Typically the seller pays the brokerage fee for both the buyer's agent and the seller's agent. The brokerage fee is negotiable, so your agent can charge you whatever you and he agree to.
Maybe you mean that your agent expects to be paid a total 3% of the sale price, including the brokerage fee he receives from the seller's broker? That would be quite reasonable. When the seller is a bank, or the seller is using a relocation company, sometimes the seller will only pay 2.5% to 2% of the sale price to the buyer's agent. If you choose to buy a house that is for sale by owner, the seller will probably pay your agent, but maybe not. It is not unreasonable for your agent to expect you to pay the difference between the brokerage fee offered by the seller and 3% of the sale price.
If your broker also represents the seller, he will receive compensation for representing the seller as well. He has two clients, so he has twice the work, twice the expenses and, most important, twice the responsibility and liability. Why shouldn't he be paid twice the brokerage fee he would get for representing one client?
On a $100,000 sale, a 3% commission is $3,000. This may seem like a lot to you, but it doesn't seem like a lot to a real estate agent who has to give a significant portion (up to 50%) of that $3,000 to the company he works for. Then, with what's left, the agent will pay for his own health insurance, errors and omissions insurance, benefits (vacation, sick days, retirement), gas, car maintenance, printer ink, continuing education, internet, cell phone, software, equipment purchase and maintenance, marketing, professional organization memberships, and professional services like accounting and transaction management. Because real estate agents are self-employed, we get to pay the employer's and the employee's contribution to Social Security and Medicare (FICA). In other words, 15.3% of our income goes to FICA while FICA only takes 7.65% of the income of people who receive regular paychecks.
If that 3% brokerage fee is reduced to 2% ($2,000), and the agent shows the buyer 50 houses and write four offers before he sells a house, the agent's net income might not even cover his expenses on the sale. This is the reason that buyers in the lower price ranges have so much trouble finding someone to represent them. When an agent sells an inexpensive house for a low commission, his work is pro bono. It's nice to donate one's time and resources occasionally to help a deserving buyer achieve home ownership, but an agent can't stay in business when his net income is consistently less than his expenses.
If a buyer or seller decides not to buy or sell after his agent has invested a lot of time and money in helping them, that 3% brokerage fee the agent received for the sale that did close escrow is stretched even thinner.
Tierra Antigua Realty
What it sounds like you have is a Buyer Broker agreement where the broker says he's going to get 3% regardless, so if the co-broke is less than that then you're going to have to make up the difference.
There's no set commission rate but the number you've given is fairly typical. It's also far from universal. If you don't feel you want to pay that amount, when your buyer broker is up, find a different broker. It's about that simple.
I personally don't use a Buyer Broker form so, while I'm willing to accept whatever the co-broke may be without asking my clients for more, I also don't offer rebates on what that amount is. Not to mention many lenders may look askance at the contribution - if you're paying cash, different story, it's your money either way.
One note, while everything is done in the name of the brokerage, if you're working with one agent in the brokerage and they help you purchase a house listed by another agent in the brokerage, your agent won't see a cent of the seller's side of the commission split. Only the co-broke.
This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Other limitations may apply.
Minette Goldsmith-Fairway Independent Mortgage Corp. 5401 N. Oracle Road Tucson AZ 85704
L.O. NMLS# 261487 AZ L.O. License #0912618, FIMC # 2289, AZ BK #0904162 Equal Housing Lender
A good agent or broker will do a total cost estimate for you prior to writing an offer to purchase, and include any commissions you would pay which are not covered by the seller's agreement with the listing agent. An employment agreement can be a sign that your broker is a professional with set fees, and not a negative. With a good understanding of your agreement AND an estimated costs sheet completed before you write an offer, you will not have surprises at the closing table.
I often use an employment agreement, and consider it good business, because there is a clear written understanding between agent and buyer. I personally do not charge fees outside of what the seller's co-broke is offering, so there would be no additional charge to you.
Kat Tyree, Associate Broker
In the end, ask your broker/agent for them to explain the situation to you because it varies between brokers and firms.
For instance if the co-broke (or fee payed by the seller's broker to the buyer's broker) is 2.5% you would then agree to pay the difference of .5%. I could be wrong but that is the way it sounds.
Best of luck,
Please; buyer beware.
Homes of The Old Pueblo, LLC
A Gift from Sheila
Cell (520) 245-4002
Fax (520) 318-5391
You mention the broker charges you for any property you purchase? As the buyer, most of the time (not always) it does not cost the buyer anything to work with an agent or a Realtor (not the same thing by the way). I am a buyers agent and I have never once charged a buyer (client) a fee, or retainer fee for working with me.
Talk with the broker about their commissions, I cant speak for other agents or Realtors but if you interviewed 10 buyers agents here in Tucson, the majority do not charge the buyer.
Spirit Messingham, PLLC
3rd Generation Full-Time RealtorÂ®
Tierra Antigua Realty
Direct (520) 471-6900
Fax (866) 365-5208
You have nothing to do with it!
The Commissions is divided 4 ways, between both Borkers and both Salesmen.
You have no say in the matter!
They are paid out of the Escrow, from the Seller's money.
You should not be concerned with it; it is actually none of your business!