How Does a Buyer's Agent Get Paid?
Real Estate Agents perform their services with the expectation that, provided that they represent either a buyer or seller in the sale of a particular property, they will be compensated for their time and expertise. Many people are still confused about how a buyer's agent gets paid for their services. Hopefully, this post will dispel any myths that might be present. The scenarios provided are meant to give a general illustration of how real estate agents are compensated. There are always exceptions to any general discussion. If you are in doubt, you should feel free to ask your real estate agent about the specifics of your situation.
The compensation of a buyer's agent results from the intersection of two different contracts between two sets of parties:
1. Between Seller and Listing Agent: When a listing agreement is signed, the terms of how the listing agent will be compensated for bringing the property to the closing table are included in the document. Further, the listing agreement will state how much of the total compensation provided to the listing agent will be paid to the agent of any buyer who is represented. If a buyer comes unrepresented, the listing agent will retain the entire amount specified in the listing agreement, unless otherwise stated in the contract.
2. Between Buyer and Buyer's Agent: Most buyer's agents will work for a buyer under the direction of a buyer broker agreement. This agreement cements the fiduciary duties of the buyer's agent to work for the best interest of the buyer. The buyer broker agreement will specify a minimum compensation amount to be paid to the buyer's agent, usually in terms of a percentage of the purchase price.
Typically, the amount offered in a listing to a buyer's agent is equal or greater than the minimum specified in a buyer broker agreement. However, there are occasions when the amount offered in the listing for a particular property is less than the minimum amount specified in the buyer broker agreement. If you are a buyer and are working with an agent, you should discuss this scenario with your agent before signing a buyer broker agreement. Without specifying an alternative solution in a buyer broker agreement, the buyer will be expected to make up the difference so that the percentage compensation specified in the buyer broker agreement is met.
Can you get a "better deal" if you come unrepresented to a seller? The listing agreement is a contract between seller and listing agent. A prospective buyer is not a party to that contract and the terms of the contract are enforceable. In other words, a listing agent is under no legal or other obligation to change the terms of the original contract between themselves and the seller just because a buyer comes to them unrepresented.
Many of us were raised to think it impolite to talk about money and how people are paid. However, in the case of a real estate transaction, it is important for clients and agents to feel free to discuss compensation in order to eliminate any problems later.
How Does a Buyer's Agent Get Paid?
