent explain how your agreement applies. If you want a legal reading of the builder's contract, an attorney can do that.

  • How does a REALTOR get paid if the deal does not close?

    That is determined by the written agreement, so ask before you sign what happens if the purchase does not close, if the agreement ends early, or if you buy without the agent. Do not assume. A clear answer in writing protects both sides, and an attorney can review it with you if you want a legal opinion.

  • What if the seller offers less than my agreement says?

    That is one of the questions to ask before you sign. Find out whether you owe the difference, how it is handled at closing, and what your lender allows. Compensation is negotiable, so the answer should be written in your agreement. Ask your agent to walk you through a few scenarios with real numbers, and ask your lender about its limits.

Team

  • Should an attorney read my agent agreement?

    That is your choice. An attorney can explain what a document legally means, which is something a REALTOR cannot do. Your REALTOR explains how the agreement works in practice, the lender covers loan rules and the title company handles the closing. Many buyers read it with their agent first and bring questions to an attorney if something is unclear.

  • What is the difference between an agent and a broker?

    In Texas, a broker holds the license that sponsors agents, and agents work under a broker. In our case that is Texas Premier Realty. Compensation is agreed in writing, and it flows through the brokerage. Ask any agent which brokerage they work under and who is responsible for the agreement.

  • How does a good REALTOR earn their keep for a buyer?

    By building a plan around your goals, helping you use the lender's numbers to shop, writing offers that fit your situation, negotiating terms, and keeping inspection, appraisal and closing on schedule. There are many ways to buy and sell, and the usual way is not always in your interest. Talk to us and we will show you the options.

Two separate conversations

  • Who pays the listing agent and who pays the buyer's agent?

    They are separate agreements. A seller agrees to pay compensation to the listing agent they hire, and a buyer agrees to pay compensation to the buyer's own agent. A seller may also choose to offer something toward the buyer's agent when an offer is made, which is a third and optional negotiation. Each of these is agreed in writing, so read each one separately.

What buyers misunderstand

  • What does full representation for a buyer actually include?

    It means writing your offer in your interest, negotiating price and terms, protecting you through inspections, the appraisal and closing, and bringing you the title, inspector and lender contacts that keep a deal together. Some agreements amount to little more than showing homes. Two agents can both say they will be your buyer's agent and be describing very different amounts of work.

  • How should I compare agents if I should not compare by price?

    Compare what each one actually does for the amount, not only the amount. Ask who writes and negotiates your offers, who guides you through inspection, appraisal and closing, and what you owe and when. A lower number with less service is not the same product as a higher number with full representation. Talk to us and we will walk you through what we do and how it is agreed.

Buyer representation agreement

  • When is my agent's compensation actually owed?

    That is set in your own agreement. Ask whether it is a flat amount, a percentage or something else, and at what point it is owed. Typically it is tied to a closed purchase, but do not assume. Read the agreement for the trigger and ask your agent to confirm it before signing.

How the buyer's agent gets paid

  • What happens if the seller declines to pay my agent?

    If the seller does not contribute, you owe the amount in your own buyer agreement. If the seller agrees to contribute, the offer says so, the contribution is paid at closing and it is applied toward what you owe your agent. Because of this, ask your agent up front what the plan is if the seller says no, so there is no surprise at the closing table.

  • Can my agent be paid more than my agreement says?

    Texas REALTORS notes that a buyer's broker may not be paid more, from any source, than the amount or rate in the written buyer agreement. That is one reason the written agreement matters and why its terms deserve a careful read. If you have a question about how that applies to your deal, ask us.

What an agent takes home

  • Why is the commission I hear about not what an agent takes home?

    Several costs come out before an agent is paid. Depending on the agent and how the client arrived, that can include a referral fee to whoever supplied the lead, the brokerage's split, listing-service and association dues, insurance, marketing and taxes. None of this means an agent is overpaid or underpaid. It means the number on a contract is not the number in the agent's pocket.

  • What is a referral fee and why should I care?

    A referral fee is paid to whoever supplied a lead. Many big home-search websites and some lenders earn money by selling your inquiry to an agent or lender who pays for it, and depending on the program that fee can be a significant share of what the agent earns on the deal. It is worth knowing who paid for your introduction before you decide whom to call.

Avoiding out-of-pocket costs

  • Will I have to pay my agent out of pocket?

    We have an approach designed so our buyers are not asked to pay out of pocket, and past clients have not paid us out of pocket for our compensation. Past results do not guarantee a future outcome, and every deal and every agreement is different. Ask us how it would work for your purchase.

Open houses

  • Do I need a written agreement just to walk through an open house?

    No. Open houses are excluded from the written-agreement requirement that applies before an agent shows you a home. The requirement covers private showings with a license holder. If you want help beyond a casual visit, that is when a written agreement comes in, and you should read it before you sign.

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