Buyers, please take advantage of the free Laurie Keen and Associates Team MLS access via the links on this website. Before you do, please take a minute to make sure you understand accurately how commissions to Buyer agents are handled. In essence, the Buyer hires the Realtor® and formalizes that relationship via a Buyer Agency contract. As such, while Buyers are contractually committed to pay the Buyers’ Agent, more often than not the Buyers’ agent is paid from the proceeds of the sale.
All commission structures are negotiable, and every transaction is unique in how commissions are determined. To illustrate the above point, consider a transaction where the Seller negotiates and pays the listing agent's firm a commission. In this example, also consider that generally the listing agent secures the Sellers' approval to pay a portion of this commission to a Buyers’ agent or sub-agent for assistance in facilitating the sale. The listing agent keeps a portion of the commission and pays a portion to the Buyers’ agent. Regardless of any possible total or split commission amounts, the Seller is essentially paying the Buyers’ agent their commission… not the Buyer!
Why is this important? Many Buyers assume that by not hiring a Buyers' agent they will save money and help the transaction run smoothly because there is only one Realtor® (the listing agent) instead of two. Generally, the opposite is true. If Buyers call the listing agent directly asking for information or to see the home, numerous things happen:
If the Buyer purchases the home without buyer representation, the listing agent will, in most cases, receive the entire un-split commission (both halves from our example above). The savings that were expected by not hiring a Buyers' agent will likely not materialize because the total commission is paid either way. The Seller has already agreed to give a certain negotiated commission to the listing agent regardless of whether or not the Buyer has representation.
While it is possible for the listing agent to represent both the Seller and the Buyer, it is generally not the best scenario for the Buyer. Many times in this scenario, the Buyer is assuming that the listing agent is working for them, when, in fact, the listing agent already has a contract with and a fiduciary responsibility to the Seller!
The Buyer is obtaining recommendations and making significant real estate decisions from the real estate professional that is representing someone with largely opposing interests, the Seller. The direct contact to the listing agent creates a potential conflict of interest for the listing agent that they may not explain in detail because of their fiduciary responsibility to the seller. Also they will retain the full commission if there is no Buyers’ agent to whom they must pay a commission!