First time home buyer. How does my realtor "get paid"? How does that all work?

Asked by Dani, Melbourne Beach, FL Wed Jan 11, 2012

I am not sure how this whole deal works as we are first time home buyers and and just beginnig to learn about all involved. We have only ever used reltors for finding rentals, in which we have never had to "pay" them anything. When we decide on a realtor to "hire" to help us in buying our home, do we pay them upfront?? Do they make their money by a percentage of whatever home we end up buying, what other fees may there be? I am just trying to understand how the relationship works between ouselves and the realtor we choose to work with.

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18
Jessica Bate…, Agent, Beverly Hills, CA
Wed Feb 8, 2017
A real estate agent is paid by the seller. The fee is expected to be paid, you will not save anything by not hiring an agent. In most cases not having an agent in an attempt to save money, homebuyers often will end up paying more and not getting the best deal. If you do not have a real estate agent, The Lenders Network can refer you to local realtors in your area.
4 votes
Annette Law…, Agent, Palm Harbor, FL
Wed Jan 11, 2012
Dani,
There is so much we don't know at this time.
Due to the many variations in compensation created by this real estate and banking situation, the only correct answer is, "It depends."

Some distressed property arrangements defer all compensation costs to the buyer. Even in this situation, real bargains can be found.

Other situations, such as short sales, will attempt to adjust the compensation contractually agreed to by the seller and their agent, and may compel the buyer to pay the difference between the contracted compensation and the bank compensation.

Other situations will require a buyer to pay a flat fee up front. What you pay or don't pay may be entirely dependent on the property you happen to take a liking too. Your agent will be an invaluable resource in keeping you away from unexpected costs.

In a traditional transaction, it is the seller who agrees, by contract, what to pay each agent. In most traditional sales this results in the buyer incurring none of the fees associated with professional representation by a licensed agent. Be aware, the agent representing you, may have a minimal compensation requirement and if the seller is unwilling to pay this compensation, you may be on the hook.

There you have it. The complexities and intricacies of the current real estate environmental is mind boggling. The moral to the story is, "Ask your agent and inform your agent what you are willing and/or able to do." As much as a black and white answer is desired, the reality is such a simplistic answer could place you in a very uncomfortable situation.

Sit with your agent and repeat your question. It is truly important and you need to know. In a conventional sale it is the hard earned equity of the homeowner that provides the compensation for real estate professionals. The money a buyer brings, pays the banker.

Best of success in buying your new home. Your decision to stop renting and own will serve you well.
Annette Lawrence
Broker/associate
ReMax Realec Group
2 votes
Dani, Home Buyer, Melbourne Beach, FL
Wed Jan 11, 2012
Ok. So would a realtor make more money selling you a property that they were also listing (since they would not have to split the profit) ? Would that persuade an agent to try to convince you to buy one of "their" properties?
2 votes
NonRealtor, , 23456
Wed Jan 11, 2012
Hi Dan,
I'm going to give you the simple answer. You pay all the parties involved, because you're the only one buying (i.e. bringing money to the table). For example, if you don't buy, they all get nothing ( listing agent, buying agent, seller). How they get paid is not that important. Bottom line, you're paying.all the commissions, indirectly and/or directly. Wait another year to buy, prices are declining. Good Luck
1 vote
John Walin, Agent, Libertyville, IL
Wed Jan 11, 2012
Dani
I read you reponse after i posted. Further clarification, the rationale for TB is that dual agency is illegal in FL and so neither buyer or seller gets full agency representation as defined by NAR. Other agents answering question out of state- its like ministerial acts for both sides of the transaction! Wife and I went down to FL to buy a condo, I offered to sign a buyer agency, she declined said it wasnt necessary and only later found out that because the FL is written that it is presumed the public knows, no agency disclosure required. Each side, buyer and seller getting full fiduciary care is the best model for a transaction as a real estate deal is inherently adversarial. In FL however the real estate lobby won out and most folks have no idea that friendly agetn that acts like they care cant rise to the level of full agency representation without breaking the law and they dont even have to tell you.
1 vote
John Walin, Agent, Libertyville, IL
Wed Jan 11, 2012
The listing side, (seller) typically pays the gross commision and the listing office splits the gross amount to the buyer agent, whatever is in the MLS agent full data sheet. Now i am going on my soap box, as FL agents cringe. Beware in FL that the default position is transactional brokerage, TB and there is no responsibility for the agent you work with work for you as a buyer to the disadvantage of the seller. No disclosure requirment either, since FL has a presumed TB agency and no need to discuss, get your signature so you understand that the agent job is working for the transaction not you! So no advice, or consultation on how to get the best price initial offer strategy, counter offer strategy, none price advice either. They had you printouts and ask you to tell them how much to put in for the price. You get a counter offer from the seller, you ask should i go in at my walk away number or go in a bit higher and get a few counteroffers back and forth? TB is a slick liability dodge that Jeb Bush pushed through the FL legislature on his way out and consumers have no idea what a poor form of representation from an agency standpoint, TB is. No one can tell me how it benefits buyers or sellers, it only protects agents from liability so you cant sue an agent for you buying the wrong house, worth less than you paid, didnt show you this house instead of that house. . Find an agent willing to work with you using a buyer agency agreement, most will not sign one on the off chance that you like a house that is listed with their same office by another agent.
1 vote
Genevieve Ra…, Agent, Punta Gorda, FL
Wed Jan 11, 2012
As a rule, the Realtor gets paid at closing out of the sale proceeds. It is agreed to when the property is listed in the and the commission split is declared on the Listing in the Multiple Listing Service.
1 vote
Antonio Vega…, Agent, Saint Cloud, FL
Wed Jan 11, 2012
Since you will not be responsible for paying anything to the agent representing you, spent the time to find one that you really feel a connection to. There is no need to settle for less thinking it will be cheaper, it's all free to you. The company the agent works for may impose a "service fee" of not more than $300 usually, but not all companies do.

The amount of work involved in a low price closing is often more than that involved in a medium or high proced closing. Commissions earned in homes priced below $100K are usually low, so if you think your agent did a really good job for you don't hesitate to let them know how much you appreciated their dedication.

Tony Vega
Charles Rutenberg Realty
1 vote
Kevin Clouti…, Agent, Cape Coral, FL
Wed Jan 11, 2012
Dani,

You hire a Realtor to be your representative just like the seller does. You sign an agreement guaranteeing theb agency he/she works for will be paid a certain percebtage of the sale price and any other fees that may be required. No that fee you contracted with your agent is usually offset by the commission offered by the listing agency through the MLS service.Due to the economy, there may be a flkat fee commission in addition to the percentage and you will see that in the contract. Its there because houses can be so cheaply sold, the commission isnt enough to ive on for the agent or for the agency to keep its doors open. But look at it this way, if your buying a $400,000 house for $75,000 and your agent gives you all you wanted and more. Do you really mind a couple hundred dollars when you saved $325,000 or got a lower rate from his lender?

Good Luck

Some agencies charge a retainer upfront so that they are not just wasting their time showing you properties you have no real intentions of ever buyeing and it is either credited at closing or not. That is negotiable.

Its really that simple. If the home you like is a FSBO, the commission is usual;;y requested by the buyer in the offer.

In otherwords, you are usually covered for juat about the entire commission.
1 vote
Tim Moore, Agent, Kitty Hawk, NC
Wed Jan 11, 2012
Yes ! If they are the lister and seller you are in what is called a dual agency with one company that has an agent representing the seller and one representing the buyer. It does not have to be the same agent, just has to be agents in the same company and it makes it a dual agency. If the same agent lists and sells then they will get more commission. The agent gets paid by their company who actually gets the commission. They have to split the commission with their company so they do not get it all, maybe half or up to 70-80% depending on the split with their company, BUT they will get more if they list it and sell it. You are getting an agent that does not really work "for" your interests as well because as a dual agent the agent can not put your interests over the sellers so you are both treated equally and fairly. Many will say it is better to have your own agent, but often one agent does both as a dual agent and things work out just fine.

Good luck
1 vote
Ron Thomas, Agent, Fresno, CA
Wed Jan 11, 2012
Yes, they would do better if they sold one of their own Listings.
I am inferring something here; I hope you don't have a "problem".

Good luck and may God bless
1 vote
UpNest Top R…, Agent, Burlingame, CA
Fri Jul 28, 2017
Hi, Commission rates are negotiable and can vary. The key to negotiating the best rate is to compare and interview several agents in your local area. We started UpNest (http://www.upnest.com) to help you compare top agents that compete to earn your business. Since agents compete for you, they offer their very best rates and services. You'll also get to ""comparison shop"" like you do for all the other things you usually pay for. It's free and there's no risk to try us out, Good luck! http://www.upnest.com

You can also find out the average commission rate for your area here: http://www.upnest.com/re/realtor-commissions/
0 votes
UpNest, Agent, San Francisco, CA
Tue Feb 21, 2017
A realtor is typically paid by the seller. I would highly recommend hiring a realtor to help you search for your next property. http://www.UpNest.com can help you find the right brokers in your local area who have experience in the Florida neighborhood you are seeking. Hope this helps!
0 votes
Dean Charles, Other Pro, Boston, MA
Mon Jul 14, 2014
@Genevieve Ramachandran answered this as succinctly as possible and @NonRealtor added a dose of reality.

A Buyer's Agent, most oftentimes, receives a commission at the closing table (it's their broker that actually receives the commission, takes their split, and then passes the remainder to the agent) based on a predetermined amount that the seller and the listing agent agreed upon at the time of signing the listing agreement which led to the home being on the market. Ultimately, it's the seller that initially decided to compensate a Buyer's Agent, and they do so with the money that you pay for their home.

We recently released first of its kind research on how much Buyer's Agents get paid in commission by sellers in Massachusetts, feel free to investigate further using the web reference immediately below.
0 votes
Allison Fish…, Agent, Ann Arbor, MI
Wed Jan 11, 2012
As a buyer you get the help of an experienced agent to help you through the process, and the seller of the home you buy is responsible to pay whatever commission was negotiated at the time of the listing. This all takes place at closing.
0 votes
Mark Bachman, , Tampa, FL
Wed Jan 11, 2012
The realtor is typically paid by the seller. The percentage varies depending on how the home was listed. One benefit of working with an experienced real estate agent is that if they are familiar with your area, they should be familiar with the different programs and benefits available to first time homebuyers. Many communities offer down payment assistance and other special programs. Any realtor can look up homes for you, but you want to work with someone who can guide you in taking advantage of all the best programs and benefits available to you. Feel free to contact me if you have additional questions.
0 votes
Mott Marvin…, Agent, Sunny Isles Beach, FL
Wed Jan 11, 2012
Usually, the seller pays the brokerage fees. But that too is not etched in stone. Virtually every and any element of the contract is negotiable.

Waterway Realty, Realtors
Web Reference:  http://dBa22.com
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Wed Jan 11, 2012
First of all you won't pay them at all, so it's a free service to you. The seller pays the commission to the agent they hired to list the house and the payment comes out of the sellers proceeds at closing. The sellers agent then gets all the commission and they split it with the agent that worked with the buyers (you).
0 votes
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