Homebuyer FAQ: How do Buyer's Agents Get Paid?

I work for free!  If you saw that line in ANY advertisement, would it make you suspicious?  If someone tells you that, do you believe them?  My reaction is usually something like: "seriously?  Then how do you feed your family?!"

One thing I've found in real estate is that many people don't understand how a Buyer's Agent is paid during a real estate transaction.  This confusion is perpetuated by agents that say things like "I work for free," or "free buyer representation" in their advertisements.  Unfortunately, this confusion leads people to choose not to work with a Buyer's Agent when looking for a home.  Why?  because they believe they'll get a "better deal" on a home if they are unrepresented and contact the listing agent directly.  Let's tackle these myths head on!

First, when someone decides to sell their home they typically sign a listing agreement with an agent.  That agreement includes a commission percentage that the seller pays for the service of selling their home.  For this example, let's say that commission is 6%.   Basically, that seller has agreed to pay the 6% commission if the home sells through their agent.  If the listing agent brings a buyer client to them as well, then when that home sells, they receive their 6% commission from the sale.  If a second agent brings their buyer client to purchase the home, the commission rate doesn't change, it's simply split between the listing agent (3%) and the buyer's agent (3%).    

As you can see, the same amount of commission is paid on either type of transaction.  If you contact the listing agent directly to buy a home, you'll only be doubling their pay, not getting a better deal!  Also, you can see that Buyer's Agents do not work for free!   Although some folks want you to be confused on how this works, it's really pretty simple.

Have any other questions about how real estate transactions work?  Feel free to contact me and I'll be happy to answer them. 

Give me a call if you or someone you know is interested in Parkville, Liberty, Gladstone, Platte City, Smithville, or any other Northland community!  I'd love to help!  (Just not for "free!")