Good Question! More than 98% of Buyers use a Realtor when they want to buy property. According to the National Association of Realtors, only 8% did not use a Realtor when buying a home last year.
You might ask “Why are Realtors who work with buyers paid a portion of the commission?” Realtors are educated professionals who know the market and know how to represent their client’s best interests. They spend many hundreds of hours educating themselves in this area. A good buyer’s agent will begin by learning their clients’ wants and needs, lifestyle and also their financial capabilities. After they have a good idea of what the buyer is looking for, they will start to search the Internet and decide which properties they will show them. They will network with other Realtors asking if they have any “matching properties” soon to come on the market. They will also take neighborhoods as well as lifestyle into consideration. If funding is needed, they also help their client get pre-approved for a loan with a lender.
Besides taking their clients to see various properties, they also advise their clients on areas, pricing and both pros and cons they may not be aware of. A professional Realtor is skilled at writing offers for their clients, and they will negotiate for their clients once the offer has been sent to the seller. You would be amazed of all the mounds of paperwork that needs to be tended to after a property goes into escrow! Realtors work hard behind the scenes to hold the sale together. You would be shocked of how many sales fall thru when there is no Realtor involved.
If commissions were not split between the listing agent who markets the property, and the buyers agents who represent buyers......few homes would be sold. These commissions have been split between the listing agent and the buyer’s agent since 1908.
If you deal directly with the Listing agent and you buy the home thru the Listing agent, that is called Dual Agency......meaning the Realtor got compensated as both a Listing Agent and Buyers Agent because they represented both the buyer and seller. In our area a common commission paid by the seller is 6%. Each side receives 3% and most agents then split that 3% with their Brokers. Please keep in mind that commissions are “built in costs”, just like they are when you buy any product on the market. There are many “hidden” costs in everything you buy! Today when I was searching properties on the Internet, I came across one property offering 3.5% commission to the buyer’s agent, another one at 4% and a seller offering the buyer’s agent a $5000 bonus if they would bring them a buyer!
Hope this helps explain why you compensate Buyers Agents in real estate. If you choose not to offer a compensation to the buyer’s agent, Realtors representing buyers would never tell their clients about your home and your home would have very few showings, if any.