Fees
This web resource will help you better understand what a buyer's broker (or buyer's agent) is -- and how they can save you time and money.
Most questions -- and misconceptions -- about buyer agents are about fees.
Fee FAQ
Who Pays the Buyer Broker?
The surprising short answer: Nearly always, the seller does. However, it really depends on perspective. The seller pays the professional fee most often out of the gross sale proceeds, yet there would be no gross sale proceeds without the buyer’s money. So one could argue that the buyer pays the fee but it’s more accurate to say the transaction pays the professional fees.
How Does That Work?
Although the overall professional fee for selling a piece of real estate is negotiable, we'll use 6% of the sale price for this example. It is important to realize that this fee is split in most cases, 3% going to the listing agent (a/k/a the seller's agent) for the marketing and representation of the seller in the process., and the other 3% going to any cooperating agents who bring a buyer to purchase the property (a/k/a the buyer's agent). So, in fact, the part of the commission paid out to compensate the buyer's agent is in most cases coming out of the full fee. (In this example, 6% of the sale price.) So the sellers essentially pay the buyer's agent to represent the buyer against the seller.
Why Would a Seller and their Agent Do THAT?
Simple. They want to sell. If there's no buyer, there's no sale. If the buyer gets cold feet during the process, there's no sale.
Real Estate transactions work more smoothly -- and are a lot more likely to be successful--when both sides are represented. While you might think that whoever is paying for a service (in this case, for a buyer agent) is the one getting the best representation, the courts have ruled otherwise. Paying an agent does not automatically mean the payer is the client. The party on the signed agreement is the client.
So using a Buyer's Agent is FREE?
In many cases, there is no additional charge. The transaction funds the professional fee, when the commission being offered out to the buyer's agent in the transaction is the same as what was agreed to in your exclusive right to represent agreement with your buyer's agent, in this (example 3%)-- even if both sides are represented.
Important note:
There are a variety of circumstances in which the entire fee agreed to in an (exclusive right to represent agreement) between the buyer and their buyer's agent is not completely covered by the transaction.
For instance if the professional fee agreed to between the buyer and their buyer's agent is for example 3%, and the buyer wants to purchase a home that has been listed and the fee being offered out to a buyer's agent is only 2.5%. In this case, unless the buyer's agent is able to negotiate the .5% difference in the fee from the seller, then the buyer will be required to pay their buyer's agent the .5% difference in the fee. In this example sometimes the seller agrees to pay the difference and some times they won't. Regardless in most cases it's a small price for a buyer to pay for the services being provided.
There are many different scenarios governing how these fees may be paid based on the different types of listing agreements that exist, and how their respective professional fee structures are set. An exclusive right to represent agreement can also include properties that are not listed on the MLS system, such as (For Sale By Owner) properties. So it is important as a buyer, that when retaining a buyer's agent, that you thoroughly discuss the terms of the any agreement with your prospective buyer's agent, and that you completely understand the agreement before signing.