Who pays for a Buyers Agent?

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That is a common question that I get from first time home buyers. There’s a lot of information you should know about your buyers agent. One of the concerns you can push to the side is the fact YOU DON’T PAY THEM. Yep, they work for free…well not really. But Bob, right there in the Buyer Agency Agreement, it says I must pay them X%. Read a little closer…

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If the seller has agreed to pay the co-op to the broker that brings a ready, willing and able buyer, the seller will pay commission. This statement really applies to FSBO (For Sale By Owner) properties. There are occasions when the FSBO homeowner is reluctant to pay a commission. Your buyers agent should know this when he/she schedules a showing for the FSBO property. (Some agents charge a retainer fee for their services, this is the exception not the norm) The seller credit for the commission will show up on the HUD1 at closing as an expense to the seller.

Here is some of the minimum paperwork your buyer’s agent should go over with you on your first visit. At the very minimum he/she has to disclose to you two forms; Understanding Whom the Real Agents Represent and Consent for Dual Agency. I am not going to go into complete detail on both of these today. But a couple things I want to stress, these are required documents from our Real Estate Commission. They are non-binding. If I am to show you a house, I need you to understand a few disclosures.

Understanding Whom the Real Estate Agents Represent basically tells you the roles of the agent. An agent can either represent a seller or a buyer…NEVER BOTH. When you tell your agent something in confidence, it is theirs to keep and respect…not to be discussed with others. Your agent is to represent your best interest. I like to think of it as…it is my job to keep the most amount of money in your pocket and protect you from future damages as best as possible.

Consent for Dual Agency has to deal with the brokerage company. Your buyers agent can show you any house that is listed in the MLS or on the internet in the area in which that agent is licensed to sell real estate regardless of who list the home. Example: I work for Long & Foster Real Estate, Inc. I can show you any house listed with RE/MAX, Coldwell Banker, Keller Williams, Weichert, Real Estate Teams, or any Frederick Real Estate Companies. Agency is actually with the broker of record not the agent. Now where dual agency comes into play is with an agent showing you homes listed with their brokerage. (me showing you other Long & Foster homes) what you have to understand; Long & Foster has an agency agreement with the Seller and the Buyer on the same house. They no longer have exclusive agency with the buyer and the seller. In my opinion, the seller’s agent and the buyer agent are two different people and protect their clients information from everyone in the office, but you must be informed that the chance exist that it can be compromised in the same office. Without consent for dual agency, two things can happen, either the property can be shown on behalf of the seller (seller’s best interest in mind) or agency is broker for either the buyer or the seller and representation is made with another brokerage. Either way you need to know your options.

A good buyers agent will alway look out for your best interest. They will walk you through the whole process of buying a home. Stick around are read more about the buying process.

Here is an example packet prepared for a Buyer. Read through the documents. This is not an all inclusive list of documents, there will be more as preferred by the buyers agent. I am not a lawyer and do not offer legal advice. If you have questions concerning the legal aspects of the documents, please consult an attorney for advice. If you have questions about real estate…call me.

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November 28, 2007 · Filed Under Buyer, Frederick MD Real Estate

Comments

3 Responses to “Who pays for a Buyers Agent?”

Boston Real Estate on November 28th, 2007 2:31 pm

Great Post We are about to launch our very own exclusive buyers brokerage next week! Cant wait!
gotbob on November 28th, 2007 9:59 pm

Thanks for stopping…good luck on you buyer brokerage.
Jon Boyd on November 11th, 2008 7:47 pm

Interesting discussion, especially where you suggest that a broker is a dual agent on an in-house transaction and the agents are not. In Michigan that is called designated agency and it is crazy.

Anyway, as far as where buyer agents are paid, ask yourself how the agents are paid in the last appraisal you looked at.

If a property sells for market price and there aren’t agents involved, the sellers got paid for their efforts.

(Or received less than market price for there property or some variation.)

Regards,

Jon Boyd
Exclusive Buyer’s Broker
The Home Buyer’s Agent of Ann Arbor, Inc.