How does the buyer's agent get paid?

Question

Let's say I was looking at a house FSBO and wanted to be represented. Does the agent contact the owner and just say "Hey...I'm representing ____. I'm going to need 3% of your sale price, sign here."

Obviously phrasing would be different, but what happens there? What does the agent have the owner sign, and when, that says the owner will be paying the buyer's agent. And how do you, as an agent, approach the owner in this situation?

Steve Babiak · Answer

I have come across a couple of variations on the quoted point that deserve mention.

The first is the case where the agent requires a specific minimum dollar amount for thee transaction; if the seller pays the agent less than that, the buyer owes the agent the difference.

The other situation is one where the agent expects to be paid their commission based on the listing price, rather than the actual purchase price; the agent doing this says that if he negotiates a lower purchase price, he expects to be paid at least what he would have received if he had let you buy it at the listing price; in this situation, the buyer will be paying the difference most likely since the seller will only pay the buyer's agent based on actual purchase pirce (if at all).

Bill Gulley · Answer

The agent must first obtain an Authorization To Show giving the agent the right to step foot on the property. The commissions can either be paid by the seller by signing an Authorization To Show Agreement or an Exclusive Listing Agreement limited to that one customer. It's the seller's choice as to how they wish to proceed.

Another way is to have the Authorization To Show and the buyer can agree to pay a commssion or any flat fee under a Buyer's Agency Agreement.

Regardless of who pays any fees, if a contract is made, usually in those states requiring dual agency, that agent will then need to proceed as a dual agent as the seller is not represented and the agent can only represent the buyer when there is representation for the seller.

If you don't have dual agency in your state, an Authorization To Show is not a contract that establishes an agency relationship and the agent would need a Buyer's Agreement if the seller does not agree to pay commissions, the buyer would pay the fees and the agent would then only represent the buyer.

No agent is required to show any property for sale, they are required only to show those on a multiple listing service or offered in a co-brokerage real estate market.
 
This was on the RE Broker's exam....

Jeff S. · Answer

You can simply ask your, or any agent, how much they would charge to handle the paperwork and escrow if you found the house and negotiated with the seller.

Somewhere around $500 would seem reasonable, but some agents don't have much leeway, (due to large company rules), so you need to check with each one. I used to do it for $500 and enjoyed it, just a slam dunk in most cases.

If you want the agent to handle the whole thing, negotiating and all, he will charge more and the seller may want to add to the price.

Since he would get both ends and  there is no advertising expense, or much time invested, he/she would most likely discount the commission.

They can do the full commission in which case the seller may raise the price. This doesn't stop you from making an offer reflective of what it was before the price was raised.

Angie Menegay · Answer

Why do you think you need an agent if you already found a FSBO house yourself? Mathematically, the Seller will just add the 3% commission back to the sales price. You can just negotiate with the FSBO seller directly.

If you've already been working with an agent and would like to do this so that your agent can be compensated (which is very honorable of you), then as everyone else had mentioned, either the agent will ask the Seller for that 3%, or you will pay him/her that commission, depending on your Buyer Representation Agreement.

BTW, it's a different story if the Seller is represented by a listing agent, but I don't think that's the case here.

Angie

Steve Babiak · Answer

There might even be other variations that I did not mention in that prior post.

Karen Margrave · Answer

The original poster asked if he was looking at a FSBO, implying that he was looking, and did not yet have an agent. When I worked as an agent, had someone asked me to write a contract for them on a FSBO, I would have happily done it, at a discounted price if the buyer had found the property themselves. So it's very likely that you can find an agent, especially in this market, to represent you for less than the standard 3%. I am still an agent, but now only write offers for our company.

Ren Ver · Answer

JSCOTT said "perhaps ask the seller upfront if they will pay a commission before you speak with an agent"   This approach/FSBO agreement/ is highly unlikely. What would you do --run around and look for an agent after the fact, or hope you can get an agent to agree to write a contract for you at a reduced commission. Also, if you already have an agent it would be counter productive to approach a seller directly.  
 The reason a FSBO is selling under most circumstances himself, is because they do NOT want to pay a commission.  Many FSBO sellers do not understand the complexities of the Realtors job and getting the property closed. Agents work hard to earn their commission.  
Best to let your agent contact and work out the commission with the FSBO -PRIOR to you showing up.  This is a good way to entice the seller with YOU --the buyer. Exclusive agency agreement can be signed between FSBO and your agent.  Then, to move forward your agent has agreed to a reduced commission or a transaction fee to assist in follow thru and closing.

The good news is, if none of this works out, most sellers eventually list their properties with a Realtor, and at that time you could make an offer on the property.

J Scott · Answer

A couple ways this could work:

-  The agent may refuse to show you the property.  They would likely make an excuse as to why they can't show you as opposed to flat-out refusing, as technically they can't refuse if they represent you;

-  The agent may contact the seller and ask if they'll pay a commission;

-  Your agency agreement with the broker may specify that if the seller isn't willing to pay commission for any reason (FSBO or otherwise), it is the responsibility of the BUYER to pay the agent's commission.  Most likely, this would be the fall-back plan for the agent to get paid if you ask them to show you an FSBO where the seller won't pay.

So, read your contract and ensure you know if you'll be on the hook for paying the commission if the seller doesn't.  A couple other things to consider:

-  Perhaps ask the seller upfront if they'll pay a commission before you speak with an agent (if you don't already have an agent);

-  If you don't already have an agent, perhaps pay one to deal with the paperwork without actually representing you (transactional relationship, not agency).  You may be able to pay an agent a couple hundred bucks to do this, assuming it's legal in your state and the broker allows it.

Karen Margrave · Answer

The agent would contact the seller and tell them that they have a buyer for their property, and ask if the seller is willing to pay a commission. Are you offering full price or ?, and what is the actual value? All of that will factor into it. If you found the property you want, and know details, the agent might be willing to take less of a commission since he didn't have to find the property, etc. All they would need to sign is the purchase agreement, as long as it shows the commission amount and to whom it's paid on it.

How does the buyer's agent get paid?

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