Most sellers are listing their home with a listing agent. This includes banks (post foreclosure properties) The listing agent is agreeing to split their commission with any agent that brings the buyer and succesfully makes it to the closing table. That's where your buyer agent gets paid.
The explanation below is a great one. A buyers agent is on your side... and trust me, in today's market you need that. There are some great deals out there but the process can be pretty ugly, and you'll want someone to be looking out for your best interest.
When we return to a sellers market, I will still urge you to have your own agent. But, that is a conversation for another day. For today, read the post below which will begin to educate you on the current market. I will say that it was written in December, and we're already seeing some changes, as it is a constantly shifting marketplace... but in general, it is still accurate. When you have a buyers agent they will explain the regional differences to you, and any current trends.
Frequently the buyer's agent is compensated by the the seller's agent, who advertises the level of compensation in the MLS. But the buyer's agency contract will specify how the agent is to be compensated. Some agents work of a flat fee. Some are paid directly by the buyer and there could be many other payment arrangements.
From the National Association of Exclusive Buyers Agents website:
"Exclusive Buyer Agents can assist you with locating and evaluating property. An EBA works to negotiate the best price and terms for you, not the Seller! They can assist you in evaluating loans and financing options, or help you find competent home inspectors and home warranty companies. Above all, the EBA offers undivided loyalty and works to protect the Buyerâ€™s interests throughout the transaction. An EBA will not ask you to limit your level of service for their benefit. The goal of the EBA is always to protect you â€“ the Buyer. "
If you would like, I can email the document real estate professionals are required by law to show you at first meeting "Real Estate Agency Disclosure" . This shows you that the State of Michigan requires Buyer's Agents to work for the benefit of their buyer and what duties they perform. It also shows what duties a Seller's Agent must perform for those selling their homes.
Just to clarify, Buyer's Agency can be for one home, one day, a week, whatever time period you and the agent agree upon. I suggest interviewing at least 3 agents before even viewing homes. If purchasing "short sale" or bank owned investment properties, there are Certified Distressed Property Experts and Short Sale specialists that work with these type properties all the time. If necessary, I can refer a few names to you.
Most real estate business models: Compensation is offered by the homeowners real estate company to the buyers real estate company. Should you choose to purchase from someone selling privately, there may be a clause in your Buyers Agency contract stipulating you, the buyer, agree to pay XXX at closing. When interviewing agents, I strongly suggest reading the entire document before signing.
I have sample copies of these documents that can be emailed, no obligation or cost. Any agent you work with should sit down and fully explain these documents. You should also have the option of having your attorney review completed documents before signing.