There are a ton of people out there that think the seller pays the buyers agent and that is somewhat true.
HERES THE DEAL:
When a homeowner decides they want to sell their house, they will start to interview real estate agents.
After all of the interviews are done and they have made their selection, they will sign a listing agreement. That agreement is technically between that homeowner, now seller, and the broker that the agent works for.
Yes, you read that correctly. Listing agreements are signed with the broker, not the individual agent. The agent they originally met with and have hired acts as a representative for that broker.
Make sense so far?
In that agreement there is a section that outlines the compensation to the brokerage. This is always negotiable but often falls in the 5-6% range.
Of that 5-6%, the listing broker will hold a portion of this off to the side and use it to incentives other agents to bring their clients to the house, write an offer and close. The amount held off to the side is negotiated ahead of time between the seller and listing broker. It usually falls at 2.5%.
Pro Tip: This is a critical decision. If you offer too little, some agents may steer their clients in a different direction. If you offer too much, you are wasting money.
So, the seller agrees to pay the full commission to the listing broker. Then that broker takes a portion of that off to the side to inventive another agent to bering their client to complete the transaction.
Great, we’re done right? Wrong!
Though what I wrote above is the typical way it works, there are two scenarios you should be aware of regardless of if you are a buyer or a seller.
Scenario #1: The seller doesn’t want to offer anything to the buyer or offers less than whatever is customary for that area and price point.
In this case one of three things will happen.
The agent of qualified buyers will either steer their clients in a different direction. This isn’t really ethical but it happens.
The agent will have to work for less or free – very unlikely.
The agent will be asking his/her/their buyer to make up the difference.
This is important because in this event it either means the buyer has to add roughly 2.5% to the price of the home to pay their agent
– or –
the buyer will reduce the offer they make by that much to make up the difference to get their agent paid. This is a negation and will likely impact the transaction in some way. Not to mention the fact that if a buyer has to negotiate with their agent and then the seller, they may fatigue earlier in the process.
Either situation is tricky so just be aware of it.
Scenario #2: Buyers, this one is for you! If you have a buyer/broker agreement in place, make sure the listing broker is offering a commission equal to or greater than what you agreement says. Otherwise, you are making up that difference.
For example: if the listing broker and seller decide to offer 2% and your agreement is for 2.5%, then you are going to be brining in the extra .5%.
To conclude, the seller hires a listing broker (who is represented by an agent) and agrees to pay them a commission. The listing broker takes a portion of that to incentives other agents to bering their clients to the property to complete the transaction.
Seller > Listing Broker > Buyers Agent
If I can add further clarity or answer other questions, please do not hesitate to reach out. My info is below.
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