How is a buyer's representative typically compensated when a client purchases a home?

A buyer's representative is typically compensated through a commission that is contingent upon the successful closing of a real estate transaction. This means that the representative earns their fee only if the client successfully purchases a home. The compensation structure is often defined in the buyer's agency agreement and is commonly a percentage of the home's purchase price, which is paid out of the seller's proceeds at closing.

This contingency arrangement aligns the interests of both the buyer and the representative, as the representative is incentivized to find a suitable home that meets the buyer's needs. Since the fee is based on the completion of the sale, it encourages the representative to ensure that the transaction is successful, providing a motivating factor for them to work diligently on behalf of the buyer.

The other compensation options listed, such as an hourly rate, flat fee, or non-contingency fee, do not reflect the standard practice in real estate transactions for buyer's representatives. Most arrangements are performance-based, which is why a contingency fee is the most common method of compensation in this context.