Jack Gates, Both Buyer and Seller in Seattle, WA

Where can I find out how much my buyer's agent is getting paid?

Asked by Jack Gates, Seattle, WA Sun Jul 5, 2009

He says that it varies by property and won't tell me the specific percentages. Why doesn't the commission information show up on real estate search websites? Shouldn't he be willing to tell me what the commissions are? This all seems very shady to me. How do I know if he is pushing me towards homes with higher commissions??

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Answers

94
James Hsu, Agent, Bothell, WA
Fri Jul 17, 2009
@Myra @Linda
The problem with your reasoning or justification with how commissions are is that ... the buyer and the seller don't care how the commission is being split up between the selling and listing office or how much you have to pay in advertising or your desk fees. When you go to the grocery store to buy food, do you care how it got there or the costs to get it there in terms of transportation costs from the farm to the processing warehouse to the packaging to the distributor to the trains to the local stores onto the shelves. Nobody really considers all the ins and outs of how that piece of food got to your grocery store. All you really see is how much it's going to cost you. So same thing applies here. Nobody but real estate agents cares about our desk fees, or office splits or what not. So to keep using that explanation (which is more than likely a trained response) makes us all look petty and a bunch of whiners. Oh look at the fees I have to pay ...that's why I'm gonna take a $10K commission. What would anger me more is ..if your office was taking 50% of your share of the commission, what in the world are they doing for 50%?!? Did they do half the work?!
4 votes
James Hsu, Agent, Bothell, WA
Sun Jul 5, 2009
Some believe the commission the buyer's agent is paid is none of the buyer's business ...or so I've been told and heard. It's not shown on public sites because that particular data field is not a public field. The commission earmarked for the buyer's agent can vary from house to house ...it is set by the seller and the listing agent when the house goes on the market ... so whatever they set ..is whatever your agent gets.

This brings up a whole host of issues...some of which you've voiced. Simple way to find out is flat out ask your agent to disclose what their commission will be on whatever house you're looking at. Agents who can justify their worth should have little issue with disclosing that info. Agents, in my opinion, who refuse to disclose that info need to get with the times. The tough part is you don't know if he's pushing you toward homes with higher commissions and not showing you ones that aren't paying as high...it's a messed up system. You can ask to see the agent listing print-out. Agent commissions are under a field called SOC and is usually represented as a percentage number.

Basically, ...ask your agent to disclose the info, and if he refuses or is reluctant to, ... demand why. OR, .. search for homes on the real estate search sites yourself and tell him what you want to see. That way, ..regardless of what commission the listing is paying... you see what you want to see. If your agent can provide you with the info and service that will make you feel comfortable, great! ....If you don't feel comfortable for whatever reason, ...time to look for a new agent.

...just another reason why I think commissions should be split up. Buyers pay their own and sellers pay their own. Makes so much more sense... but the industry will fight this to no end.
3 votes
David Chambe…, , Saint Petersburg, FL
Fri Jul 17, 2009
I agree with James, it is not the buyers fault you got a bad commission split, that is your fault. and who cares about your expenses. There is a cost of doing business for everyone, stop whining about it.
2 votes
Al Brent, , 44145
Fri Jul 17, 2009
Jack
It DOES vary by what percentage or flat fee the OWNER has listed the property for. (Poor grammar I know). Most of the time the amount of commission is insignificant if the property you want to purchase fits your exact needs.
For example let's say you REALLY WANTED a Corvette - REALLY, REALLY, REALLY. You wouldn't care how much it costs or how much the salesman would make, you'd buy it. Oh, you might try to negotiate a little. But you would probably buy the car.
SO even if your agent, who is working for you presumably, pushes you towards homes with higher commissions you don't have to buy them.
2 votes
Rachelle Kni…, , Orange, MA
Fri Jul 17, 2009
Frankly, after reading most of the answers to your question Jack, and reading your responses, it sounds to me like you simply expect ANY real estate agent to cheat you and be dishonest. Every explanation you've received has been met with a "what if" and further suspicion. Perhaps you should examine why you feel this way in the first place, and then re-read many of these responses. What it boils down to is- if you don't like the person with whom you are working, find someone new. If you expect to feel cheated by any Realtor or agent, then consider trying to list your home and buy a new one on your own. It may not be a fun or profitable way to go, but if it provides you with a better feeling of security then it may be your best choice.
2 votes
No Name, , Seattle, WA
Wed Jul 8, 2009
Jack, I think opinions are pretty much consistent from coast-to-coast: trust your current agent to work diligently for you or find another one!

:^)
Web Reference:  http://www.dugaldallen.com
2 votes
No Name, , Seattle, WA
Mon Jul 6, 2009
Jack, the agent is right: it does vary by property.

You have asked (among others) two very easy to answer questions:

Question #1. "So what do I do if he won't tell me how much commission he gets paid on each listing we look at?"
Answer: work with someone else if you can't get over this aspect of his service.

Question #2: "How do I know if he is pushing me towards homes with higher commissions??"
Answer: Make sure it's *you* that's driving the purchase decision on a particular home. Make sure you are comfortable that you are being given the opportunity to see all homes within your search criteria.

Jack, my advice to you is to take the commissions question out of your own decision-making. I know you're bringing the money, but the seller has already contracted with the listing agent to pay the buyer's agent, so that number is out of your control. I prefer to say to clients that "the transaction" pays me - which is (in my view) a better description of what happens. You may be bringing the money, but the seller is taking that same amount *less* from the closing table, so both parties are participating.

If you don't trust your agent, then work with someone you *do* trust. *You* drive the home purchase decision. It's *you* that's going to be living with the long term decisions here.

I hope that helps.
Web Reference:  http://www.dugaldallen.com
2 votes
Kevin Lisota, Agent, Seattle, WA
Mon Jul 6, 2009
I cannot understand why an agent would refuse to disclose their commission to you. Given how large the dollar amounts of commissions are here in Seattle, it seems only fair that they be transparent about the commission that each property is offering. It helps you to understand how your agent is compensated, and it points out any conflicts that your agent has with showing you listings that have higher or lower than normal commissions.

If you suspect that your agent is steering you away from homes with lower commissions, then take the home search upon yourself and insist on seeing all of the properties on your list. Better yet, I'd find another agent.

There are agents out there who will freely discuss their compensation and the commissions that they are paid on each property. (Our brokerage, findwell, does this.) I suggest you seek out an alternative agent if the one you currently employ is not being forthcoming with the information.
Web Reference:  http://blog.findwell.com
2 votes
David Chambe…, , Saint Petersburg, FL
Sun Jul 5, 2009
It does vary by each listing.

Here is an exerpt from the code of ethics:

Standard of Practice 1-13

When entering into buyer/tenant agreements, REALTORS® must advise potential clients of:

the REALTOR®’s company policies regarding cooperation;

the amount of compensation to be paid by the client;

the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties;

any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker, subagent, landlord’s agent, etc., and

the possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties. (Adopted 1/93, Renumbered 1/98, Amended 1/06)
2 votes
Ardell Della…, Agent, Kirkland, WA
Sat Jul 18, 2009
Dugold,

If it was a "penny" it wouldn't be worth talking about :) Frankly, from my perspective it's not about "the money" per se, as much as giving buyer's the dignity of the discussion on their side of the equation.

When an agent thinks they are paid by the seller and outright "entitled" to an amount promised by the seller, they don't treat buyers as well, and think their client (the buyer) isn't paying them. It's not a good way to look at it.

If every agent for the seller understands their portion of the total comes from the seller, and every agent for the buyer understands their portion is paid by the money the buyer brings to the table, it keeps everybody honest as to their allegiance to their own client. It's just a change in mindset really, and not so much about money.

Every buyer then has a "discussion" regarding the buyer agent fee when hiring a buyer agent. It's not about how much or how little...it's about the right to have "the talk". I find agents who believe their client is paying them, see everything in a better light as to their client's rights throughout the entire process. If the agent thinks the buyer is getting representation "for free", well, I think we all agree that is not the best case scenario.

Agents not wanting to have a discussion with a buyer the same as they do with a seller, is kind of like saying "you're not my client; just hurry up and buy something and what I get paid is none of your business." That stance is inappropriate, and no buyer should hire an agent who refuses to acknowledge that each agent is paid by their client within the transaction.

The buyer pays their agent via the purchase price, and it is shown on the seller side "as a convenience to the transaction" so it can be easily financed, and so the asking price can be set accommodating the fee, before the buyer is a known entity.
1 vote
Paul Howard, Agent, Cherry Hill, NJ
Sat Jul 18, 2009
Dugald,

This statement: "If it's listed, then the listed commission is guaranteed to the buyer agent (subject to the MLS rules and exceptions). There is no need for subsequent (or any) discussions or paperwork on the matter between the listing and selling agents. "

I don't disagree with this statement. What I disagree with is the implication that the selling office is bound to accept whatever it is that the seller and their agent decide on as payment in full. If that were true there would be no point in the buyer and their agent negotiating but buyer agent's commission.

If you have some legal document from your board that says otherwise I would be very interested in reading it. I don't think it matters that the MLS may be owned by it's members.

Do you disagree with my assertion that a buyer can select a company to represent them and that they can negotiate a fee for the services to be performed by that company AND that they can condition a purchase offer on the seller's agreement to pay that fee on their behalf? It seems to me a matter of contract law. If you do disagree, do you have any basis for the disagreement aside from 'tradition'?

While I have heard all the arguments before, I have never seen any legal document to back them up. If it exists I would like to see it. I might be wrong and if that can be shown I will say so.

It would be significant to tell home buyers across the country that they do not have the right to select a company to represent them and to negotiate the compensation that company will receive.

Paul Howard, Broker
NJHomeBuyer.com Realty
1 vote
Ardell Della…, Agent, Kirkland, WA
Sat Jul 18, 2009
When a seller sits down with their seller's agent (listing agent) they determine a buyer agent "offering" for a few reasons:

1) The seller wants as many agents as possible to show the home
2) The buyer is unknown, so the buyer agent fee is also an unknown on that day
3) The buyer will likely be financing the buyer agent fee in the sale price

Because the seller sets the asking price, the seller needs to "set aside" within that price, an amount sufficient for the buyer to hire representation, and pay for that representation, as part of the transaction. The seller does not tell the buyer and buyer's agent what that fee "should be". The seller simply sets in motion the means by which a buyer and his agent can fund their agreed upon commission.

Jack is correct that the seller offering "a bonus" for a buyer agent to "direct" a buyer to his home (in order to make more money), is an outdated and inappropriate offer. It is a "leftover" from the days when all agents represented the seller. Though the seller is free to use any means to entice a buyer, doing so by means of a bonus the buyer is not privy to, only made sense when ALL agents represented the seller back 20 or so years ago.

The mls offering is not what the agent for the buyer is "to be paid". It is an amount "set aside" to be discussed and decided between the buyer and the buyer's agent. Think of it as a "retainer".

An attorney may ask you to deposit $5,000 with him as a retainer. But if the final agreed upon price between the attorney and client is $200 an hour, and at the end the total monies needed to pay for the service is $4,000, then the attorney does not keep the remaining $1,000 from the retainer. Same with a buyer agent fee. If the seller offers 3%, but the commission understanding between the buyer and his agent is 2%, then the fact that 3% was "set aside" by the seller, does not change the agreement between the buyer and his agent.

While everyone is correct regarding "the rules we made for ourselves", at some point we have to understand that our clients, and in this case the client is the buyer and not the seller, are no longer going to sit still and watch us make our own rules and determine how much they will pay us, without their input.

The rules we made for ourselves when we ALL represented sellers of homes, and never buyers of homes...well, really. Does it make sense to anyone that we didn't sit down and change our rules back 15 to 20 years ago when buyer's attained representation? I don't think so, and neither do most buyers of homes.

Web Reference:
1 vote
Paul Howard, Agent, Cherry Hill, NJ
Sat Jul 18, 2009
Dugald, You are correct that the "offered" commission is not to be later negotiated. However, neither does it need to be accepted as complete payment by the selling office. The buyer, being bound by a buyer agent contract to a specific rate of payment, is quite free to condition the purchase offer on the seller paying in full (or even in part) the amount the buyer and their representative agreed to.

In the end there are 3 contracts. (at least)

Listing office and seller.
Selling office and buyer.
Seller and buyer.

The 'offer' of compensation in the MLS is just that - an offer. The selling office may already have a contract for their payment with the buyer. The buyer could agree to pay it or they may negotiate to have the seller pay it.

This position is consistent with the code of ethics and the standards of practice and supporting arbitration rulings of the National Association of Realtors.

This position is not region dependent. It applies nationally.

This further supports my opinion that the "offer" in the MLS is price fixing because so many agents believe that the seller and their agent can actually dictate via that offer the income of the selling office.

Paul Howard, Broker
http://www.NJHomeBuyer.com Realty
1 vote
Paul Howard, Agent, Cherry Hill, NJ
Sat Jul 18, 2009
Donald, I did not misstate, misinterpret or misunderstand. I meant exactly what I said and it applies to any state in the country. And, it is in accordance with the NAR COE and arbitration precedents.

The agreement between the listing company and a seller is between them alone. They decide on an "OFFER" amount for compensation to a selling company. That "OFFER" is place through the MLS. It is only an offer - to be accepted or not by a cooperating broker. Any statement to a seller by a listing company that the selling agent MUST accept that amount is false. (By the way, if that were more than an offer it would be price fixing and the MLS would be a party to it - that is why it is an OFFER.) Personally, I think the MLS should be banned from posting offers of compensation in the MLS because so many agent THINK they are binding that the effect is nearly the same.

The agreement between the selling company and the buyer is between them alone. It does not matter what house is involved or what the listing agent and seller decided to OFFER. The buyer is free to make their purchase offer contingent on the SELLER paying that commission. If the buyer agent commission is more than the amount offered in the MLS the seller would pay a little more if they accept the buyer's purchase offer. If the buyer agent commission is less than the amount offered in the MLS the seller would pay a little less if they accept the buyer's purchase offer. This is completely independent of any agreements the seller and the company they have enlisted to represent them have come up with. Just as the selling company's agent is not permitted to interfere with the agreement between the seller and the listing company, the listing company may not interfere with the agreement between the buyer and the selling company.

ONLY when the buyer fails to enter into an agreement specifying the commission is the agent in the position of playing pot luck with the commission. And only then is the buyer at risk of poor service because of failure to enter into a contract. You get what you pay for. The code of ethics section that David Chamberlain cited earlier is relevant here.

It is well known that when seller's and their agents "OFFER" a low commission to cooperating broker the house stays on the market much longer because most agents don't enter into contracts with the buyers they represent and so have no way to protect their commission. Despite any obligation they may have to show all homes listed they are human and many will look for a way to protect their income even if it means not showing homes that will not result in sufficient income, The 'average' agent makes less than $45000 per year. There is not a lot of margin for working for buyers at a discount. The volume just is not there.

Both the buyer and the selling company will be well served by entering into a binding contract.

Paul Howard, Broker
http://www.NJHomeBuyer.com Realty
811 Church Rd Ste 111
Cherry Hill NJ 08002
http://www.facebook.com/pages/Cherry-Hill-NJ/NJHomeBuyercom-…
http://www.twitter.com
1 vote
Ardell Della…, Agent, Kirkland, WA
Wed Jul 8, 2009
Jack,

I recently had buyer clients who purchased a bank owned property with a very low commission offered to the buyer's agent (me). The buyers got a really good deal on the house. I still think it is because of the low commission. The listing agent didn't even put a sign on the property, as the amount they were paying him was low as well.

My point is that sometimes a low commission offering can keep lots of agents with buyers away, and that could end up being the best deal for you price-wise. I answered your other questions earlier, but thought this was worth mentioning.
Web Reference:  http://www.raincityguide.com
1 vote
James Hsu, Agent, Bothell, WA
Wed Jul 8, 2009
@JR ...we get our buyer's pre-approved for a loan for a reason ..so we really know how much they can qualify for. Perhaps we don't directly ask them, but we indirectly can determine what they qualify for.

@Jack ...JR has always had a very strong and passionate opinion when it comes to questioning his commission. You've been warned.
1 vote
Anna M Brocco, Agent, Williston Park, NY
Mon Jul 6, 2009
Keep in mind all commissions are negotiable, and if you are not comfortable with this particular agent move on, you have many other good Realtors to choose from and I am sure of that.

Anna
1 vote
J R, , New York, NY
Mon Jul 6, 2009
So if I sign a buyer's agreement that says my agent gets paid 3%, what happens in a property is offering 4% as an added incentive for agents? Signing such an agreement does not expose this conflict of interest. It seems to me that agents who refuse to disclose such incentives are not working towards my best interests as a buyer.
~~~~~~~~~~~~

There are so few properties offering incentives to agents and so many more things to worry about, like paying too much for a house, I'd concentrate more with learning what other similar houses sold for. Commissions rarely vary more than 1%. If your agent is truly working as YOUR buyer’s agent, than your agreement should state their fee, and you offer should also state the amount that is his fee to be paid to his agency.
1 vote
Jack Gates, Both Buyer And Seller, Seattle, WA
Mon Jul 6, 2009
So if I sign a buyer's agreement that says my agent gets paid 3%, what happens in a property is offering 4% as an added incentive for agents? Signing such an agreement does not expose this conflict of interest. It seems to me that agents who refuse to disclose such incentives are not working towards my best interests as a buyer.
1 vote
Ardell Della…, Agent, Kirkland, WA
Sun Jul 5, 2009
Jack,

My clients and I determine a commission when we first meet, whether it is a buyer client or a seller client. When we decide to work together we establish a fee for my services. It shouldn't change from one house to the next.

This way it doesn't matter what the seller is offering until we get to the offer phase. When my buyer client is ready to make an offer, or they narrow the search down to a few houses, then we look at the commissions of only those houses together. Commission amount could affect the terms of the offer, but it doesn't affect how much my client agrees to pay for his representation.

Your question: "How do I know if he is pushing me toward homes with higher commissions?" concerns me as it suggests you don't trust your agent, and you should not work with an agent you don't trust to represent your best interests.
1 vote
Steve McDona…, Agent, Seattle, WA
Sun Jul 5, 2009
Jack,
First and foremost, agents are obligated to show you any house that is suitable to your needs. If your agent is not showing you such homes then that may indicate a serious issue. But assuming you are seeing homes that are in your price range and satifiy your stated objectives then it really doesn't matter how much the agent gets paid - It's not coming out of your pocket. Generally, the market around the Seattle area almost dictates 3% SOC (sales office commission) to keep a listing active and competitive. The exceptions are bank owned properties and most short-sales that rarely ever pay the full 3%. There may be the odd circumstance where a seller is paying a bonus that could be contingent on a full price offer or deadline. Bottom line it sounds like you may have some trust issues with your agent. Is he also listing your home? If you can't let go of the issue or get your agent to divulge these details then it's time you moved on.
Steve

PS. I've never had a clinet ask what my commission is going to be - gross, net or otherwise
1 vote
Jim Swanson, Agent, Tacoma, WA
Sun Jul 5, 2009
Jack. The commission information is not made public becaus it should not be that transparent as commissions are negotiable and based on the listing agreement. The truth is that it does vary from home to home, but no one has ever inquired to the commission I was getting paid. I think the focus should be on the buyer getting the right house for them. As far as agents trying to "push" a client towards higher commission homes, that should not happen. I do not focus on that, but I understand there are some agents that do. If you honestly think that is going on, then you don't have the right relationship with your agent. There is a lack of trust for whatever reason.

I suggest you be honest with your agent and let him/her know your concern. I know that there is some hesitation in telling a client what we make because it is not really all our money. Some agents have agreements to split part of the commission with the brokerage (brokerages take money to operate too), and then there are Income Taxes and any other overhead costs an agent may have. I can tell you that 3% of $300k is $9000, and if the agent pays 30% to broker, now they have $6300. Take 25% out for taxes and now they have $4725. Factor in costs of doing business of about 1/3 and now the agent has $3165 to live on. This is only an example, but I hope it helps you understand that we do not make a ton of dough on one home sale/purchase. If we can put together 3 of those in a month, then we do ok.

I have buyers buying at $260k and I have buyers buying at $125K (here in Tacoma) and I do not feel one is more or less inportant than the other just because one earns me more commission. The truth that I have clients for life, and down the road when they buy and sell again, I want to be there to serve them again, not to mention the referrals that can come my way from treating them well.

I hope this helps with your question.

All the best, Jim

PS I don't work in Seattle
Web Reference:  http://www.homesbyjim.com
1 vote
barbara mcma…, Agent, Everett, WA
Tue Aug 11, 2009
I agree with Daniel. Commissions are approximately 3% per side. However, with short sales and bank owned properties, they could be close to 0. Don't forget that the 3% is a very rough number. If a relocation is involved, they usually take about 45% from the top. Then, a full service broker will take their portion, sometimes as much as 50%. Then-the agent has to pay federal taxes and both sides of social security.Then, there are expenses and time. Unless you are "after" some of your agen'ts commission, you shouldn't worry, unless you want to pay them more if they are under compensated.
0 votes
Daniel Bretz…, Agent, Seattle, WA
Wed Aug 5, 2009
Yes, great question, thumbs up, but Jack, I have a question for you. Why is it so important to know what commission your agent is being paid? Sometimes, the really good deals come with a higher commission, because the seller is motivated.
0 votes
Ardell Della…, Agent, Kirkland, WA
Wed Aug 5, 2009
Seems odd there are 97 answers and only 4 thumbs up to Jack for the question. C'mon people, give Jack a thumbs up for asking a question of obvious interest. The conversation has been stellar.

I enjoyed it, so thumbs up Jack!
0 votes
Mark Cooper, Agent, Englewood, CO
Wed Aug 5, 2009
1. Your agent should have explained his or her agency relationship with you before you started looking for homes and in Colorado and most states that would include a buyer agency agreement.
2. If he or she didn't, you might want to find a different agent who will explain how they will be working with you.
3. Ask them specifically what they are paid on the transaction..
4. Your the ultimate decision maker on the home and if you feel he or she is steering you, confront them.
0 votes
Nan Simcox, Agent, New Bern, NC
Wed Aug 5, 2009
I have just finished reading some of the other answers to this question and am really surprised to see how many of the answers indicate that the individual agents will receive 100% of the offered compensation on each side of the transaction.. Than would certainly be the exception rather than the rule although it seems that most consumers seem to believe that the commission checks written at closing are made out to the Agents when the great majority of the commissions are received by the Companies and the Agents are paid just a portion of that amount.
0 votes
Nan Simcox, Agent, New Bern, NC
Wed Aug 5, 2009
Your Buyer Agency agreement should contain the amount of compensation that the Agency will receive upon the closing of your transaction, but if you feel it necessary to know how much your Buyer Agent is going to receive, then you need to ask the agent. It is common practice for every real estate company to have a compensation agreement with each of their agents and that spells out the amount the agent will be paid upon the closing of a transaction. The HUD1 or Settlement Statement will show the amount of compensation the Listing and the Selling companies are receiving and from that amount, they will pay their respective agents is per their agreement. As there is no such thing as a set commission fee and all commissions are negotiable between the seller and the listing agency, the percentage or flat fee the selling agency will receive is published by the Multiple Listing Service and these figures vary greatly as some sellers are more generous that others and some companies are more generous with their agents than others may be..
0 votes
No Name, , Seattle, WA
Wed Aug 5, 2009
Ardell, you said "...Can a seller pay 15% commission, without the buyer's lender refusing to finance that? Max I have seen a buyer's lender allow in terms of commission is 7%. Or does the buyer's lender never see the commission (or care about it either0, these days?"

Going back to the accounting reality: the commission is on the seller side of the HUD and while this is a pretty radical example, I can't see why the lender would care. It's not a seller concession...
Web Reference:  http://www.dugaldallen.com
0 votes
Marlow Harris, Agent, Seattle, WA
Wed Aug 5, 2009
Jack,

If you don't have a Buyer Agency Agreement with your agent, ask him to draft one for you. It should spell out exactly what he will be paid.

The suggested amount may be 3% of the sales price. If a Seller agrees to pay more, like 4%, you would get the extra amount. If it's LESS than 3%, then you would be expected to make up the difference.

Some agents choose not to share the amount of the commission paid, at least at first showing, because they would rather have the Buyer concentrate on the house itself, if you like or dislike it, irregardless of the commission, as that amount may be irrelevant if the house is the home of your dreams.
0 votes
Mack McCoy, Agent, Seattle, WA
Sun Jul 26, 2009
- Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it.

Tell us, who pays the commission in NY NY? What's the "revolution" there?
0 votes
Vision 2 Eve…, , Seattle, WA
Sun Jul 26, 2009
Well, as a general rule the amount that a buyer can use for seller concessions regardless of what they are used to pay is either 6% or 3% depending upon the loan type and down payment.

For example, FHA loans allow 6% of the sales price and conventional loans allow 3% up to 20% down and 6% after 20% down. Typically these percentages are used to pay the buyer’s closing costs.

I have never heard of the buyer financing real estate commission with these percentages. However that does not mean that that is not possible.

Mike Carpenter
Mike the Money Man
0 votes
Ardell Della…, Agent, Kirkland, WA
Sun Jul 26, 2009
Mike, glad you popped in. I was just having a convo on twitter regarding the commission being financed by the buyer. Some agents are disputing that. I was surprised as I thought it was widely known that the buyer's lender had a cap on who much they would permit the buyer to finance in terms of commission. Used to be a total of 7%.

Has that changed? Can a seller pay 15% commission, without the buyer's lender refusing to finance that? Max I have seen a buyer's lender allow in terms of commission is 7%. Or does the buyer's lender never see the commission (or care about it either0, these days?
0 votes
Vision 2 Eve…, , Seattle, WA
Sun Jul 26, 2009
I am not a realtor and I might be stepping outside my area of expertise but, the buyer’s agent should be very upfront about the commission. Typically the seller agent will negotiate a 6% commission. This 6% commission is usually spit between the seller’s agent and the buyer’s agent.

In most transactions the buyer’s and the seller’s agent both get 3% of the sales price. In some cases the seller will negotiate a smaller commission especially if the seller’s agent will sell their clients house and act as the buyer’s agent on the sale of the client’s new house.

Your agent is correct in part that the commission will vary depending upon the circumstances but in most cases it is 3% of the sales price of the house you buy.

This is quite widely known so I do not see a reason that your agent should keep the information from you. If your agent is not acting in your best interest he MAY try to steer you towards homes that pay a full commission but, I have not see this as a standard industry practice.

Hope this helps

Mike Carpenter
Mike the Money Man
0 votes
J R, , New York, NY
Wed Jul 22, 2009
Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it. This is not a "local" issue, this is a buyer revolution to some extent...and long overdue. A line is drawn in the sand, guys. "Are you in the past or in the present?" is the only question being asked and answered here.

~~~~~~~~~~~~~~~~

Alrighty then, Ardell. My seller bought their house for 600,000 2 years ago. They are being transferred and are selling. Their house is now listed at 479,000. Who is paying the 6% commission?
0 votes
Ardell Della…, Agent, Kirkland, WA
Mon Jul 20, 2009
Anyone who is still saying "the seller pays the commission" in this day and age, is simply missing the point and refusing to "get" it. This is not a "local" issue, this is a buyer revolution to some extent...and long overdue. A line is drawn in the sand, guys. "Are you in the past or in the present?" is the only question being asked and answered here.

There is a missing step. When Buyer Agency first came to be, buyer agents submitted a form that said:

"I refuse and negate the mls offering, and replace it with a Buyer Agent fee in the same amount, as a condition to this offer. This Buyer Agent fee is to be shown on the seller side as a convenience to the transaction." There was also a different Purchase and Sale Agreement to be used that favored the buyer vs. the seller.

This method immediately became problematic (talking early 90s here) because buyers refused to present an offer on the seller favored form, and sellers refused to accept offers on the buyer favored form. Consequently, our industry went back to the drawing board and drafted a new purchase and sale agreement that tried to strike a balance between seller and buyer concerns. The defaults in most contracts were changed to favor the buyer vs. the seller at the end of the day, as did inspection clauses.

The commission issue was largely left as it was, with the understanding that the buyer commission was being included "as a convenience to the transaction" and was no longer money paid by the seller to "procure" a buyer. What we forget causes life to regurgitate old battles already won.

If you think the seller pays the buyer agent fee (vs only their own agent's fee) then you also think you are paid to "procure a buyer FOR the seller". ..and that simply cannot be.
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Paul Howard, Agent, Cherry Hill, NJ
Mon Jul 20, 2009
JR. I agree that " Just because the buyer is a client of SOMEONE does not have any bearing on the commission the seller pays their own listing agent."
But to preface that with, " There Is only one CLIENT regards commission and that client is the seller. The seller is the CLIENT of the listing agent. The listing agent and the seller decide what part of the commission THEY negotiate between THEM will be paid out to the agent who SELLS the house.", seems incongruous.

I would say just because the seller is a client of SOMEONE does not have any bearing on the commission negotiated between the BUYER and THEIR agent and does not impact the buyer's right to negotiate with the seller to pay that commission.

Paul Howard
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Al Brent, , 44145
Mon Jul 20, 2009
Well I think we have discussed this topic long enough. This subject also varies by state law and mls rules sometimes. It was interesting, but I have more sellers to help get their homes sold than continue on with this debate.
If Jack wants to know how much his agent is being paid, Jack should ask him/her. If that agent won't answer and it's important to Jack he should find one who will.
Jack, why is it being shady when there are soooooo many variables that have been thoroughly explained?
Is your bigger concern that you want to negotiate the your buyer's agent commission? Of course the seller usually pays the commission anyway. But there we go with that word "usually" again.
I am always happy to help answer these questions. But there DOES come a point where it means I am neglecting my many owners who need to get their homes sold.
Best of luck to all who have participated:-)
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J R, , New York, NY
Mon Jul 20, 2009
JR said "There Is only one CLIENT regards commission and that client is the seller."

Interesting position but it flies in the face of the fact that I (and many others) negotiate my commission with my buyer clients all the time and what we negotiate is what I get. I like it when I know what I'm going to get when I start working for a buyer and that it is not dependent on whoever the seller and their agent turn out to be.

~~~~~~~~
I hope you read the rest of my answer.
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Ardell Della…, Agent, Kirkland, WA
Sun Jul 19, 2009
Dugald,

I think we are agreeing, we're just saying the same thing a bit differently. I'd like to meet you sometime. Let me know if you are going to the Seattle or Bellevue ReBarCamps in Sept and Oct.
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Paul Howard, Agent, Cherry Hill, NJ
Sun Jul 19, 2009
JR said "There Is only one CLIENT regards commission and that client is the seller."

Interesting position but it flies in the face of the fact that I (and many others) negotiate my commission with my buyer clients all the time and what we negotiate is what I get. I like it when I know what I'm going to get when I start working for a buyer and that it is not dependent on whoever the seller and their agent turn out to be.

Paul Howard, Broker
NJHomeBuyer.com Realty
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J R, , New York, NY
Sun Jul 19, 2009
M ark; First, let's be clear that the buyer is the one who is really "paying" their buyer's agent. I just love all the ads that say something to the effect that there is no cost to the buyer because the commissions are paid by the seller.

JR: That’s just spin. It’s spin to say “it’s free to you, the seller is paying” just like it’s spin to say “you’re the buyer, you bring a big bag of money to the closing table—the seller just brings the keys and the deed!”


Mark: WHERE DOES ONE THINK THE SELLER GETS THE MONEY TO PAY THE COMMISSION? From the buyer of course. It's built into the price.

JR: What if the seller is selling at a loss or it’s a short sale? Where does the extra money come from? The seller is paying, pure and simple.
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J R, , New York, NY
Sun Jul 19, 2009
With reference to agents comparing their services to that of lawyers I wonder what their clients would think if the 2 opposing attorneys determined between themselves what their client would pay. Or, a better analogy - what if the defendant and their attorney decided in advance how much to pay the plaintiff's attorney?

It might not look too good to the plaintiff. :) That is our current (and past) real estate industry.
~~~~~~~~~~~~

Your answer makes no sense. There Is only one CLIENT regards commission and that client is the seller. The seller is the CLIENT of the listing agent. The listing agent and the seller decide what part of the commission THEY negotiate between THEM will be paid out to the agent who SELLS the house. The buyer may be a client of the selling agent, in that case the buyer and the selling agent can negotiate the minimum commission the selling agent gets, and the buyer is a client of his own attorney, and presumably that party and the attorney will have their own agreement (although I’ve never had an attorney negotiate their paycheck when it comes to a closing). Just because the buyer is a client of SOMEONE does not have any bearing on the commission the seller pays their own listing agent. Which is why your answer makes no sense.
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J R, , New York, NY
Sun Jul 19, 2009
That fact of the matter is, agent commissions are more often than not very much in play when buyers and sellers are negotiating price.
~~~~~~~~~~~~~

I’ve never had my commission come up during negotiations, so it obviously didn't play a very big part. Actually, commission usually plays a cameo appearance in my listing presentation, which is when I negotiate it with my client. After that, it isn’t heard from again. ☺
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Paul Howard, Agent, Cherry Hill, NJ
Sun Jul 19, 2009
Stephen, this statement: "That fact of the matter is, agent commissions are more often than not very much in play when buyers and sellers are negotiating price." may not be the case at least so far as I am aware. Of course, there are some agents that will cut their commission to make a deal work. To my knowledge it is not common, though, except in the case of short sales but even then I would not do it. I'll negotiate my commission with my client at the beginning of the relationship. Once it is decided I have never yet changed it.

The average agent makes less than $45,000 per year. Some will cut a commission because they can't afford to lose a deal. What else will they do not to lose a deal? Buyers are represented better when they have an agent that is contracturally obligated to perform and one that knows what they will be paid for doing so.

Paul Howard, Broker
http://www.NJHomeBuyer.com Realty
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No Name, , Seattle, WA
Sun Jul 19, 2009
Just in case it's not obvious.....

I have a stalker. Never met the guy. ...never done business with him/her. Somehow don't think I will...

Hi Steven!
Web Reference:  http://www.dugaldallen.com
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No Name, , Seattle, WA
Sun Jul 19, 2009
Paul,

The disclosures outlined in the press release are already required in WA State...
Web Reference:  http://www.dugaldallen.com
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Paul Howard, Agent, Cherry Hill, NJ
Sun Jul 19, 2009
With reference to agents comparing their services to that of lawyers I wonder what their clients would think if the 2 opposing attorneys determined between themselves what their client would pay. Or, a better analogy - what if the defendant and their attorney decided in advance how much to pay the plaintiff's attorney?

It might not look too good to the plaintiff. :) That is our current (and past) real estate industry.

Paul Howard, Broker
http://www.NJHomeBuyer.com Realty
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Paul Howard, Agent, Cherry Hill, NJ
Sun Jul 19, 2009
Jack,
Speaking of transparency you might be interested in this. The organization that put it out only works for buyers. http://www.reuters.com/article/pressRelease/idUS106593+19-Ju…

Many agents continue to believe that a buyer does not have a complete right to know not only what commission "their" agent will receive but does not have a right to determine that commission via a buyer's agent agreement.

Some (agents) appear to believe that MLS rules can impact the terms of a buyers offer. The buyer owns the offer - not the agent and not the MLS so that is not true. Also, the terms of the sales contract for the property are not controlled by MLS rules - whether or not the agents the seller and/or buyer are using are members of an MLS or not. Neither the agents nor the MLS are a party to that contract.

If the buyer has conditioned their offer on the seller's agreement to pay their agent and the seller has accepted that condition that had better show up in a contract between the buyer and the seller else the buyer may end up paying it to their agent out of their own pocket.

The best way for a buyer to protect themselves is to insist on a written buyer agent agreement specifying the terms of the agreement including the ending date and the commission amount or rate. Given the lack of knowledge regarding contract law most agents (and consumers) have it would be wise to have that contract reviewed by a real estate attorney too.

Paul Howard, Broker
http://www.NJHomeBuyer.com Realty
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No Name, , Seattle, WA
Sun Jul 19, 2009
Jack, while there were more than I was expecting, I don't think the majority of responses were contrary to your point of view. I'm glad of that.

As a lot of folks have said below: if the agent you are working with does not answer the question(s) to your satisfaction, then find another agent who will.

...but yes, even if you do know the commission, you should take that out of the equation in your search. It was set before the ink was dry on the listing contract - the one between the seller and the listing broker. To paraphrase Mark L below: "it's already in the listing price."

If you think your agent is steering you to higher commission properties, then find another agent who will steer you right.

If you don't think it's possible to get objective advice, then you may be someone who's more comfortable buying without representation. That may work, too. ...but if you do, you should know that the listing agent has no requirement to rebate you anything from the commissions and it may not be in his client's interests to tell you what those commissions are. He/she doesn't work for you at all.
Web Reference:  http://www.dugaldallen.com
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