Recently, I met a fellow who thought that because I "worked for" John L. Scott that I was on a salary and my job was just to show homes even if he was not going to use me as his agent. After explaining too him about agency relationships, I think that he went away informed. It was then that I realised that the general public might have a large misunderstanding about professional buyer's agents.
We all see advertisements for FREE buyer's agency. Let me explain a little bit about this. If you have found the right professional agent to work with then he/she has been answering your questions to the best of their knowledge, helping you through the process of qualifying you for a loan with a reputable mortgage lender, and showing you homes that fit into your budget and balance your needs and wants. In most cases, many hours are also spent by the buyer's agent doing research on your behalf. A good buyer's agent will also be there for you throughout the negotiations and help manage and facilitate the mortgage process and escrow of the property.
But how is my agent compensated? We work solely on the faith that you, the buyer, will reward us by writing your offer with us when the time comes to purchase. The listing agent has negotiated the compensation with the seller before or during the listing for a portion to be paid to the buyer's agent upon successful closing of the property. This amount show up on the seller's net sheet in the form of agent commission. This is why it is known as "FREE" to the buyer, since it does not show on their net sheet at closing, but on the seller's. Yes, it is built in to the price along with the listing agent's commission, but the value of a knowledgeable buyer's agent is priceless.
Our companies that hold our licenses do not pay us for our time. (We actually pay them to hold our licenses and supervise our transactions!) We actually are individual self-employed, independent contractors who cooperate/network with one another to sell houses. There is a large risk involved. We do not get compensated a dime until the transaction has closed and has been recorded. Even once this happens, we pay our companies, the government, and reimburse our business accounts for advertising and expenses incurred while working for "free". What remains pay for what my co-worker calls "groceries" or bill and extras. There are even time when we put in extra efforts to close a difficult transaction and it never makes it to the closing table.
Yes, we can ask you to enter into a exclusive buyer's agency agreement, but many agents and buyers do not like to use these. It is much safer for the agent (and the buyer), but many buyer's do not want to commit. What is wrong with a commitment to an agent? Nothing, unless you do not like them or trust them. You will be spending quite a bit of time communicating with them. They are putting in many hours on good faith. This is really up to you and your agent though.
Hopefully that has answered the question "How is my agent compensated?".
The bottom line...Your professional buyer's agent works very hard for you...Please Be Loyal.
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