Home Buying in Pittsburgh>Question Details

Kristin, Home Buyer in Hanover Park, IL

Do you charge a separate fee for being a buyer's Agent?

Asked by Kristin, Hanover Park, IL Thu Jan 1, 2009

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In reply to geokon_2000, an unlisted property is "for sale by owner" (assuming it's for sale at all). If it's an estate, there may be probate or other issues that need to clear before title can be transferred.

To use a Realtor in these situations, you would typically hire a buyer agent and sign an agency agreement specifying a minimum commission. (Note that I'm in PA, and describing how it works here; it could be different in your state.)

When making an offer to a "for sale by owner" seller, the Realtor will normally ask the seller to pay their fee (e.g., half a standard commission). This is done through a "Broker Fee Agreement" or similar instrument. It is essentially a listing agreement limited to one buyer (sometimes called a "one party show").

With a regular "exclusive right to sell" listing agreement, the seller owes a commission when the property sells, regardless of where the buyer came from. With a broker fee agreement, the seller owes a commission only when the specific named buyer purchases the property.

Some sellers (a minority!) may absolutely refuse to pay any commission. Hence the minimum commission in the buyer agency agreement between you and your Realtor's broker. If the seller won't budge and you still want to buy the house, the minimum commission specified in the agency agreement would come from buyer's funds at closing. (Of course, if you don't buy the house, you owe nothing.)
1 vote Thank Flag Link Tue Jan 29, 2013
Most Real Estate agents do not charge the buyer for anything. We get paid from a split in the commission offered to the Listing Agent by the seller.

The main exception to this if if we are working with a "For Sale By Owner" or if the commission in the MLS is lower than normal and customary. That amount will vary with different companies. However, I have never charged a client for either if these in the 14 years I have represented buyers.

I would be glad to refer you to a top buyers agent in your area who would not charge you.
1 vote Thank Flag Link Thu Jan 1, 2009
I'm looking to buy an estate home....it is not listed, but I would still like to be represented by a realtor. How would this work out? Since it's not listed.....there's no commission to be split.
0 votes Thank Flag Link Tue Jan 29, 2013
Agents can charge whatever they want, and it is up to you to accept or reject that. Period. There is no "normal" or fee that all do or nothing do. Each firm sets their own rules and fees. If you as the buyer do not want to pay then call another firm.
0 votes Thank Flag Link Tue Feb 7, 2012
I am a mortgage banker in Pennsylvania. If I have submitted a Good Faith Estimate to my buyer and it does not include this absurd fee, I will not let the real estate agent collect this fee at closing. This is a classic piling on fee. New legislation from FHA will not allow this fee.

Matt in Pittsburgh
0 votes Thank Flag Link Tue Feb 7, 2012
The contract provisions Kathi refers to are already in the standard PA Buyer Agency Agreement. You write in a minimum commission for listed and unlisted properties (which can be different; I typically write in something like "the greater of 3.5% of the sale price or $4,500" for both).

To make an offer on an unlisted property, we use a Broker's Fee Agreement, asking the seller to pay a typical selling side commission (e.g., 3.5%). He may insist on paying no more than 2%. In that case, the buyer might withdraw the offer -- or kick in the extra 1.5% if he really wants the property.

Note that signing the buyer agency agreement doesn't by itself obligate buyers to pay any part of the commission (a point I always make when explaining this to buyers). They have to additionally sign a sales agreement on which the seller's side comes up short.

This is a very rare occurrence. In practice I only see buyers paying commissions on HUD homes (which have no minimums). Other than HUDs I've maybe done one or two where the buyer had to kick in a small amount.

Finally, the closing company doesn't see the buyer agency agreement. Unless the broker insists (the agreement is between buyer and broker -- not buyer and agent), the agent doesn't *have* to enforce the minimum. I've had cases where buyers signed a 3.5% agreement, but they bought a higher-end house with a 3% commission and had to struggle to put it together. The broker was willing to accept the 3%, so we didn't charge the buyer the extra 0.5%.
0 votes Thank Flag Link Tue Jan 6, 2009
I work in the Southwest WA market. We are on the border of WA state and Oregon, our MLS is located in Oregon. Our MLS allows any agent to advertise listings through the system as long as they offer a commission.

Here's where the problem occurs, as long as you offer to pay $1, you can be in the system. It is against the rules to refuse to show homes based on commission rates, unless you have something signed by the buyer stating that they understand that you will only show them homes with a commission of
__ percent or more. Most buyers understand that your gas costs more than $1 and that you cannot afford to work for only $1.

The other solution is to let the buyer know that you expect to be paid ___percent of the purchase price and that they, the buyer will be expected to make up the difference on any listing paying less. Why would they agree to this? Because they want and deserve to see every home that meets their needs regardless of the commission it pays. What if their dream home is the home only paying $1? They may never see it. If they agree to pay the difference, they are assured of seeing everything that meets their needs.

Now the reality is most commissions are not $1, and the buyer usually only ends up paying a few hundred dollars, which can sometimes be offset by having the seller pay the same amount towards the buyers closing costs.

The bottom line is it's still the buyer's decision as to whether they want to pay the difference to see everything or to only see the homes that pay what the agent has set as theier fee. By the way, when the agent agrees to work for X amount and the commission posted is higher, in my opinion, the agent should rebate the difference back to the buyer.
0 votes Thank Flag Link Tue Jan 6, 2009
Kristin,

Lots of good information here, I've got friends in Hanover, very nice part of our great state of PA. Most PA agents will not charge a "separate" fee for being a buyers agent, most are happy being paid once. That payment, in most cases where the property is "listed" with an agent; has been previously agreed to by the seller.

Most private/unrepresented sellers or "for sale by owners" will also pay a buyers agent fee if asked to sign a "commission agreement" by a buyer's agent before showing the property to his or her buyer. The only time I would look for a buyer to pay a fee is if I represented them on the purchase of an unlisted property and the seller refused to pay it, at that point point I would advise my buyer to make this a point of negotiation and get some other concession from the seller that would help the buyer to mitigate the cost of the commission such as seller assistance, a price reduction, personal property, etc.

Either way, you will get better service by obtaining your own buyer's agent to represent you and agree upfront to cover the cost of commission if the seller won't pay. This situation is very unlikely to come up and you will no doubt have a better working relationship with your agent who is secure in knowing that he or she can show you any property that they come across without fear of losing a commission. Private seller deals require more work for an agent, they will work twice as hard for the same amount but are reluctant to do so without a loyal buyer.

Best of luck,

Kevin
0 votes Thank Flag Link Tue Jan 6, 2009
While we're chiming in again, I'll add that real estate practices vary widely in different states. What is standard practice in PA may be foreign to practitioners in other states.

A realtor in California might stress the importance of square footage; if a seller there said he didn't know the square footage, buyers might be suspicious. (Just an illustrative example; I've never worked in CA.) In Pittsburgh, nobody cares about square footage (except for commercial property), and most sellers don't know exactly how big their house is.

Compensation practices vary as well; each state has different corporate tax rates and puts different regulatory burdens on brokers. License law in each state may further constrain acceptable compensation. RESPA in PA bans any compensation except for real estate services (e.g., you can't get a referral fee for recommending a home inspector or appraiser or home warranty). All these factors influence what works and what doesn't in each state.

In addition, each company has its own compensation policies. Full service brokers in Pittsburgh generally charge a flat administrative fee as a closing cost (to everyone in most cases; buyers aren't singled out to pay extra).

Commissions are (by state law) always negotiable -- but agents are still subject to company policy. Even if the starting commission were 8%, the buyer's agent would often get 2% (splitting it 4 ways between two brokers and two agents) to start -- minus MLS and other fees. Then we get taxed on the income, of course. In the end an 8% commission might yield 1.5% actual take-home pay to the buyer's agent -- and commissions are hardly ever 8%!

In any case agents can only cut their own personal commissions -- not the broker's or co-broker's. If the broker has an internal minimum commission of, say, 6%, you can always list for 5% -- but the broker may deduct the difference out of the agent's hide at closing. (They'll take what their share would have been had you listed at the minimum, and give you what's left over. A $100K house at 5% would be a $2,500 commission for the agent, ignoring taxes and fees. Under a minimum commission policy, the broker would take $3,000 (1/2 of 6%) and give the agent $2,000 -- as if he'd listed at 4%.)

Same goes for admin fees. If the buyer refuses to pay, the agent can still take the business -- but some brokers will dock the agent's commission at closing.

My point is it's more expensive than it may appear for agents to cut commissions (which is what waiving a broker fee amounts to), and it's incompatible with agents running a successful business and providing full service.

The definition of "full service" varies as well. I cater agent tours, check up on vacant properties (once discovering a gas leak!), weed whack / mow / remove dead squirrels before showings, make appointments, then wait around to let in inspectors and contractors, pour antifreeze down drains if the power goes out, etc.

As Rebekah says, you get what you pay for!
0 votes Thank Flag Link Tue Jan 6, 2009
In my previous answer, I noted that such fees are charged usually by full service brokers. A buyer might want to consider that they are paying for top quality and full service when charged such a flat fee, because the agents such as myself who work at these top brokerages have to pay extra out of our pocket in order to provide the superior services to our clients. As with anything else, there is no such thing as a free lunch--you get what you pay for, so when interviewing agents to work with, I in fact encourage buyers to ask why they should work with me and what my company has to offer over others.
0 votes Thank Flag Link Tue Jan 6, 2009
I am currently looking at buying in Pittsburgh and I have found several realtors that don't charge any fees at all to the buyer. Look around and you can find a good realtor that won't charge the extra fees......especially in times like these where it is definitely a buyers market.
0 votes Thank Flag Link Tue Jan 6, 2009
Kristin most agents do not a charge any extra fees to their buyers. I certainly do not. The buyer agent is getting paid theor commission form the fee listed in MLS by the listing agent. There is no reason to add any additional charges to the buyer no matter what kind of fancy name is put on them. Good luck with your search Kristin.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Jan 4, 2009
Respectfully Liz - "After lot's of hard work" you earn a HUGE commission, so tell it like it is - just nickle and dimeing the client. Is 5%-6% not enough? I charge a flat fee too of $399 to sellers to list, but that's all I charge them. No percentage after... and buyers sometimes get rebates of a percentage of my commission.

Kristen - You can find MANY brokers that do not charge these crazy fees.
Web Reference: http://ctflatfee.com
0 votes Thank Flag Link Sun Jan 4, 2009
Most full service real estate brokers do charge an administrative fee. I work as a Realtor for Coldwell Banker in Pittsburgh and yes we do charge a flat fee of $395 for both buyers and sellers. I have never had this fee be an issue with my clients not wanting to pay the fee, and it is just another small part of the closing costs after lots of hard work.

Hire an experieinced Realtor in your area and - don't sweat the small stuff.
0 votes Thank Flag Link Sun Jan 4, 2009
Kristin, Not all full service brokers charge these "extra" fees. Technology fees are just another way to nickle and dime sellers and buyers, don't ever pay them! The agents make enough commission. These "junk" fees are unnecessary. If your agent won't eat them, I'm sure you can find another agent that doesn't charge them.
Web Reference: http://ctflatfee.com
0 votes Thank Flag Link Thu Jan 1, 2009
All full service brokers charge a "broker's fee" as part of the closing costs; (Coldwell Banker has called this the "technology fee," to defer their $45 million tech investment on such things as Google keywords). It's actually charged to both buyers and sellers, so don't feel singled out :-)

It's a *closing* cost, so the buyer agent might work for months, yet get nothing if you don't buy. And compared to title insurance, transfer tax, and prepaid escrows, it's a pretty minor fee.

If buyers still object to this small closing cost (0.2% of a $200,000 house, after all), I point out that they get what amounts to a lifetime of "tech support." If you call me two years later with a title problem, I will help you with it - and you won't get a bill.

I charge it without apology; the service I provide is well worth it.
0 votes Thank Flag Link Thu Jan 1, 2009
In many of the full service brokerages in my area, buyer's agents charge a flat fee ranging between $200 and $400, depending on the company they work for. This fee is not paid until the closing, so if the buyer doesn't end up buying anything, they don't have to pay anything for the services they've already received.
0 votes Thank Flag Link Thu Jan 1, 2009
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