Home Buying in New York>Question Details

Terry, Home Buyer in New York, NY

Wwho is responsible for paying a commission when one is represented as a buyer's agent.

Asked by Terry, New York, NY Sun Sep 2, 2007

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Amy, I instantly gave you the thumbs down because of the word "Always". Then I read through the other posts and was pleased by those responses. I then looked up what state you were from OH and compared it to Terry asking in NY and was even more disturbed by your "Always" answer.

JR a NY agent who posts here frequently just addressed that in another thread about commission splits:
http://www.trulia.com/voices/Tech_Tips/Re_Commission_Splits_…

JR said: "From what I have learned, the buyer's agent accepts what the listing agent is offfering in most cases, however, the EBA can state that the buyer's agent's fee is 3% (for example), which if not covered by the listing agent's compensation (which is, say, 2%), will be put in to the offer. If it is not accepted by the seller, the buyer/client is responsible for the extra percentage."

Here in IL I have seen it done this way as well as the other ways stated below.
Ruth
3 votes Thank Flag Link Sun Sep 2, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
Terry,
Great question Who?
Who brings the money? the Buyer.
Who decides on how much to offer the Buyer broker? the Seller.
Huge debate.
Greg Swan over at http://www.BLOODHOUNDBLOG.com just wrote a 3 day, I mean 3 part essay.
Check it out.
2 votes Thank Flag Link Wed Nov 14, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
Terry, I am glad you asked this question. I find that people who do not buy and sell a lot may not know the ins and outs and therefore not make the best decisions in the process of buying a home. If you are working with an agent the seller pays the fee out of his proceeds at the closing table for agent commission on both sides of the sale.

Buyers that aren't aware of this often do not seek the help of a professional because they don't want to have to pay fees on top of buying a house. They often end up not being represented and risk making a home purchase that is not in their best interest. Buying a home is one of the biggest investments that we make. It is always best to seek the help of a professional IMHO.
Web Reference: http://carriecrowell.com
2 votes Thank Flag Link Sun Sep 2, 2007
If the property is listed through the MLS, the seller pays the buyer's agent commission. Actually technically speaking, the seller pays the commission to the listing brokerage who then pays the selling brokerage the commission that was advertised in the MLS listing. On the other hand, if the seller is a FSBO (for sale by owner), then the seller only pays the buyer's commission if the seller agrees to do so. In California, the exclusive buyer broker agreement obligates the buyer to pay a commission to the agent, but the obligation is offset by the commission that the agent will receive from the listing brokerage. Most exclusive buyer broker agreements just say that the buyer's obligation to pay a commission is limited to what the listing agent offers to pay in the MLS listing. Most FSBOs will also cooperate with a buyer's agent and pay a commission in order to be able to sell the property, but it's not automatic. If a buyer's agent wants the FSBO to pay the commission, the agent needs a written commission agreement with the FSBO. Otherwise, the agent will have to look to the buyer for compensation. If the agent does not have a written commission agreement with the buyer or the seller, the agent is out of luck. This does not happen a lot, but it could happen.
Web Reference: http://www.go2kw.com
2 votes Thank Flag Link Sun Sep 2, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
You have choices. If you have met with an agent that has checked of "buyers agency" on your required NYDOS disclosure form, what will likely occur is that, when you make an offer, the request for payment of commission by your Realtor will come from the SELLER side (out of the commission agreed to with the listing agent- it's a shared amount). The price of the home, if it's in the MLS, includes a total that is shared between the listing/selling agents, and is in the price that you're paying for the home.
If you've decided to sign a buyer agency contract, then in the event that the seller refuses compensation to a buyers agent (typically, it's not sellers that take issue- it's listing Realtors) then you will have agreed to compensate the buyers agent out of pocket for an amount agreed to. Additionally, if the seller is offering less than what is agreed to in your contract, you may request from the seller that amount paid to your buyers agent in your offer. IF (and only if) the seller refuses, you would then be responsible for any difference. Buyer agency is not "kicking and screaming" in most areas, because agents understand that the primary objective is to sell the property to two represented parties, out of the fee that is in the price of the property- simple.
Web Reference: http://optionsrealty.com
1 vote Thank Flag Link Tue Mar 18, 2008
Hi Terry,

In a free market society, there is no always. In the real estate industry, we are in the midst of a sea of change.

Who pays? Depends upon how the agreement is written. The buyer agency agreement that I use defines the commission that I will be paid from the transaction. Any offer of compensation offered by the seller/sellers’ agent will be applied first. Any balance due will be included in the offer to be paid by the seller, similar to a seller concession to pay closing costs, or any other buyer fee. I have worked with buyers in the past where the buyer simply agreed to pay our brokerage directly any fees above and beyond seller/seller agent offered compensation.

Roll the clocks back 15 years ago, and "buyer agency" was uncommon in many states. Instead, it was common that agents who were working with buyers were sub-agents of the seller and had duty to the seller.

Roll the clocks back 5+ years ago, and buyers were commonly represented by buyer agents instead of sub-agents of the seller, but formal agreements outlining the relationship, duties and compensation were rare. Buyer agent commissions were almost always paid by the seller/sellers' agent in accordance with the listing agreement signed between the seller and broker/agent.

In the recent few years, the options of seller representation diversified and this has rolled over to how buyer agents are, and will be compensated. In recent years, there is great diversity in the compensation offerings made via listings in the MLSs, FSBO sellers, FSBO via flat fee listings, and sellers who are not listed at all, anywhere. As a result, the buyer agent job is no longer clearly defined and neither is compensation. Buyer agents pick up more responsibilities and liability when bringing a buyer to a FSBO, or flat fee listing. Moving forward, we will probably see more and more buyer agency agreements executed that define compensation and duties.

Agents and Brokers have many sets of rules and regulations to which they must comply, including, but not limited to, each MLS to which they belong, state, local and national associations, state and federal fair housing and disclosure laws, RESPA laws, and the state regulatory body for real estate. Any client agreements and contracts must be compliant with any and all regulations. Some of the regulations that were once on the books prevented seller agents from presenting alternatives to sellers. These regulations have been challenged with some successes. We may see more of that happen on the buyer side, soon.

As more change evolves, we will likely see more buyer agency agreements and their structure and content will also evolve. Recently I have heard of up front payment, retainers, and minimum guarantees.......paid by the buyer at signing of agreement. Consumer choices in how sellers were/are represented dominos into the relationships how buyers will be represented.
1 vote Thank Flag Link Thu Sep 27, 2007
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
The seller generally pays the commission. However, if your Realtor represents you and helps you find a home where a commission is NOT being paid by the seller (maybe an FSBO) you may, depending on how yout buyer broker agreement is written, be responsible for the commission. Not sure? Ask the Realtor representing you or take a look at the contract.
Web Reference: http://www.cindihagley.com
1 vote Thank Flag Link Sun Sep 2, 2007
Cindi Hagley,…, Real Estate Pro in San Ramon, CA
MVP'08
Contact
The seller usually pays the commission for both buyer and seller. The listing agent takes a listing at lets say 6percent and cooperates with other agents on the MLS buy offering a portion out. Let's say 3percent for the sake, Good Luck.
Web Reference: http://www.agentjustin.com
1 vote Thank Flag Link Sun Sep 2, 2007
Terry,

at closing the seller pays the agent(s). all the seller has to do - is tell the buyer - what they are willing to accept (they have their own net that they want to achieve). all the LISTING AGENT has to do is NEGOTIATE with the buyers agent - and prove value, prove to the buyer agent that the seller is willing to accept X.

PERIOD.

There is and should not be any outside money exchanging from the buyer to their agent.

It's in the deal. It's in the transaction as part of the purchase price - period.

That's the basis the buyer has in the property and it is for their tax advantages. The small transfer tax increase for the seller is something they must deal with. And if we're talking of say an extra $4000 - that's 16 bucks more transfer tax paid by the seller. lol

Don't get bogged down in details. The problem with buyer agency - is alot of buyer agents - don't understand it. The ones that do continuously run into listing agents who are clueless as to how to PRESENT AN OFFER and NEGOTIATE.

There's lots of agents out there - and sooooo many of them are just not up to the challenge of being....good.

that's why NAR has lost nearly half of its registered members. The stinkers who didn't belong in the biz are leaving. And the cream is slowly rising to the top.

Bottom line - seller cuts the checks for commissions at closing - period end of discussion. A buyer should pay NOTHING to an agent outside of the transaction. I specialize in buyer agency. I charge 3% for my service to the SELLER. I negotiate hard for my client - and when I make offers - they're backed by numbers that the listing agent can't avoid. I don't specialize in low ball offers - waste of my time and buyers time. I educate my buyers so that the listing agents get deals done. I'm not there to get in the way of the transaction. I bring a value to the table just like any other legitimate business.
0 votes Thank Flag Link Sun Jan 18, 2009
If you Trulians ever get to take a class from John Pinto I'd reccomend it highly. He gave a private talk to my California All*Star group years back and really drove home the point, "You spend 1 to 2 hours at a listing presentation and don't feel it is successful unless you walk out of the house with a signed listing agreement-yet you'll grab a buyer, talk them up for a few minutes and start showing property!!"
He's absolutely correct. And his business at that time consisted of many buyers which he handled via the web and email. The old axiom stating you can't work with many buyers versus listings all depends on HOW you work with your Buyers.
I met a Realtor Broker who specializes in Buyer Brokerage who FORBIDS his agents from putting a buyer into their car! He also get's $500.00 up front retainer. Now this may seem extreme to many but many are still working the old paradigm (buzz word--bingo!). I know many, me included, who fight against the malaise of toooooo many years in the business!
The quickest way to become an old dog is to quit learning new tricks!--Zig Ziglar
0 votes Thank Flag Link Thu Nov 15, 2007
The way our buyer agency contracts are written the buyer agent is paid X% of the purchase price which is paid by the seller (from the listing agent's cobroke amount). If the listing agent is only offering less percent, the buyer is responsible for the balance. Buyer agency is coming kicking and screaming to NY, because buyers are accustomed to getting all the info they want for free from the listing agent or subagent, and having no loyalty.
0 votes Thank Flag Link Wed Nov 14, 2007
When the market was roaring we had agencies putting listings into our MLS which flatly stated the Buyer was responsible for the Selling agent's commission. They tried It a couple of times but after all the confusion and rather heated exchanges--they backed off. We had on Realtor write an offer explaining that since the Buyer generated all the funds to pay eveyone, the BUYER would only pay 3% to his selling agent and made it a contingency of the transaction that on the HUD 1 statement the price would be reduced 3% against the Seller's proceeds to make sure the listing agent got the fees from the Seller. It created all sorts of fun discussions and really ticket off all parties!!
I know Realtors/Licencees who have a buyer broker signed wih a $500.00 retainer and if the Buyer objects they say, "Next!" and move on.
In the greatest state of California we have three separate buyer/broker conracts and only one stipulates fee to be paid by Buyer if Seller will not.
0 votes Thank Flag Link Wed Nov 14, 2007
That debate has gone on for years. On your HUD1 it should show that it is coming out of the sellers proceeds.
Web Reference: http://GetPrequalified.com
0 votes Thank Flag Link Wed Nov 14, 2007
In NYC, the seller pays the commission to the listing agent, who divides it with the buyer's agent according to their agreement.
0 votes Thank Flag Link Mon Oct 8, 2007
In most cases the Seller pays the commission but on rare occassions, the buyer may pay.
0 votes Thank Flag Link Thu Sep 27, 2007
Terry,

Ruth gives a good example

Here is a sample Buyers Agency agreement from Michigan, I'm not sure about NY. As you can see, the Buyer is agreeing pay the fee to the BROKER and be credited any paid by the seller. See section 10 but read the entire agreement.

Generally, it is to the sellers advantage to offer payment to the BROKER reprisenting the buyer. That's for two reasons, 1. They receive money from the lender/Title company at closing and 2. Most buyers cannot afford the additional payment. This would limit the number of homes sold to some groups and is unacceptable.

If you have a question about language for any contract, I suggest contacting an attorney.

Additional sample forms (for Michigan) are available at http://activerain.com/smith3gary
0 votes Thank Flag Link Sun Sep 2, 2007
Terry:

The person signing the contract is responsible to pay the agent. The Buyer's Agency Agreement our local Realtor board uses states that the home purchaser is responsible to pay the agent. It also contains a clause, if checked by the purchaser, that the buyer's agent is to first seek payment from the Seller's broker.

Although the Buyer is RESPONSIBLE, The Seller is the PRACTICAL payer of the buyer agent fee. Hope this helps.
0 votes Thank Flag Link Sun Sep 2, 2007
The seller always pays the commission. Whatever rate the seller negotiates between the listing agent is taken out of the sellers proceeds at closing. The only fee a buyer has from their agent are any in house transaction fees plus regular closing costs. Again, all fees on both sides are paid at closing.
Web Reference: http://www.amywengerd.com
0 votes Thank Flag Link Sun Sep 2, 2007
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