Breaking Down the Ways Real Estate Agents Get Paid
When it comes to real estate agents, there are so many players — buyer agents, seller agents, brokers, dual agents, exclusive agents, discount agents and more — that many home buyers are often left in a state of confusion. Whose interests do the agents represent, and who pays their fee for service? Are they paid by salary or commission? And what is a Buyers Exclusive Agency Employment Contract agreement? The answers to these questions can be equally perplexing. Buyers’ real estate agents are actually paid by the broker, rather than the consumer. In turn, the broker is paid by the seller’s agent, who together with the seller comes to an agreement about how much commission the listing brokerage will receive. This commission is then split between the listing agent and the broker, which pays the buyer’s agent. To simplify this for you, here is a breakdown of what you need to know about how real estate agents’ compensation works.
Who Are the Players?
Buyers’ real estate agents represent the buyer, while sellers’ brokers (also called listing or conventional brokers) represent homeowners. Listing brokers enter the home for sale on a multiple listing service (MLS), where every home for sale listed by a real estate agent can be found, based on an agreement reached with the seller. Listing brokers offer to share the commission with the agent/broker who brings a buyer. Dual agents (or facilitators) are agents who bring buyers and sellers together to close a deal, thus representing neither side.
How Agents Are Compensated
Only licensed real estate brokers can receive a commission. Since real estate agents are usually independent contractors, their fees are paid by the broker not by the customer. Yet, it’s the seller who establishes how much a buyer’s agent is paid from the commission since the seller pays the listing broker and it is then divided between the listing and selling sides. The split is not always 50/50. Highly experienced real estate agents who have closed many deals may receive a higher split than do less experienced agents. It’s important to understand that all real estate commissions are negotiable. In general, listing commissions vary from 1 percent to 10 percent of the sale price; however, 4 percent to 7 percent is the standard.
Why You Should Sign a Buyer-Broker Agreement?
Signing a Buyers Exclusive Agency Employment Contract (also known as buyer representation) with your agent is critical, for it specifies the relationship, duties and agreed-upon compensation. An exclusive buyer-broker contract stipulates that you are bound to a particular agent, meaning that you can’t buy a property without owing this agent a commission. Non-exclusive agreements allow you to switch agents midway. However, you are still obligated to pay a fee to the first agent if he or she introduced you to the home you end up buying. You also have the option of requesting a short-term exclusive buyer-broker agreement, wherein you are committed for only a limited period of time — for example, 90 days, 30 days or a week.
The Procuring Cause
One of the key reasons to sign a Buyers Exclusive Agency Employment Contract agreement is to eliminate commission disputes known as “procuring cause.” The procuring cause agent is the agent who causes you to purchase a home and who is entitled to the commission. Procuring cause is only an issue when you engage the services of multiple real estate agents. By signing a contract, the agent ensures that you, the buyer, are responsible for payment of his or her fees because they are representing you and your best interest.
How the Alexander Team Works
We offer our services FREE to buyers of all shapes and sizes. Whether you are a First Time Home Buyer, Relocating to St.Louis, or even looking to down size, we would love the opportunity to help you out! Here is St. Louis, it is a common practice that the sellers pay out the commission to the selling agent and the buyers agent.
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