Home Buying in Atlanta>Question Details

Tia, Home Buyer in Atlanta, GA

Exclusive Brokerage Agreement Commission: Is it usual for a buyer to pay a 3% commission to the broker in

Asked by Tia, Atlanta, GA Thu Jan 10, 2008

case the Seller does not pay Broker a commission? Why would the Seller agree to pay this commission if the Buyer has signed an agreement with the Broker to pay it?

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Tia... the Exclusive Buyers Brokerage Agreement is required about the Georgia Real Estate Commission to be signed if you desire advise and representation by your agent. In Georgia, the seller pays the commission on all listed properties by agreeing to pay a commission in the listing agreement. The listing agent then agrees to share the commission as part of their marketing in FMLS and MLS, our two listing services. So in reality, the listing agent is paying the buyers agent by sharing their commission. Most for sale by owner properties agree to pay a buyers agent by disclosing "agents welcome" or "we honor agents" on their sign and flyer thus communicating they will pay the commission on your behalf as part of their marketing. Builders pay buyers agents as part of their marketing.

I personally place a special stipulation noting that the seller pays the commission to put my clients mind at ease. In the event a seller is not paying commission the buyer then has the choice to have me represent them and pay the negotiated commission themselves or I will walk away and not represent them. For me the goal is for my clients to find their dream home. If the dream home is a property not paying a commission and the buyer cannot pay the commission then I will walk away. Doing the right thing pays three times more in the end with referrals. This is fully discussed in the initial consultation that I have with my buyers.

I call the commission section of the agreement the s____w me clause... meaning this only comes into effect if a client s____ws me. This agreement states that you will work exclusively with the agent you have entered into the agreement with and that in the event you purchase a property without the agent while under agreement you could be liable to pay the negotiated commission outlined within the agreement. If you do not exclude your agent from purchasing a property during the agreement then you will not be liable to pay the commission... it has already been offered to your agent by the listing agent or seller.

Long story short... the seller has already agreed to pay your agent by listing their property. In the event you fall in love with an unlisted property that is not honoring an agents commission then you either pay your agent or you purchase unrepresented and that is your choice. You may want to negotiate a lessor amount in the event that you do fall in love with a property that is not offering your agent a commission so that you still get representation and your agent is not working for free.

It rarely happens that a seller is not agreeing to pay a commission... all listed properties are paying your agent a commission.
1 vote Thank Flag Link Thu Jan 10, 2008
A Buyer Broker agreement is a promise between the Buyer and the Agent. A promise that the agent will go above and beyond to find the home, negotiate, and all the necessary due diligence to close the transaction.

It is a promise from the Buyer that while this agent is looking, previewing, networking, etc. on behalf of the buyer the Buyer will exclusively work with this agent.

When all that happens the terms of what this agent will be paid is stated in the Agreement. The Buyer agent doesn't get paid for any of their work unless and until escrow closes.

Now if the agreement is for the agent to be paid 3% and the seller is offering 3% then the Buyer doesn't usually pay anything above what is typical in the process. Let's say that the seller is only offering 2.5% then the Buyer is agreeing to pay the difference, or 1/2% to their agent.

I have worked with a Buyer who decided to purchase a house I found not offered on the MLS. We negotiated a price, but the Seller did not want to pay the Buyer Agent fee. We could have built it into the selling price, but the Buyer chose to pay it outside of the loan amount.

Why would the seller agree to pay 3%? First off the Seller may not even know of the contract between the Buyer and the Buyer Agent, and they don't have to know. Secondly if the seller wants to sell why would they let a willing and able Buyer walk away from the deal at only 3%? And finally if it is on the MLS the Seller has a Listing Agreement with their Selling agent and already agreed to offer a certain % to a Buyer Agent on the MLS.
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Thu Jan 10, 2008
Hi Tia,

The most common scenario for this to happen is when the Seller is a FSBO (For Sale By Owner) This is the reason why it is included in the agreement. Your agent should explain this to you before you sign. To answer your question it is common for the agent to request 3% but this can be re-negotiated BEFORE you sign. In other situations if the seller is only offering their agent a total of 5% and they take 3% the buyers agent would only receive 2%........It is important for you and your agent to agree on those specific terms in advance and if the agreement needs to be altered to make you feel more comfortable about it then so be it.

Hope this helps !
0 votes Thank Flag Link Tue Apr 8, 2008
Lori said:
Tia... I would never buy a house where commissions had to be rolled into the price to pay your agent because the seller refused to pay the commission.
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But the commission is always included in the price of the house when the seller pays the commission. What is the difference?
0 votes Thank Flag Link Mon Jan 21, 2008
saw this one answered on another site....the agents wanting to represent a buyer with this language may have this put into their agreements with the buyers in case they get into a deal with a FSBO or a discounted listing where the buyer's agent may have a risk of not getting paid, at closing, an adequate or full commission for their efforts in steering the buyer to the property
0 votes Thank Flag Link Mon Jan 21, 2008
Thanks Deborah. You are 100% correct. Lenders do not consider commissions a concession because they have nothing to do with market value...commissions are a deduction in the sellers proceeds.

Tia... I would never buy a house where commissions had to be rolled into the price to pay your agent because the seller refused to pay the commission. With the current state of the market you cannot afford to do this and the home likely is not under valued to allow you to do this. For me personally, I write into my buyer agreements with my clients that in the event a for sale by owner/seller refuses to pay a commission then I will negotiate with my client a lessor amount ito continue representing them in exchange for referrals of their friends, family, and co-workers. If my client cannot afford to pay me a commission then I walk away. This is after I submit an offer which includes a commission and they refuse to pay. My client can then submit their own offer on a form that they purchase at Office Depot or somewhere as I cannot legally give our contracts for them to use. I cannot represent a client without being paid a fee.

Why can I write this into the buyers agency agreement? Because this will happen one time out of a million as most for sale by owners are willing to concede a portion of their profits to get their home sold and all listed properties the sellers have already conceded plus builders have conceded. From my experience, for sale by owners that refuse to concede any commission amount typically refuse to concede any concessions to a buyer of any kind and are difficult to work with that buyers walk away. And I do this because at the end of the day for me, it is more important that my client have their dream home then me a check. It all comes around in the end.
0 votes Thank Flag Link Sat Jan 12, 2008
I agree w/ Lori. Comps are pulled from sales data irregardless of who sold the property. Markets set value.

Read your buyer agency agreement to determine the exact terms. Buyer agency agreements that state the buyer will pay a commission are frequently built into the transaction and paid by the seller at closing. One might compare it, loosely, to an offer where a buyer makes an offer price subject to the seller paying points for a loan, or closing costs, or some other seller concession. I used the term "loosely" comparable, because lenders do not consider a seller paying a commission a "concession", but a lender will consider a seller paying closing costs a "concession."

Deborah.
0 votes Thank Flag Link Sat Jan 12, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
Joshua... I have to strongly disagree with you that buyers pay the commissions by "a little bit more for the home" because there are commissions involved. Commissions have absolutely NOTHING to do with market value... the commissions agreed to be paid between the seller and the listing agent are deductions to the sellers bottom line and not an addition to market value...it is the seller and the seller only that is paying the commission and then the listing agent agrees to pay the buyers agent as part of their marketing plan just as builders agrees to pay a commission as part of their marketing plan.

A homes value is not determined by the commissions paid by the seller. We witness this on a daily basis with for sale by owners... when for sale by owners (which are typically not priced for market) decide to list their home because they need the aggressive marketing and representation a great agent can provide they cannot raise their price to cover the commissions if comparables do not support the price. In some cases they have to lower the price to be priced right for the market.

Lets say a buyer comes without an agent and the listing agent agrees to reduce the commission to the seller since there is no other agent involved. An agent does not have to agree, does not always reduce the commission, and is not always asked to reduce in this situation. Who is the reduction benefiting? From my experience, a buyer coming without an agent benefits the seller and it benefits the listing agent. The "deal" the buyer feels they received in many cases is not a deal and they could have done better with an agent representing them or at the very worse receive the same "deal" they received with no representation to watch out for their interest from offer to closing.

Lastly, the appraisal is performed based on sold comparables whether they are listed or for sale by owner properties. I can speak from my own purchase this year... there are no adjustments made for an agents involvement in the transaction or no agent involved in a transaction.

Knowing that commissions between a listing agent and a seller are negotiable... does this mean a home is worth less than a home where the commissions are higher... absolutely not. The seller that agreed to pay a higher commission down the street has agreed to net less. If buyers agency goes away and only listing agents exist do you think this will effect the value of a home...absolutely not. If the listing agent agree to take a lower commission do you think this will effect the value of a home...absolutely not. It simply adds to the sellers bottom line.

Joshua... I know that you are a fabulous agent. I am challenging your belief because I think it sends a false message. This plays into the myth that some buyers think they will get a better deal and therefore dismiss representation and hurt themselves in the process.

I think you have seen from me on Trulia that I do not always give the answer that thrills agents so I support you giving an unpopular answer so I would never give you a thumbs down. Additionally, I know that you are a brilliant agent. I just maintain that commissions have nothing to do with a homes value; therefore, the commissions have nothing to do with what a buyer will pay for a home.
0 votes Thank Flag Link Fri Jan 11, 2008
I'm a licensed real estate salesperson in Georgia. I'm a Realtor, a multi-Million Dollar Club member since 2004, and I have a specialty, which is helping Sellers and Buyers in Intown Atlanta and Decatur.

By profession, I am a consultant. Consulting is nothing more than the application by a specialist of technical information to a problem which, when solved, offers a disproportionate benefit to the client compared to the fee he pays.

You are paying whatever you pay your broker because they delivered a disproportionate benefit to you and made the purchase and sales experience better for you, based on your unique needs, right? The broker helped, right?

You should be able to work this out as long as everyone involved is reasonable.

Sometimes some of us here at Trulia Voices get paid 10% contingent commissions. Sometimes we get paid up front as retained consultants. Sometimes we structure flat fees.

It's 2008, and we here at Trulia Voices are offering disproportionate benefit.

Tia, if your agent is not one of us here at Trulia Voices, then they may not be worth what you are paying them. I'm just sayin' ...
0 votes Thank Flag Link Fri Jan 11, 2008
At the top of the agreement, it says, "it's required for a Realtor to have a signed document before representing them" (not verbatim).

First, we need to have an agreement in place to actually be able to perform the duties that look out for your best interest. We have a fiduciary responsibility (this is the same responsibility that attorneys have) to look out for your interest.

Secondly, if you are visiting listed homes, homes that are listed with agents, then they have ALREADY agreed to pay (usually) the Buyer's Broker something. Since that agreement came first, it rules the day (in the event that a Seller decided on this argument).

Lastly, let's be real. Who pays the commission is debatable. I won't be popular for this answer, but if you really think about it, who really pays. The buyer is either paying a little bit more for the home, due to the commission (even in the event of a FSBO, the seller often prices their home similiarly to listed homes thus, most buyers pay a commission... to the owner) OR the seller is taking less than he could (assuming you thought the home was worth what you are paying) have taken.

That's the pessimisstic engineer's view of things. Bottomline, your agent is there to look out for you and should advise you on when you might be in a situation to pay an extra commission (FSBO scenario).
0 votes Thank Flag Link Fri Jan 11, 2008
Joshua Jarvis, Real Estate Pro in Duluth, GA
MVP'08
Contact
The seller, when listing their home for sale, agree to pay the listing broker a commission to sell the property. The listing broker in turn, through a cooperative agreement , pays the broker who represents the buyer. So the buyer's agent and broker is paid a portion of the commission that the seller agreed to pay when they listed the home.

The buyer broker agreement states how much the broker representing the buyer is to paid as a percentage of the purchase price or a set amount that is agreed to between the parties. The buyer is agreeing that the buyer's agent is providing them with a valuable service.

I have never seen an instance were the seller refused to pay a commission to get their home sold. Even For Sale By Owner sellers agree to pay the buyers broker the commission. To protect my buyers from having to pay a commission I get the listing agent, or if need be the seller, to agree in writing as to what they are willing to pay.

I hope this helps with your understanding of the process. I conduct a "First Time Buyer Seminar" in which the entire process is discussed in detail. If you would like more information on it fell free to contact me.
0 votes Thank Flag Link Thu Jan 10, 2008
3% is a typical commission paid is to the buyers agent (as determined by the listing agreement - or with a single property agreement with a for sale by owner). Though, this can vary. Some listings offer 4 or even 5%, some offer less. An exclusive buyers agreement is, at it's core, a commitment by the buyer to work exclusively with one particular agent (or team) to represent them on the purchase of a property. A buyer's agent does more than just show the home, and write up the offer. They may do a tremendous amount of research to find the best properties and help with determining a fair purchase price. After the offer has been accepted, they will help during the inspection and mortgage process, as well as with any other questions/concerns to ensure completed sale.

As far as the Agreement guarantee of a minimum commission paid, it is a protection for the broker that the buyer will not disregard their agent, and go into contract on a property without any consideration to the work done by the agent. As Realtors are not employees, they are not paid a traditional salary. One would not have an employee work for a pay period, then decide not to give them their paycheck. It is the same here. If for some reason a buyer is unhappy with the service they are receiving by their agent, they can certainly end the agreement and find another agent to work with. I know I personally would not hold a buyer (or seller for that matter) under a contract to work with me if they were completely unhappy with my service. Though, I have never had this happen.

As with any contract, I would advise you to read it carefully. And, if you have any specific concerns, get an attorney's opinion before signing it. A reputable Realtor would, of course, allow you this time.
Web Reference: http://www.helpinghomes.net
0 votes Thank Flag Link Thu Jan 10, 2008
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