Home Buying in Tucson>Question Details

Vermillion801, Home Buyer in Tucson, AZ

My broker charges a of 3% of the total cost of any property I purchase. If he also represents the seller then the seller pays whatever percent they

Asked by Vermillion801, Tucson, AZ Wed Jul 10, 2013

agreed to up front. If the seller cost to the broker is smaller than the 3% I would make up the difference? Do brokers always charge a fee? Is it always so high?

Help the community by answering this question:

Answers

13
Hi Vermillion801,

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.

Best regards,

Donna Moulton
Associate Broker
Tierra Antigua Realty
http://www.SweetDesertHome.com
1 vote Thank Flag Link Thu Jul 11, 2013
A lot depends on the cost of the properties you are buying. If they are lower priced, then the 3% is very reasonable. We for example always use a Buyer Broker Agreement that states we are paid by the seller up to a certain percentage with a stated minimum to cover real costs. If it is an inexpensive property,sometimes the buyer has to make up the difference but that is pretty rare. there are certain costs to agents and brokers that occur on every deal and those plus a reasonable profit need to be paid for each closing. You probably don't work for free and you shouldn't expect the agent or broker to work for free. What you don't see behind the scenes is a lot of work and effort to protect your interest and your agent/broker need to be compensated. that said the agreement has to be fair to both parties and is negotiable.
0 votes Thank Flag Link Thu Aug 15, 2013
While I respect my colleagues arguing the commission cause ... one quick question. Are you being charged out of pocket, or are you talking about the co-broke fee that your broker earns when your broker helps you purchase a place?

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.
0 votes Thank Flag Link Wed Jul 31, 2013
In this world, you get what you pay for. Every Broker(agent) charges what the market will bear. It is not cheap to advertise and sell a home and remember they don't get paid anything if it doesn't sell. In a break down of RE expense, we spend about $500-600 a month in actual cost per listing and that doesn't count the man hours of work to sell and bring the property to a close. A typical sale will average about $1000-1500 in direct expense to sell. The quality of the Agent makes a BIG difference in getting the home sold for the best price. There are discount Brokers out there that come and go but remember "you get what you pay for". Do you want your biggest asset sold by the best or the cheapest. Discount Brokers have already shown their negotiating skills up front because they can't sell you on their worth. Is that who you want negotiating to sell your biggest asset. I don't personal;ly think so.
0 votes Thank Flag Link Wed Jul 31, 2013
You are the consumer there are many realtors in the area, it is your CHOICE. But remember to consider the quality too.


This information is not intended to be an indication of loan qualification, loan approval or commitment to lend. Other limitations may apply.
http://www.GoodMortgageInTucson.com
Minette Goldsmith-Fairway Independent Mortgage Corp. 5401 N. Oracle Road Tucson AZ 85704
520 975-3909
L.O. NMLS# 261487 AZ L.O. License #0912618, FIMC # 2289, AZ BK #0904162 Equal Housing Lender
0 votes Thank Flag Link Thu Jul 11, 2013
Commissions are negotiated on an individual transaction basis between the broker providing the service and the buyer or seller. Yes, all brokers charge a fee or they would be working for free, since we receive no other compensation except commissions, and those commissions are received only when a transaction closes escrow. In Tucson, the most common arrangement is for the seller to have a contract with the listing broker to sell their home, which also agrees to pay a percentage to the buyer's agent. Please read your paperwork - you may have signed an employment agreement to pay your agent/broker to represent you as a buyer, and your broker may have a minimum fee that he works for.

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
Long Realty
520-730-5540
0 votes Thank Flag Link Wed Jul 10, 2013
Yes, of course brokers always charge a fee, how else would they stay in business. The amount of the fee, however, and who pays them will vary for broker to broker and from agent to agent. If you feel,that you are being overcharged, then speak to other agents for some comparisons. Understand, though, that our code of ethics is quite explicit as to how we can discuss commissions.
0 votes Thank Flag Link Wed Jul 10, 2013
What you are telling us is very rare and not what is called "normal and customary". You should interview a few more brokers and/or agents.
0 votes Thank Flag Link Wed Jul 10, 2013
This is definitely a question for your broker. A great deal of the time, the seller pays the brokers fees in closing. Hope this helps.

In the end, ask your broker/agent for them to explain the situation to you because it varies between brokers and firms.
0 votes Thank Flag Link Wed Jul 10, 2013
Brokerage fees are how we make a living. Your situation seems odd call your Broker and ask them to explain. My bet is that you signed a "buyer broker agreement" that requires you to pay any difference between what the listing broker agrees to pay from the MLS and 3%..
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,
Brad
0 votes Thank Flag Link Wed Jul 10, 2013
Ron; Beings I used to work in your part of the world I realize this question may look/sound differently to you. Here in Tucson some agents use buyer broker agreements. If the buyer has signed an agreement with an agent/Broker before looking for a property it may state the buyer has to make up any difference between certain amounts. The buyers need to be very aware of what they have signed. I still have my old California ways and never use the buyer Broker arrangement but others here do.
Please; buyer beware.

Kat Carr
Broker/Owner
Homes of The Old Pueblo, LLC
A Gift from Sheila
Cell (520) 245-4002
Fax (520) 318-5391
0 votes Thank Flag Link Wed Jul 10, 2013
This is a commission question for the brokerage in question, we can't answer for them.

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.

Good luck.

Spirit

Spirit Messingham, PLLC
3rd Generation Full-Time Realtor®
Tierra Antigua Realty
Direct (520) 471-6900
Fax (866) 365-5208
SpiritRealty@cox.net
http://www.TierraAntigua.com
0 votes Thank Flag Link Wed Jul 10, 2013
The Total FEE is negotiated between the Listing Agent and the SELLER:
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!
0 votes Thank Flag Link Wed Jul 10, 2013
Wow, you're an uneducated jerk.
Flag Wed Jul 10, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer