There seems to be much discussion about who owes the fees to the buyers real estate broker when the buyer chooses to purchase a house. Perhaps a little history is needed to put the answer in perspective.
Until the early 1990s, buyers were not represented by real estate agents in the purchase of real estate. You could call a real estate agent and ask him to help you buy a house. The agent might drive you around and show you several homes from which to choose. Perhaps the agent will help you determine value of homes or even help you craft and submit an offer. However, that agent did not represent you. The agent was actually working for and representing the seller in the real estate transaction through an arrangement called seller sub-agency. The agent had no fiduciary obligation to you. Those fiduciary obligations include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care (OLDCAR). In fact, the agent owed those responsibilities to the seller. The agent was forbidden from sharing information about the seller with you, yet he was free, if not obligated, to provide information about you to the seller that perhaps you would not necessarily want shared. Buyers began to complain about the inequity and unfairness of this arrangement. The trend began to shift to buyer agency arrangements where buyers could enter into the same types of fiduciary relationships as the seller's with their agents. Seller sub-agency has all but disappeared in Pennsylvania.
Today, most buyer agents will insist on a defined buyer agency relationship with their buyer clients. At the minimum, when you are in an agency relationship with your real estate professional, your agent is obligated to provide the aforementioned fiduciary responsibilities. Many buyer agents will also offer a value proposition that might include other services. In exchange for these services, the buyer agent may specify a minimum fee to their buyer clients. The fee is usually a percentage of the purchase price of the real estate and the fee is to be paid at settlement or transfer of title. There may also be an additional minimal fee that a buyer might be responsible to pay to cover some of the administrative tasks performed by the buyer's broker. This fee is usually represented as a flat fee commission.
The seller, through their agreement with their own real estate agent who has listed the house, will agree to pay a commission to their agent. The listing agent may share a portion of that commission with the buyer's agent. The buyer's agent will apply that share of the commission to the fee owed by the buyer. Most often, that share will adequately cover all or most of the buyer's fee obligation to his agent. In those cases where the share of the commission does not adequately cover the buyers obligation, the buyer may be responsible to cover the shortfall between the shared commission and the fee they agreed to pay.
There are many ways that you and your buyer agent can negotiate how the shortfall will be paid (or waived) and you should discuss that with candidate buyer agents who are competing for your business. But, at the end of the day, you will need to decide whether you wish to complete the a specific real estate purchase transaction based on the costs associated with the transaction. Real Estate licensees are obligated by law to provide an estimate of costs associated with a transaction so the buyer understands their financial obligation in advance of making an offer.
When a buyer is selecting someone to represent them in a real estate transaction, they should consider this: Once the agency agreement is signed, the agent is ethically and legally responsible to provide those fiduciary responsibilities stated above. Those fiduciary responsibilities are very important but buyers should also consider the value their real estate agent will provide based on the agents value proposition.
The real estate industry is very competitive and like most things, you usually get what you pay for. There are no set industry fees for services so a consumer must carefully weigh the value of the services offered against the their costs.
In summary, if you enter a buyer agency agreement with a real estate licensee, the terms of that agreement will most likely require you to pay a fee. In most cases that fee or a substantial portion of it will be paid the listing agent but you should be aware of who is paying the fee to your buyer agent with each and every offer you make.
I hope that information is useful and helpful. I wish you the best of luck in your search and ultimate purchase of your new home.
Keller Williams Real Estate
Exton, PA 19341
Office: (610) 363-8444
Mobile: (484) 948-0936
All fee's, commissions, etc. paid to an Agent must be fully disclosed in writing and paid to the agents Broker upon execution or fulfilment of the contract. These fee's (compensation) shall then be dispersed (paid) to the Agent by His/Her Broker. No compensation shall take place void of the Broker...
First, when you contract an agent, you agree that the agent (their broker really) will either get "x%" as commission from the sale. Let's say this number is 2.5%. If he shows you a home, which you end up buying, where your agent (broker) would get 2%, you would then owe the other .5% IF your agent pushes the issue. Most will not.
The other way is that when you contract an agent, they may charge you a fee which would be collected up front and would in most cases be taken off from the commission collected from the sellers side. In other words, it would show as a credit to you upon the purchase of the home.
A buyers agent does now collect a commission typically from the buyer. It is usually paid by the seller when a home settles. Some companies charge a flat fee commission or a conveyancing fee when the home settles and it is charged as a part of the closing costs. It can range from 250-650.00 depending on the company.
Hope this helps and good luck finding a home.
Coldwell Banker Preferred
223-225 Market Street
Philadelphia PA 19106
Prudential Hodrick Realty
Danville, PA 17821
There is a Transaction fee and other Settlement Charges based on your purchase. However, I recently heard some Agents are charging a fee to go around and look at homes. I heard one firm charges an hourly fee. Thats NUTS,
The short answer from me is NO. I will qualify you to purchase, send you up to date Listing info that fits your criteria, show you the homes you choose to see, walk you through the whole process from purchase to settlement with NO up front fees. And questions are always free. :)
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
The buyer's agent is paid from the seller's proceeds at closing.
Typically the seller of a home contracts with a brokerage for a certain amount of commission to sell their home, and that broker shares the commission with the broker for the buyer. However, some agents will charge a small amount to the buyer in addition to the seller paid commission, which is paid at closing. This must be disclosed on the agreement you sign with your buyer agent.
You should also inquire about special situations - for example, if your agent helps you find a home that is for sale by the owner - if you will be charged any commission.
Good luck house hunting! -Meg