People love free stuff. Free is a magic word. Whoever gives something away - for FREE! - feels like a God, like generous, kind, almighty God who makes people happy and smiling. What a gracious life!
You may know this feeling if you are Real Estate agent and work for home buyers in Cleveland or in other parts of America. Why?
Because here in America home sellers pay Real Estate commission. Buyer's representation is apparently FREE!
Is it really free or it's not?
That's a good question to discuss with your potential clients when you ask them to sign the Consumers Guide to Agency Relationship, which is required by law in State of Ohio. Indeed, the tradition is that the sellers pay Real estate commission. Sellers also authorize their agent to offer part of this commission via MLS to cooperating brokers for allocating the buyer who is ready, willing and able to purchase the seller's property.
According to this tradition, only sale of the property listed in MLS leads to the buyer's agent's commission. Agency relationship itself is not the basis for monetary reward. That's why discussion of Consumers Guide to Agency Relationship is so important for both buyers and Real estate agents.
What buyers can ask?
O.k. dear Agent! You say that I don't pay for your representation. Commission will be paid by the seller. Does it mean that you in fact represent the SELLER's best interest, not mine? What's the point to hire you if any Real Estate agent in your MLS in fact represents the Seller? Does it mean that if I go to the seller's agent directly I can actually save some money and get the same level of representation as you can offer to me? Why then I should be loyal to you? What's the point?
What agent should say about agency and money?
Dear Mr. and Mrs. Buyers! If you need a professional, knowledgeable, experienced Real estate expert on your side, you should hire one. Good news is that more likely it will not cost you additional money. Yes, we get the commission from the seller if you buy the property listed in our MLS. In fact, over 85 % of all Real estate is selling via MLS. There is a real high probability that your dream house will be listed in our system.
There is also a high probability that the listing agent is skilled enough to offer a decent commission split to the buyer's broker. Real Estate is my profession and I do it for fee. The fee structure is favorable for the buyers, so you may end up by paying no extra fee for my services.
However, some properties are offering by owners who chose to offer a very small fee to both listing and buyer's agents. Some owners chose not to utilize the professional services of Real estate agents. I will ask you to sign the Exclusive Buyer Agency agreement if you want me not to limit your choice by considering only MLS properties with adequate Real estate commission. You may be required to pay commission directly to my broker on the top of the home price. I WANT TO REPRESENT YOU DILIGENTLY REGARDLESS THE SELLER'S INCENTIVES OR GREED. Fair enough?
That's how the most confusing part of agency and commission problem may be cleared by simple discussion of Consumers guide to agency relationship.
This post is the second one in the series of posts dedicated to the agency relationship.
In my previous post How to Use Consumers Guide to Agency Relationship we spoke about client's confidentiality and agent's fiduciary duty to keep the client's confidentiality, no matter what happens.
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