how much does a buyer realtor charge, and do the buyers pay out of pocket for them?

Asked by Lee, Michigan Fri Feb 22, 2008

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24
Alan May’s answer
Alan May, Agent, Evanston, IL
Sat Feb 23, 2008
The buyer will pay, only what the buyer will pay. So regardless of what adjustment the seller might make (to allow for commission) the buyer won't pay any more, than the market will bear.

So... since the price is basically going to be the same (as far as the buyer is concerned) regardless of who pays the commission... the only person who's bottom line changes, due to commission is the seller. Leaving me to believe that the seller pays commission.
3 votes
Alan May, Agent, Evanston, IL
Sat Feb 23, 2008
I want you to note...

I did not say the buyer pays the commission
I did not say the seller pays the commission
I did not say the buyer's agent is FREE

I said the buyer's agency fee is paid at closing from the seller's proceeds. And the buyer does not have to pay out-of-pocket for them. The direct answer to the direct question.
3 votes
Alan May, Agent, Evanston, IL
Sat Feb 23, 2008
T-man,

I love that story, each and every time you tell it. But the question here was "do the buyers pay out-of-pocket" for their realtor.

There's an argument to be made on both sides as to "who" pays the buyer's agent... buyer... seller.... combination of both... We could argue that 'till the cows come home to the eerily quiet subdivision... but that wasn't the question here, was it?

The answer is that the buyer's agency fee is paid at closing from the seller's proceeds. Period.
3 votes
Deborah Madey, Agent, Brick, NJ
Sat Feb 23, 2008
There are times when a buyer agent has a minimum fee and the coop commission offered to the buyer agent is under that threshold. For example, the seller/sellers' agent offer a coop fee to the buyer agent of $1. Yes, I have seen this. The buyer agent, individually, or through his/her company has a minimum fee that is required in order for them to represent you as a buyer. The situation I describe is the exception, not the norm. It is however, becoming more common today vs. a year ago......and was unheard of just a few years back. It results from the fact that some offer of compensation is required, but no minimum is required.

We will see more and more buyer agents execute written agreements with their buyer clients.

Who pays the buyer agent commission is a matter of perspective. Even when a buyer agent and his/her client have an agreement for the amount the buyer agent will be paid, the fee is almost always paid from the seller proceeds at closing.

Typically, the seller/sellers' agent offers a coop fee that covers the buyer agent commission, and that amount is paid from seller proceeds. One can argue that the seller pays the fee, so it is "free" to the buyer. One can also argue that no sale happens until a buyer agrees to buy, and that the buyer, in reality is paying the real estate commissions for both the seller agent and buyer agent. The perspective that I endorse, is that the commissions paid are but just one of many expenses of the transaction...........as are realty transfer fees, attorney fees, etc. The parties, both buyer and seller, execute a contract when the benefit of the transaction outweighs the expenses of the transaction. This does not apply to only real estate fees.......there are other expenses required to close and transfer title on real property.

In absence of a real estate agent, a seller believes they are entitled to the "savings" and the buyer believes they are entitled to the "savings"...........and in each situation, the end result may be favorable or highly unfavorable for one or both parties. Sellers will look at comps, and assume they should sell for the same amount. Sellers will argue that they did the work and carried the expense that a real estate agent would have. Buyers disregard that, and look at the comps and $$$ accordingly.

Since it is a sellers decision to sel without an agent, I believe the buyer should not be penalized are put at risk by engaging in a purchase without a real estate agent (and preferably a Realtor). My first suggestion is that a buyer retain a buyer agent and build that into the transaction. If a buyer is not doing that, the buyer should pay substantially less than any comps.....and I mean substantially. There should be a discount from the comps to reflect any fees that would have paid to a real estate agent. And, there should be a discount to the buyer for entering a transaction where there is greater risk of current or future cost or liability. If a FSBO seller is not willing to discount substantially from the comps, walk away and find another property.
3 votes
J R, , New York, NY
Sun Feb 24, 2008
Gary, why are you continuing to argue your point with me? It looks as if we both agree that it comes from the seller.
1 vote
J R, , New York, NY
Sat Feb 23, 2008
Gary:
When you purchase a home, you either pay cash or take out a mortgage for the purchase price. Once the seller receives the money at closing, they pay the selling broker (not necessarily the agent) per their agreed upon contract between seller and listing broker.
~~~~~~~~~~~
AHA! And the guy that writes the check PAYS! :)
1 vote
Gary De Pury, , Pasco County, FL
Sat Feb 23, 2008
Tman,
That is why all of the FSBO's end up with tons of buyers walking up to their door and saying...Hey, you are saving a commission here, congratulations. "You just go ahead and keep that!" I am not asking for any of if off of the price. No not me, Mr. FSBO Buyer.

Yea, in crazy upside down land.


Thanks
Gary De Pury
Broker-Owner
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
1 vote
Tman, , 30642
Fri Feb 22, 2008
Good morning Lee,


Here's something you've never heard before - "nothing is free" ..... especially what realtors charge.

The mindset has always been ~ the seller incurs all the cost, not the buyer, it's free ~ ....... hogwash.

Let's get to reality 101 ....

The seller finds a listing agent that will hopefully promote, advertise and run it down the MLS marathon .... prior to that, the agent has disguised in great detail the point of pricing ... you spend 7% Mr Seller and I'll do all the work and I'll save you 20% (as the magic wand gets waved over their head) because you'll probably only have to discount it 2 or 3%, it's my job Mr Seller to save you $$.

In the meantime, here comes Mr. Buyer with his agent ..... Mr Buyer probably has been told 122 times by "his" agent that these houses are strong in the market, don't get crazy with your offer, don't blow yourself out of the deal because "sellers are sensitive", but I'm here to help you ..l.o.l.. (the last house I bought the guy was a Navy Seal, twice decorated and he was as sensitive as Kevlar)

Keep in mind, this is a "sales event" where you never see the other person, and you have to take the word of 2 strangers that are on commission (hmm, am I missing something here.?) .. and we all know there is three sides to every story .. his agent, your agent and somewhere in between (maybe, somewhere) falls the truth.

It's just like sending your brother-in-law to your next job interview and you didn't get the job -- "ahh, the guy said positively maybe."

You weren't there, so you you'll never know ... he could have discounted the home another $60,000 with a good negotiator at the table, but you only got the 3% discount - oh well.

Yes, buyers pay ..... you just never know how much, it's usually large.


Good luck and happy hunting.!

;^)
1 vote
Alan May, Agent, Evanston, IL
Fri Feb 22, 2008
In many cases, most in fact, the buyer's agent does not charge you anything up front. The buyer's agent's fee is paid from the seller's proceeds at the closing.
1 vote
Mary Eva Pas…, Home Buyer, 08015
Tue Apr 6, 2010
You know what I think is sad and pathetic, buyers asking questions and agents acting like bafoons and joking in terms only they understand.

This is a Q & A section and if you don't have an honest, forth right answer, than perhaps you should keep it to yourself or find a forum where it would be appreciated, because I "Googled" the agent's name that I was going to use and they showed up in this post, so they just lost my business and anyone else that asks me who I went with.

Lee ~ I hope that the reputable agents on this board answered your question and clarified any ponderings you might have had, they did mine and I thank them for it!
0 votes
Tman, , 30642
Thu Mar 6, 2008
>>> "Hello Lee,

To avoid a long drawn out death post. My opinion is.......

THE BUYER ULTIMATELY PAYS, and if you have a buyers agent that tells you
"Don`t worry, the seller pays for everything" Your really going to PAY.





Thank you Mr. Patrick Mahony, Realtor. in Arizona. Phoenix, Scottsdale,Tempe,Chandler,Gilbert,Mesa, Queen Creek. for being upfront and honest.!


-
0 votes
J R, , New York, NY
Sun Feb 24, 2008
I thought maybe you just got up on the wrong side of the bed, LOL. :)
0 votes
Gary De Pury, , Pasco County, FL
Sun Feb 24, 2008
JR

Three reasons.
1) Uh...because you were the only speeder I could catch....(old cop joke)
2) It is easy to argue with someone on the same side, because when I ultimately lose the argument, I can claim victory. (I learned that from my wife)
3) My Dog made me do it.....(got that one from my son)

Sorry JR...I re-read the posts and I don't know why.....Lack of coffee I suppose.
(Damn, and I had the perfect argument lined up too) .


So Lee, to answer your question....The you should pay nothing up front.


Thanks
Gary De Pury
Broker-Owner
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
0 votes
Mr.P, , Arizona
Sun Feb 24, 2008
Hello Lee,

To avoid a long drawn out death post. My opinion is.......

THE BUYER ULTIMATELY PAYS, and if you have a buyers agent that tells you
"Don`t worry, the seller pays for everything" Your really going to PAY.
0 votes
;, , Riverhead, NY
Sun Feb 24, 2008
Lee, when a house is put on the market by a Realtor participating in the MLS, the sellers are offering an amount included in the purchase price to be paid to both the real estate agent on the sign out front, and the real estate agent that presents a buyer (you) to the seller. While this amount is typically paid at closing out of the sellers proceeds, you've accepted this amount within the price of the house.
If you buy from the listing agent, it's my opinion that you are paying the amount in it's entirety, as the listing agent has promised to get the seller the "best possible price".
If you hire your own representation, with a buyer's agent that has pledged to get YOU the "best possible price", it becomes gray- anything saved at that point is a result of having someone seeking to get you a price that is likely lower than what you would be advised to offer from the listing (seller's) agent.
You are both paying the commission in the latter example, although it is something that is deducted from the seller's proceeds (but, because it's in the price of the house, is part of your purchase price).
Web Reference:  http://optionsrealty.com
0 votes
Gary De Pury, , Pasco County, FL
Sun Feb 24, 2008
JR that is called 1 tier logic or simple logic.

For instance, I am licensed, my wife is not...But I (being the owner of the company) write the commission cheque. I write one to myself, but she gets it.......
Using 1 tier logic, I have just violated State licensing laws. Giving a commission cheque to an unlicensed individual.

Now we both know the truth, but using simple logic or 1 tier logic that is what I have done.

It is obvious that we are not going to change each others minds. I use the professional business model laid out by the University of Chicago. The Seller / Property is a fixed asset. The money is going to come from that fixed asset. I am attaching myself and my argument to that fixed asset. Some will argue that without a buyer that there is no money. that is true. BUT, here is the caveat, Go get yourself a buyer, tell him that he has to sign a form saying he is going to pay x% to the transaction and that when we find a house we are going to lower the price enough so that it doesn't come out of the proceeds but instead the buyer will pay it all. Then Add to that, if you can't find that house within a short period of time, he can fire you, but must pay all of your "looking" costs and possibly a "firing" fee.

Let me know how that goes for you....I'll be waiting. Until then, until this old investigator sees what we call evidence, I am kinda done with the discussion.

Thanks
Gary De Pury
Broker-Owner
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
0 votes
J R, , New York, NY
Sun Feb 24, 2008
"AHA! And the guy that writes the check PAYS! :)"

"AHA! And the guy that writes the check PAYS! :)"

So what you are saying then JR is that the title/escrow agent pays the commissions??? Weird...

Wow, as a Broker-Owner of a real Estate Firm, I never knew that.
I always just assumed that the seller was paying, with his part of the profit from the sale of the house.

Now if you are saying that since the buyer is part of the transaction and since he is bringing cash to the table, well if by that you mean that the buyer is paying my fee, then I guess you may have a point.

I need to buy a new pump for my pool. Instead of paying the cashier, I think I might just mail a cheque to the pool company’s electric company. Since I am the cheque writer and it has nothing to do with the business and the proceeds or anything...heck...thanks for explaining it to me in that super simplistic way...now even I can understand....
~~~~~~~~~~
Gary, I know you aren't dense. You've certainly taken literalism to the extreme. That's exactly what I said. The buyer BUYS the house and the commission check comes from the sellers proceeds. If there were no commission the seller would make that amount more, assuming the house sold for the same price. Just because the seller doesn't physically write the check, it comes from him. If you work for a company, who pays you the treasurer's assistant who physically writes the check or the company? Geez.
0 votes
Gary De Pury, , Pasco County, FL
Sat Feb 23, 2008
"AHA! And the guy that writes the check PAYS! :)"

So what you are saying then JR is that the title/escrow agent pays the commissions??? Weird...

Wow, as a Broker-Owner of a real Estate Firm, I never knew that.
I always just assumed that the seller was paying, with his part of the profit from the sale of the house.

Now if you are saying that since the buyer is part of the transaction and since he is bringing cash to the table, well if by that you mean that the buyer is paying my fee, then I guess you may have a point.

I need to buy a new pump for my pool. Instead of paying the cashier, I think I might just mail a cheque to the pool company’s electric company. Since I am the cheque writer and it has nothing to do with the business and the proceeds or anything...heck...thanks for explaining it to me in that super simplistic way...now even I can understand....


Thanks
Gary De Pury
Broker-Owner
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
0 votes
smith3gary, Agent, White Lake, MI
Sat Feb 23, 2008
Lee,

I see you hit a nerve with your question, good for you. Just like the argument; “Which came first, the chicken or the egg?”, Tman’s answer that the buyer pays is essentially correct. When you purchase a home, you either pay cash or take out a mortgage for the purchase price. Once the seller receives the money at closing, they pay the selling broker (not necessarily the agent) per their agreed upon contract between seller and listing broker. In turn, the listing broker is required to pay any amount offered as compensation in the Multiple Listing Service to the Broker representing the buyer. Because there are many business models this amount can very widely and cannot be discussed per Federal and State laws and regulations on collusion.

A sample copy of a Buyers Agency Agreement is available at http://www.mi-living.com/index.cfm?pageid=1619 I suggest reading the agreement. And, making your own decision based upon “facts”. If you have any questions, you should ask your buyers agent or a real estate attorney to explain the contract before signing.

To answer your question, do buyers pay out of pocket? In general, lenders not real estate professionals determine if buyers are allowed to pay out of pocket. In most cases, lenders do not qualify a buyer to pay contractual fees when purchasing a home. In these cases, it benefits the home seller to pay all fees from the proceeds of their sale.
0 votes
Melinda J. R…, Agent, Hudsonville, MI
Sat Feb 23, 2008
Lee, Buyers agents are paid in accordance to the contact that the listing agent has with the sellers. Of course if you are purchasing a for sale by owner it is slightly different, but most of the time the for sale by owners are happy to pay a commission just to have a buyer who is ready, willing and able to purchase their house.

Having a buyers agent is really a great thing to have. They are protecting your best interests and the sellers are contracted to pay the commission if it is professionally marketed. That does not cost you anything, yet you are being protected. The analogy I like to use is, it is like going to court having an attorney protect you and be thinking of your best interest, but you don't have to pay for it.

Again, things are slightly different with a for sale by owner, but that can be negotiated in that you want the sellers to pay your agents commission. It really is not who pays the commission, but what pays the commission is a transaction between a buyer and a seller.

Not sure the specifics of your situation, but would be happy to discuss it in more detail if you wish. Best Wishes to you!
Web Reference:  http://www.gomelinda.com/
0 votes
Tman, , 30642
Sat Feb 23, 2008
Alan (aka elvis) ..

I guess I wouldn't have to interject the reality if agents were more up and up with their clients ... but heaven forbid, lets not let that little issue cloud the consumers mind, so lets just do the math.

asking price - $250,000 ... 6% commish for agent.

sold price - $242,500 ... agent(s) get $14,550

seller nets - $227,950 ... difference - $22,050

.. somewhere between $227,950 and $250,000 the buyer and the seller had a basis for doing business - they just had to pay $22,050 to get there ....

Lee .. whether it comes from your left pocket or your right pocket it comes from the same pair of jeans .. you either financed it or it comes from your down payment, it's part of the incurred cost that happens to be *you* the buyer .. no matter, you paid.

There's nothing wrong with commission and the word profit is "not" a four letter word and it's okay that agents make money that is earned ... but let's not call a duck a rabbit when it doesn't jump, smell or look a rabbit ...

Nothing is free .... if an agent ever tells you that, have them lower the selling price by their commission amount at the closing table --- hey, it's "free" right.....?

.... misery is the price of gluttony .......



:^)
0 votes
Missy Caulk, Agent, Saline, MI
Sat Feb 23, 2008
There is not set price, Lee. Some Buyer Agents charge a buyer agency fee, which is paid on the closing statement and not up front.
Some Buyer agents are required to charge a Processing Fee by the Broker they work for, again, no set price.
I have seen fees in my area from 95.00 to 395.00. There is probably some higher but I haven't seen them.
0 votes
Paul Renton &…, , Atlanta, GA
Sat Feb 23, 2008
Lee,

buyers agency here in GA is Free! I would check with a local Realtor in your areif you letr me know which toen you are in I woulld be happy to send you details of a Top Producing agent wo can help you directly with your question.
Web Reference:  http://www.TeamRenton.com
0 votes
Michelle Gor…, Agent, East Grand Rapids, MI
Sat Feb 23, 2008
Buyers do not pay commission to the buyer’s agent, if the home is listed with an agent. The commission has be negotiated between seller and seller agents………the sellers and sellers agent have decided how much of that commission is given to a buyers agent. There is no money out of your pocket to your buyer agent. The only exception to this rule is if you are putting an offer on a FSBO (for sale by owner) and the seller of this home is dead set against paying commission. (In this market it may be because the seller can not afford to pay commission, as they may be selling at their bottom line) then, if you want a buyer’s agent to represent you, you would have to add the commission to the price of the home agreed upon. In this situation the commission is negotiable between buyer and buyer’s agent.

Hope this helps!
0 votes
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