As I noted in my last post, most Realtors are contractors with real estate firms and not employees. We typically work on commission and generally are not paid until you close on your home.
There is no industry standard for the amount of commission a real estate firm charges. On your agency agreement, you will see a certain percentage or fee. This is what we expect to be paid. In this area, we ask the seller’s real estate firm to pay our commission out of the total commission they receive from the sellers. If we show you a house that is offering to pay us more or less than this amount, then we have to tell you that before we prepare an offer for you on that particular house.
If we are being paid less than the amount on your agreement, we will ask you to pay the difference. If we are being paid more than this amount, you need to know that, as well. We now have disclosures for you to make sure you know the amount offered to us. As a rule, I try to have them with me anytime I show a home that will pay me more or less than what I am expecting, so you know it before we ever walk into the home.
The vast majority of the time, as buyers agents, we will be paid what we expect to be paid by the sellers. Even if we show you a home that is For Sale by Owner, most of those sellers are happy to pay our commission. Of course, there is no complete certainty that our commission will be covered by every single seller. If a seller is offering me less than I expect to be paid, I will try to negotiate with them first to increase that amount. I will only come to you if I cannot get the seller to pay the full amount I expected to be paid.
Many agents are beginning to charge a non-refundable fee up front, when you first hire them. You can agree to the amount as well as whether or not that fee will be credited back to you when you do close. Most buyers do complete their transaction, at which point the agent will receive their entire commission. Unfortunately, from time to time, buyers end up not being able to complete their purchase. The reasons vary from not being able to qualify for a loan to a change in job status to an unexpected need to move to another area and so on. When this happens, the agent may have already spent a great deal of time showing & researching homes, perhaps even preparing and negotiating offers and contracts, or going so far as working through the due diligence process and toward a closing. Because of that, more agents are asking for a certain amount up front to defray the cost of their time, gas, etc. should the transaction not be completed.
Next time, we will discuss other aspects of the agency agreement.