Do You Have to Pay a Real Estate Agent If You Don’t Buy?

Home sellers are commonly believed to be solely responsible for paying real estate agent commissions. While sellers traditionally covered these costs, a buyer’s direct agreement with an agent can introduce financial obligations for the buyer, even if a purchase does not materialize. Recent changes in real estate practices highlight the importance of understanding these financial arrangements and potential payment responsibilities beyond the typical closing transaction.

Understanding Buyer-Broker Agreements

A Buyer-Broker Agreement (BBA) is a formal contract between a homebuyer and a real estate brokerage, establishing a legal relationship. This agreement outlines the agent’s responsibilities, such as finding suitable properties, negotiating offers, and managing paperwork. BBAs formalize representation and ensure the agent acts in the buyer’s best interests throughout the home search.

Common types of BBAs include exclusive right-to-represent, exclusive agency, and non-exclusive agreements. An exclusive right-to-represent agreement, frequently used, obligates the buyer to work solely with one agent for a specified period, often ensuring compensation regardless of how the property is found. Conversely, non-exclusive agreements offer more flexibility, allowing a buyer to work with multiple agents or find a home independently without owing a specific agent a commission. Signing any BBA creates a contractual commitment that can include specific financial terms.

When Agent Commissions Are Typically Earned

Traditionally, a real estate agent earns commission upon the successful closing of a property sale. In most residential transactions, this commission has historically been paid by the seller from sale proceeds, not directly by the buyer. This arrangement typically involves the seller negotiating a total commission with their listing agent, who then shares a portion with the buyer’s agent.

The concept of “procuring cause” is central to an agent earning commission, meaning their efforts directly led to the completed transaction. This involves the agent initiating negotiations and remaining involved until a sale culminates. If a dispute arises regarding procuring cause, local real estate boards often arbitrate such claims. This commission structure has been the default, but recent industry changes are shifting how buyer agents are compensated, potentially making buyers directly responsible for their fees.

Scenarios Where Payment May Be Due Without a Purchase

Despite the common understanding that commissions are paid by the seller at closing, several scenarios can obligate a buyer to pay their agent even without a purchase. One such situation involves retainer fees, which are upfront payments made to an agent or brokerage at the start of their working relationship. These fees, often a few hundred to $1,000, compensate the agent for initial services like market analysis and property searches, and are typically non-refundable.

A buyer might also incur payment obligations due to a breach of their Buyer-Broker Agreement. If a buyer backs out of a signed purchase agreement without valid contingencies, or directly purchases a property introduced by their agent outside the agreement to avoid commission, they could be liable for compensation. For instance, a buyer under an exclusive agreement who buys a home shown by their agent through another party may still owe their original agent.

Specific clauses within the BBA, such as “protection periods” or “safety clauses,” can also trigger payment. These clauses typically state that if a buyer purchases a property introduced by the agent within a certain timeframe (e.g., 30 to 180 days) after the BBA expires, the agent is still entitled to commission. This protects the agent’s efforts if a deal closes shortly after the agreement ends. Another instance where a buyer might explicitly agree to pay is in “for sale by owner” (FSBO) transactions, where the seller may refuse to pay the buyer’s agent commission, leading the buyer to cover it. This payment can be negotiated as part of the purchase price or paid out-of-pocket.

What to Review in Your Agreement

A thorough review of your signed Buyer-Broker Agreement is essential to understand potential financial obligations. Pay close attention to the compensation clause, which details how and when your agent is paid. This section clarifies whether you are directly responsible for fees.

Examine the termination clause, which outlines conditions for ending the agreement. This clause specifies any associated fees or penalties for early termination. Look for language regarding retainer fees, noting whether upfront payments are refundable or creditable against a future commission. Finally, identify any protection period or safety clauses, which may entitle the agent to commission if you purchase a property they introduced within a specified period after the agreement expires. If terms are unclear or a dispute arises, seeking legal advice is prudent.