Home Buying in Cary>Question Details

Dreams, Home Buyer in 27513

Does the Seller get the commission set aside for the Buyer's realtor back if I do not use a realtor to purchase a home?

Asked by Dreams, 27513 Tue May 24, 2011

I know the area where I'm interested in buying very well as I've lived there before, so have been doing internet searches for homes. In most cases the Seller has agreed to pay 5% commission - 3% to the Seller's realtor and 2% to the Buyer's realtor. If I, as the Buyer, do not have a realor involved (my lawyer would be involved in drawing up the paperwork), will the Seller get that 2% back that was set aside for the Buyer's realtor?

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No, the seller will not get the 2% back, the listing agent will receive the full commission and represent both you and the seller in dual agency. As many have described, the agent will now become "referee" rather than "coach." In dual agency, the agent should not advise during negotiations, only facilitate communications between the parties. I would suggest that you acquire a buyer's agent to work on your behalf, as they are trained to negotiate the best terms and will work their hardest in your best interest - the seller is paying for it anyway. Although you may know the area well, an agents daily experience in inspections, negotiations, hyper-local markets and pricing can work in your favor. Agents also handle a lot of the "hassles" of getting to the closing table for you. Best of luck!
2 votes Thank Flag Link Tue May 24, 2011
Dreams,

Wow. You are getting all sorts of input. Some on target, and some of it irrelevant. And some of it plain misleading.

Actually, no one can answer your question without seeing the Listing agent's agreement with the Seller. It is possible that in your circumstance the agreement could stipulate that a portion, or all, of the amount to be offered to a Buyer's agent could be deducted from the commission promised to the Listing agent.
Or, the agreement may not even address a circumstance like yours.

No one knows how the agreement was negotiiated from the information you present, but as noted, commissions are negotiable.

Consider a few points:
1. Even if you use an attorney, how will you access the property for inspections, appraisals, contractor estimates for repairs? Would you depend on the Listing agent for that?

2.. Should the Listing agent do that for free, or would you expect the agent to receive compensation from funds designated for a Buyer's agent for doing those tasks?

3. Would the net proceeds amount to a Seller be increased if the compensation was reduced, or would you expect to benefit from that, as a buyer?

4. If your attorney draws up a non-standard form, and the Seller must have attorney review of the Offer, would you expect that cost to come from the Seller's net? Or would some of the commission dollar designated to be offered tor a Buyer's agent reasonably be earmarked for that expense?
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1 vote Thank Flag Link Tue May 24, 2011
In most cases no, the seller pays a total of 5% commission, the listing agent than gives the 2% to the buying agent out of their commission at closing. Some home owners can negotiate that the commission will be x amount if there is no iothert agent involved and pay Y commission if there is a buyer broker involved. Withoout a buyer broker, the listing agent altyhough not working for teh buyer, must make sure the buyer is on track, work with their mortgage company, inspector, appriaser and closing attorney so it is not like buyer doesnt have an agent i get a free 2% extra commission, there is an extra amount of work accompanied with that. As a buyer you should assess what the house is worth in todays market and base your offer on that, You dont have control over what the seller is willing to pay an agent.
Web Reference: http://www.ScottSellsNH.com
1 vote Thank Flag Link Tue May 24, 2011
Very good advice from everyone! It just boils down to "it depends". It depends on the arrangement with the Seller and their agent. You as the Buyer will not know. It's more important for you to negotiate the best price, terms and conditions in your offer and then be prepared, informed and protected throughout the closing process. They may come a point after you conduct your due diligence/inspections that you may need to renegotiate too. Are you prepared to do this? Do you know what to ask and how to ask? Having a Attorney draw up paper is fine, but there is a lot more to a real estate transaction than just the paperwork the Attorney can do for you. A Realtor familiar with the area, the neighborhood, maybe even that specific home or other homes in the neighborhood will be able to provide you insight that may affect the terms you offer. If you think you are saving 2% of the purchase price by not having a Buyer's agent, you may be in fact losing 2% or more in lost negotiations on price, terms and conditions and avoidable pitfalls an experienced Realtor can guide you through. All that being said, all Realtors are not created equal. Do your homework. Interview Agents and get recommendations. Find an agent with an excellent track record in representing both Buyers and Sellers.
0 votes Thank Flag Link Wed May 25, 2011
There's this misconception that the co-brokerage fee is on the table for everyone to grab at in the absence of a co-broker, and that isn't the case.

The brokerage fee is, almost universally, paid to the listing company, who allocates it according to contract. So, if the listing company is successful in bringing the buyer themselves, they will keep the entire fee. In some states, they will not be dual agents, but they will represent the Seller.

To put it another way - the brokerage fee belongs to the brokerage.
0 votes Thank Flag Link Tue May 24, 2011
I think that your question regarding whether or not the 2% Buyer's Agent commission would go back to the seller if you didn't use a Buyer's Agent has been sufficiently answered, so I'm not going to add anything more with regard to that. However, I would like to comment on the issue of obtaining a Buyer's Agent to work on your behalf. As others have mentioned in their posts, if you do not have a Buyer's Agent working for you, the Seller's Agent will act as a dual agent. As a dual agent they will not be able to give you advise on negotiations and will only be able to act as a mediator for both parties. However, if you are to hire an Exclusive Buyer's Agent, that person will be only working on your behalf and never the Sellers. If a traditional real estate agent is working with a buyer, there is always a potential for dual agency as the buyer may become interested in a property that the agent has listed. An Exclusive Buyer's Agent never lists properties for sale and always works only for the Buyer. In most cases, because the commissions are paid by the Seller and split between the agents, an Exclusive Buyer's Agent will not cost the Buyer anything, but will give them an added benefit of their knowledge and expertise.

Best of luck!
Tanya Donaghy
828-430-1819
solutions_realty@yahoo.com
0 votes Thank Flag Link Tue May 24, 2011
Dreams
Do not make the biggest investment of you life without representation by an Agent, I would also only use a Real Estate Attorney, especially with all of the recent changes in the way NC buys and sells Real Estate. Normally the Sellers Agents Firm receives the commission and then pays the Buyers Agents firm, so no Agent they would keep it all.
Michael
0 votes Thank Flag Link Tue May 24, 2011
Typically not, but there are not set commission arrangements and anythiing can be negotiated up front while the listing agent and firm are taking on the listing. Normally what would happen is the listing agent would receive the entire commission and you would not have the personal representation that you get with a realtor vs. a attorney. While the attorney knows the law, they are typically not trained in daily real estate functions, such as establishing a vlaue of the home prior to making a offer, persoanally viewing the home, to give you advice on the neighborhood, surrounding environmental or commercial problems that can effect future home values, lot , plan design, plan functionality, condition, past trends that are no longer perceived as beneficial or even looked at as negatives, all of which effect future resale and performance in appreciation. The market is tuff enough due to down economical gains, let alone taking on a home that has signs of past poor appreciation gains and negatives for future resale. That is what an attorney will not be able to steer you from or give professional advice on from past experience. Go with a realtor that you trust to be your buyers agent and one that has experience with homes in the price range you are buying. It would be the best money you actually never spend, because it's paid by the seller.
0 votes Thank Flag Link Tue May 24, 2011
Since I'm local to Cary I wanted to chime in. The previous responses are correct for the most part. Commissions are agreed to in the listing contract between the seller and listing agent. Elaborating on your example, the listing firm will get a 5% commission. If you have a buyer's agent that agent's firm will receive 2% of that 5%. In the absence of a buyers agent the listing firm will keep the entire 5% and enter dual agency, whereas they represent the buyer and seller. The listing agent will then be more of a "paper pusher" for you since they won't be able to truly advise you to your benefit without working in the best interest of the seller. Remember, they are obligated to do what's best for the seller. If they know the seller will accept an offer $10K lower than the listing price they're not going to tell you that if you make a full price offer.

You can certainly use an attorney to review your paperwork, but a buyer's agent can help you make an offer and explain the standard contract (which was created with the help of attorneys) to you. In NC attorney's typically don't become involved in after the property has gone under contract, as they perform title searches, record the deeds, etc.

A buyer's agent can help you make sure you're offering a fair price, coordinate inspections, work with the lender, and negotiate other aspects of the deal. If you're interested in working with a buyer's agent feel free to contact me for assistance.

Best of luck to you!
Tracy
Web Reference: http://www.TracyWPender.com
0 votes Thank Flag Link Tue May 24, 2011
Hi Dreams Home Buyer,
Marie provided a great explanation. You are not going to save anything by not using a Buyers Agent and without a Buyer Agent you do not have anyone representing your best interest. Interview a few Agents and hire one that has great negotiation skills and really understands the new contract (if you are in NC) to negotiate the Due Diligence fee and time period.

Good Luck,
Shelia
0 votes Thank Flag Link Tue May 24, 2011
SInce you're asking in the Cary forum, I am going to assume you mean in Wake County/state of NC (I see where you're from Ohio and have asked about FL previously).

No, the commission which would go to your Buyers Agent if you had one will NOT go back to the Seller generally. The Seller has in essence told their Lisitng Realtor: "I am paying you X% if you can get my home sold. I don't care HOW that happens or who buys it." In very rare occasions, a variable rate commission negotiated by the Seller and their Listing Agent at inception of their agreement. But you as a buyer CANNOT come buy the house, be unrepresented, and either have the Seller get the money back, get the commission rate reduced, or take that amount off the price of the home.

This is why you may as well use a Buyer's Agent - it doesn't mean a higher price to you, and you're getting representation in negotiating to TODAY'S market value of the home in question AND the hundreds of things that have to be done between today and closing. Now, it's certainly possible that you have a lawyer that is highly-experienced in RESIDENTIAL real estate and has already familiarized themselves with the ins and outs of our new contract. And its possible that lawyer will charge you less for their time and expertise than your Realtor would earn in compensation. But will that lawyer also be able to get you great deals on inspections and other costs involved with closing - or just their fee?
0 votes Thank Flag Link Tue May 24, 2011
The first thing you should know is that in NC, all commissions are negotiable. You as a buyer have no influence over the arrangement the seller has with their listing agent. Also, I see more often that the commissions are split equal. In the NC listing agreement, the seller agrees to pay the commission to the seller's agent and the agent agrees to offer a portion to the buyer's agent. Neither you or the seller will benefit from you not using a buyer's agent and it is my opinion, that you are taking an unecessary risk. Although your attorney will read all your documents, they will not attend your inspections or help you negotiate your terms and conditions. You would not go to court without a lawyer or an IRS audit without an accountant so why would you make the largest investment decision of your life without the protections that have been provided for you? The NC real estate commission is a consumer protection agency that provides a working with real estate agents brochure which explains your rights. If you need a copy of it, feel free to contact me.
0 votes Thank Flag Link Tue May 24, 2011
I don't know whick state you are in and how their rules work, but here in WI the seller agrees to pay a set commission (6 or 7%) which is either retained in full by the list agent if no buyer's agent is used by the buyer, or is split 60/40 with a Buyer's Agent so no, the seller does not in either case retain that difference. The difference is actually for you, as Buyer, as you will not have any representation nor receive specific services that are only available with a Buyer's Agency contract. I strongly recommend that you retain the services of a Buyer's Agent, who can give you a lot more help, information and can negotiate on your behalf in any transaction.
Good luck on your home purchase!
0 votes Thank Flag Link Tue May 24, 2011
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