Newbie investor question about buyer's agent

[Daniel Owens]

I am a new real estate investor and am looking at buying a single family home as a buy-and-hold to rent out.  I received a "buyer's representation" form to sign from the realtor.  I have two questions about it.

1) It says that buyer will pay broker, as broker's compensation, 3% of the sales price.  I thought that the seller paid both the 3% to the seller's agent and 3% to the buyer's agent, no?

2) The realty company also charges a $400 "broker administrative commission" to the realty company upon a successful closing.  Is this a BS charge?  Isn't their compensation from the 3% they get from the seller?

I am in Illinois and the broker is in Minnesota, in case that is important.  

Thanks for the advice ahead of time!

[Brad Hammond]

Hi Daniel, I personally don't use buyer broker agreements.  On your side, it binds you to working with that agent and my thought is that if you don't like working with me, you should have the flexibility not to.  

1. I believe what it is saying is that if the seller (or seller's agent) does not pay 3%, you would be responsible for it.  Sometimes the seller's agent only pays 2.5% or maybe you find a deal off-market and the seller isn't willing to pay the buyer's agent. 

2. I'm not sure about a "broker administrative commission" but I know everyone is trying to squeeze as much money out of a transaction as possible with added fees.

You shouldn't feel obligated to sign this form.  Try interviewing other agents in the area and see if they have a similar system.  I can look through my referral network if you need some help with that.