How does My Buyer Agent Get Paid?

Posted by Lise | Filed under: Buyers

If you are  using a buyer agent you expect that the agent is working with your best interests (and wallet) in mind. A buyer’s agent will work to negotiate the best price, ensure the property is inspected, and make sure you have the representation you need. Things you tell a buyer’s agent remain confidential. Using a buyer’s agent also means that you will be shown homes that are For Sale By Owner (FSBO). It might seem like using a buyer’s agency means you are going to pay more — but that’s not always the case. Although there are situations where agents charge an hourly fee or a flat fee for the service, in most situations they are simply working for the same commission that is paid by the seller and split it with the seller’s listing agent. While there is still some argument that this method leaves the incentive for a higher sales price, buyer agents counter by pointing out that a $10,000 savings for the buyer only amounts to a $150 difference in commission for the buyer agent. The benefit of your satisfaction with your agent’s service and the word of mouth promotion the agent will get outweigh the loss of this small amount of money.

Generally, your buyer agent doesn’t get paid until the deal closes and you have bought a new home.  This may take a day if you are really under pressure to find a home or it may take a year or more if you are very particular about your next purchase or you need time to get your finances in order.  A good buyer agent will work with you on your time schedule and match your needs and wants with the properties that are available in the market place.

Real estate agents are prohibited from being paid a commission directly by the consumer. All real estate commissions are first paid to the agent’s broker, and then the agent’s broker pays the buyer’s agent. That’s because a real estate license must be placed under a real estate broker’s license. Real estate agents are independent contractors, for the most part, who operate under a broker’s license.

A few real estate agents are paid a salary by their broker, and work as employees of that broker, but that type of business arrangement is uncommon.

Buyer’s Agents Usually Do Not Work for Free

When you ask a buyer’s agent to show you property, you are implying that you will eventually write an offer through that buyer’s agent. If you have no intention of ever writing an offer with that buyer’s agent, you are taking advantage of that agent.

Procuring cause is a complex process that determines which buyer’s agent is entitled to a real estate commission when a buyer works with more than one agent. Generally, the agent who writes the offer gets paid.

Therefore, if you ask an agent to spend weekends driving you around, sharing knowledge and helping you to select a home, it is only fair to be loyal to that agent.

Why Buyer’s Agents Ask for a Buyer Broker Contract

A buyer broker contract is an agreement between the buyer and the buyer’s agent. There are 3 basic types of buyer broker agreements. One is exclusive. An exclusive buyer broker agreement binds that buyer’s agent to you and you to that buyer’s agent. You cannot buy a property without owing a commission to that agent.

Agents who want to ensure that they have a legal and binding agreement that allows them to represent a buyer exclusively, and be paid for their efforts, will ask a buyer to sign an exclusive buyer broker agreement.

Do Buyers or Sellers Pay the Buyer’s Agent?

This has caused a great deal of confusion in the real estate industry and with consumers. Generally, a listing agreement between the seller and the seller’s listing agent specifies how much the listing brokerage will pay the selling brokerage for bringing a buyer.  The seller, in effect, pays your buyer’s agent to negotiate on behalf of the buyer, not the seller.

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23 Responses

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