The seller pays the listing broker a commission. The listing broker may offer to share a portion of that commission as compensation to a broker that secures a buyer for the property. The amount of the compensation for a cooperating broker is specified in the multiple listing service.
A buyer's agent may have a contract with a buyer where the compensation is spelled out. There may be a charge that is a fixed percentage of the sale price or a fixed dollar amount that is not tied to the sale price. There may be a line in the buyer broker contract stating that the buyer agent will accept whatever compensation is offered by the listing broker in the multiple listing service. Buyer agent compensation does not necessarily involved the monies specified as cooperating agent compensation.
Occasionally companies that are involved with relocating employees will hire buyer agents and negotiate fees for their services that are not tied to seller-paid commissions because they want clear boundaries for loyalty and representation.
There are numerous other scenarios involving other business models, including flat-fee MLS where the seller pays a fee for specific advertising vehicles and which may or may not include an offer of compensation to an agent who brings a buyer to the property.
Unfortunately, there is a great deal of confusion among traditional agents about other business models.
The GOOD agents and the GREAT agents understand how all these business models work and they leverage their efforts to get the best deals for their sellers and/or buyers.
Do you go into Walmart and ask how much the child in Cambodia got paid for making the shirt you are buying? No...you just buy it....it is not right...but you buy it.
In real estate you can see, feel and touch the Realtor trying to make you money, get you a deal, negoitate on your behalf....so focus on the deal for you and once you are getting a deal do not be caught up in what others are making or not making...you will end up on the losing end focusing on a few pennies when you could be making/saving thousands.
This is the confusion that most buyers have with using realtors, they automatically assume they have to pay for their commission which most of the time is a misconception. In most instances, the seller pays for the listing agent and buyer's agent commissions, unless otherwise agreed upon in writing as I mentioned above. Hope this helps...
If you are a buyer, in most cases you do not have to pay the buyer agent anything as they are getting paid at closing by the listing agent. In some cases a buyer agent can say i get $6000 to work with you, and if the listing agent is only offrin a $5000 fee the buyer would then pay $1000 out of the buyers pocket to make up the difference.
I hope this helps, if not just add some more details in the comment section
While I bring the money to the transaction... I don't pay the salary of the counter girl at Macy's. Nor do I pay the salary of the waitress at Maggiano's.
That is determined by the owner... period. This argument is getting old and hackneyed.
Just wanted to add that when I represent someone in their purchase as their buyer- there is no charge to them and no added cost at all but actually a large savings due to my knowledge and skills for searching for the ideal home, comparing value,negotiating and also the generous incentives/rebates that I offer after closing, if you choose me to be your buyer broker!
The commision amount is agreed to when the seller signs the listing contract.
Buying a home without the help of a professional or one that isn't listed with a broker can be done but it is like looking for a needle in a haystack (It's actually hard & labor intensive work for us as well). We as agents/brokers have to protect the best interests of whomever we represent..we are guides and protectors and hand holders and more..As buyer brokers we find and screen the buyers and pre-qualify them and accompany them when we show listed homes help negotiate a purchase price and much more..
Only time you might not is if you buy it from a bank, a friend, a relative, or a shortly expiring commission. In all those cases, the price is probably lower than what the original list would be.
Antolin Du Bois, CFPÂ®
Find an agent to work with that you are very comfortable with, and that you trust. Ask lots of questions, and realize that there are good agents out there. You can find one if you decide you want one.
Having your real estate agent's commission be included in the price of the house is considered to be a reasonable way for buyers to handle paying for their own agent.
Here is an example of commission in the "price of the home". When a FSBO sells his home alone, he thinks he's going to "save the commission" by doing it himself. So, he doesn't lower his asking price.
When a buyer looks at a FSBO, he thinks HE is going to "save the commission" because there is no real estate agent involved. Well, you both can't "save the commission". Maybe you can meet somewhere in between, but the best thing in my view is to find a top quality agent, someone you like and trust, and have them represent JUST YOU.
If you don't trust people in general, you may find you have problems finding good guideance.
Frankly, most realtors - NOT ALL - are pretty useless and looking for a quick buck. The only advantage they give you is the MLS listing. Back in the day before all of this was available online, you HAD to use a realtor to get the listings from the old book. Now that everything is online, you can do all the homework yourself. The MLS is a monopoly that realtors cling to for their existence. This is why flat fee listings tick them off so much. Now, the seller can list himself, do the showings, put it on the internet, and do the paperwork. Its really not that difficult. HOWEVER, some realtor will not show these houses because it cuts into their commissions.
In my experience, and my wifes experience as a real estate paralegal who averaged 30 to 40 closings per month for 3 years, realtors do very little for their money. Again, this is not all of them, but probably 95% of them.
If they want to retain the MLS, great, then I think their commissions should be set by the length of time it takes them to sell a home. For example, assuming a normal market (not what we have now) where it took on average 30 to 90 days to sell a home, the commission should start out at 3% the first 30 days, 2% the second 30 days, and 1% the third 90 days. After that, if the home doesn't sell, then change realtors. This would make the realtors work an awful lot harder to sell the house sooner. It would also encourage them to tighten up their buyers to have a house in show condition. I cannot tell you the number of homes I have been in that are filthy, cluttered, or just in general state of mess and the realtor for the seller could care less.
In booming markets like we had in 03 to 06, the realtor did NOTHING because houses sold same day. Why give someone 6% of your profit for nothing.
In current market conditions, a realtor can't do anything because no one is buying.
I have worked with many realtors and the best ones have sold my house in under 30 days in a normal market . This is because they came in, gave me a solid analysis of the house and things that needed fixed, and they brought potential buyers and advertised. I have also had the unfortunate experience of one who said your house will sell when it sells and provided no feedback at all. This is most common.
I wanted to point out that Asher smith who has frequently accused many brokers and agents of being liars and unethical here on Trulia has frequently contradicted himself, if you compare his statements in his one question and his many posts! In his question he states something about a selling broker who he says offers to write up an offer for him for "free" (he says he had nothing more to do with them) then later he contradicts himself in different answers to two different questions that he is purchasing a home from the same agent! It also appears he might be promoting Redfin as he mentions them often!
BTW the best real estate brokers also have experience in fields like construction, retail, hospitality , business marketing, advertising, entertainment and other fields where thay have garnered much experience in dealing with the public. To be good at helping consumers buy and sell real estate today you don't need academic degrees or training you need solid real estate law and ethical training, good search/computer skills,good business sense and experience and good people skills. We are professionals in a business field, not a medical or legal field!