DOUBLE TALK and then some. Look, there is no money, not one cent available to anyone until the BUYER gives money to seller. Say and twist it 10 ways from Sunday and it comes down to one simple thing, the money flowing into the buyer agents hands comes from the buyer.
When someone says the buyer agent is paid commission from the listing agent, that is 100% rubbish. That is like saying you give person A 10 dollars and person A then gives person B 5 dollars. Who believes that the 5 dollars did not come from person A?
The Buyer is paying for the commission, 100%. You can argue all you want but that is semantics and words games to make it sound like the buyer isn't paying for the commission. People are waking up, slowly but they are starting to figure this commission game out.
Agent commissions are little more than a drain on the transaction. Add up the total hours spent on a sale and divide it by the commission. Who makes that kind of money? Oh, the talk of months or even a year or two to get a sale for a buyer. Really? All that time, 8 hours a day every day was spent working that deal? The negotiations? Emails back and forth, a little research if any?
Rule #1. As a buyer, never NEVER sign an agreement with a buyer agent. Big mistake.
Rule #2. Always negotiate the buyer commission if you are the buyer. Refuse to pay more than 1.5%. Who makes 3 or more present on a 400-500k sale? Not even Donald Trump.
People buy cars that cost more than 40-50k everyday. They do their own research, figure out financing and insurance plus registration and licensing yet think because something is a house they need an agent taking 6% off the top?
When a seller agrees to pay a listing agent a commission sometimes it is split in half sometimes it could be more of less.
There is an agent in the area that usually takes listings at 7-8% yet only offers 2.5% to the selling agent.
For more info you can also read my commission post.
So your buyer agent insists on telling you that you aren't paying the buyer agent/broker commission. Run away. Find a buyer agent willing to work on a sale commission basis. How does this affect you?
Say you negotiate to buy a house for $300,000. 3% of that is.... NINE THOUSAND DOLLARS. How much time do you think is involved in actual work on the part of your buyer agent? A few hours, maybe even a day or so of total accumulated time. Pretty good money isn't it?
So you have this $9000 of CASH to deal with. As I've said before, you with new found information have successfully negotiated this down to $4500. Still not shabby money for maybe two days of total accumulated work time. Remember, the time you spend looking at houses is time YOU"VE spent. Your agent is just showing the house but guess what? Anyone can do that and in fact, the listing agent will show you the house, just ask. On that note, if any listing agent refuses to show you the house, find out who the seller is (recorders office) and complain directly. There is no valid reason why a listing agent won't show you a house and the seller deserves to know.
back to the $4500 of new found CASH you get to keep. What can you do with that? Put it towards the sale of the house. How does that work? Simple.
The negotiated price assumes (assuming will always bite you) that that default commission rates apply. The seller won't know that you negotiated a lower buyer agent commission unless someone tells them. YOU are going to tell them. You will either tell them in the offer itself and when the offer is presented (here we go). At the offer presentation, the buyer agent is supposed to present your case, why you should be the buyer above all others. Guess what one of the reasons is? You got it, their commission is 1.5% instead of 3% so that 4500 dollars is retained by the seller.
Remember how all the agents tell you the listing agent pays the buyer agent? The listing agent gets the money from YOU if you follow the money chain. Well now, suddenly there is 4500 that would usually go to the buyer agent that now goes into the seller's pocket.
What does all this mean? Simple, your offer now results in the seller getting $4500 more than an equally priced offer from someone else who pays the default rate commissions.
How else could you work this? Ok, reduce your offer price by the $4500 but make sure that when the offer is presented that seller knows the amount they get is the same had your offer been $4500 more because you negotiated down the commission.
The whole thing now comes down the the offer presentation. How do you make sure what you are doing is actually getting to the seller? An offer letter. Not the offer contract but a letter from you to the seller, sealed in an envelope with a signature return indicating they got it. In that letter you clearly introduce yourself and identify the points you want to make about the commission. Spell it out very clearly, 1,2,3... Make sure that what you explain can be verified by the amounts in the offer contract.
If your buyer agent hesitates, find another buyer agent. Remember, I said not to enter into a written exclusive representation agreement with any buyer agent. Any such contract is for the agent's benefit, not yours. There are too many buyer agents out there to use one that isn't flexible and willing to work according to your style and requirements. Remember, IT IS YOUR MONEY!
Typically, you are buying one house and then not again for quite a while. Why would you need to sign a long term contract with a buyer agent for something you are going to do once? Hmm?
You can also negotiate a fixed price commission with the buyer agent. Offer an amount to work one sale transaction. You look around to your heart's content and when you find the house, you engage that buyer agent for a fixed sum if the sale goes through (after all, you pay for performance not effort). You can always offer a modest sum for actual expenses should the sale fall through to cover things like fuel, phone charges and any reports they might have paid to get but not for effort (time).
So there you go, a new perspective on the buyer agent commission. Now mind you, agents will chime in and try the double talk to confuse things and might even come up with regional or state differences. Unless it is law, none of that matters. Broker or agent policies don't matter either because guess who wrote those policies? THEY DID.
The only policies that matter are yours, YOU THE BUYER. Remember this: everyone wants YOUR money. Make them earn it and spend it wisely. There is always another house and always a better one you have yet to see. Remove the pressure from your house buying because if it isn't this one, it will be another. They didn't build just one house.
There is no typical commission for any area. That answers the question directly, something an agent will rarely do.
Next, there is something unspoken of in real estate circles and it is called the default commission. A default commission is the commission you are paying (to a buyer agent or listing agent) if you fail to negotiate the commission specifically for the sale. What does this mean? Simple, if you have a buyer agent show you a house and then they assist you with such things as presenting the offer (another thing that is way overblown) you end up paying about 6% of the purchase price of the house in commissions. Here is how that breaks down:
1. The listing agent works for a broker. The broker is going to get 3% of the sale price in commission unless they also represent the buyer (buyer be very scared) in which case they get 6%. That is unless you negotiate.
2. If the buyer agent (supposedly your agent) is not associated with the listing broker, your buyer agent's broker gets 3%.
3. The individual real estate agent then gets a cut from the 3%. That amount is dependent upon what the buyer agent and their broker negotiate.
4. The listing agent (not broker) gets a cut of the 3% or whatever they negotiate with the listing broker.
Now notice how everyone is negotiating over how much of YOUR money they get? Isn't it strange that all the real estate agents are telling you that you don't pay the buyer agent's commission? That is where the double talk comes in.
The double talk works by getting you, the buyer to believe that someone else, not you the buyer, are paying the buyer agent commission. Now ask yourself one simple question. How can a buyer agent, supposedly being paid by the listing agent act for your benefit?
Confused? Try this. Your car is hit by another car. You end up going to court because the damages are so great. You show up in court and everyone tells you that you don't have to pay your lawyers fees because the person how hit you is paying for it. makes it pretty simple huh? Guess who wins in court?
So the double talk continues. You aren't paying the buyer agent directly see, you give the money to the seller who gives it to the listing broker who then gives some to the listing agent and buyer broker who then gives some to the buyer agent. Yet somehow, we are all supposed to believe that this money didn't come from your pocket right? It came out of thin air right?
But wait, it gets better. That money changing hands? It goes through escrow and those are all separate transactions. Really? If you tried to do this in a business it would be called money laundering or worse and the IRS and tax agency of any state in the union would get you convicted for tax evasion and fraud, yet it is tolerate in the real estate industry because the agents (both buyer and listing) are not employees of the broker.
So back to typical commission fees. First, as a buyer learn one thing. YOU the BUYER are paying for everything. Without your money there is no sale and without the sale there is no money to pass around. Learn this one thing and you will be ,way ahead in this game.
Next, negotiate the buyer agent commission. Don't let anyone tell you that you aren't paying it, we already know you do right? The default is 3% of the purchase price that goes to the buyer agent's broker. THAT is what you want to negotiate. How much of the negotiated price your buyer agent gets is between their broker and them, not you. In many cases, the money is split but don't concern yourself with that.
Do not simply pay the 3%. The commission is like a tip. Top commission for top service. Now, one word of caution. If you have been told you are a difficult person, in general be honest about it because someone (the buyer agent) has to put up with you. I'm talking about really difficult ok?
Don't start at 3% and work down, start at 1% and go from there. The buyer agent will take care of starting on their side at 3%. Somewhere in between those two numbers you'll come to agreement. But that is the way it is supposed to work, remember that.
How do you know what is fair and a good buyer agent commission? Simple. Are you going after a track home with no really complicated arrangements? Did you find the house or was this house found by your buyer agent? All these things affect how much work the buyer agent puts into the sale.
Remember, in this day and age, most buyer agents sign you up on some portal and then send you away to look at listings and then call them to see the house. YOU are doing all the work, not the buyer agent.. The most important aspect of buying a house is selecting the house, everything else is a process to be managed. The selection though, is something so important that if you buy the wrong house, a zero % interest rate won't matter much, you'll be paying for years on a dump.
Keep in mind the buyer does not pay their agent the agent gets paid from the listing agent.
Best of luck to you!
Kawain Payne, Realtor
RE/MAX of Valencia
The buyer's agent is paid out of the listing agent's total commission. It is up to the listing agent's discretion how much of a commission to offer the buyer's agent. This amount tends to fall somewhere between 2.5% - 3% of purchase price.
I work with a lot of buyers, and they appreciate the fact that they receive all of my services without any upfront investment.
If you are planning to select a buyer's agent in the near future, I would be happy to apply for the chance to work with you.
Good luck and thank you for your time.
Realty Executives Newhall