How Is My Agent Paid?

Believe it or not, as the home buyer, you're in the enviable position of getting to benefit from the expertise and experience of a professional real estate agent – at virtually no cost to you.

Sound too good to be true? It's not. Real estate agents who serve buyers typically receive a commission from the sale of the home-which they share with the listing (or selling) agent. And sometimes agents are paid a pre-negotiated flat fee for services, irrespective of the sale price of the home.

Not too many years ago, real estate agencies were "seller-only," meaning that the real estate agent represented the seller, not the buyer. Under the seller-only arrangement, real estate agents (and brokers) only represented the interests of the seller, not the buyer. In fact the buyer was largely unrepresented in the transaction and usually not even aware of it!

All that changed in the 1990s when conventional wisdom caught up with this reality–without a buyer, a home won't sell.

While the real estate commission is still derived from the proceeds of the sale of the home, the advent of the buyer-agency, changed the relationship between agent and buyer.

As a buyer, you can now choose to be fully represented by a real estate agency in the purchase of your property. One of the advantages of buyer representation is that you'll have a trained professional looking out for your interests in the home buying process-interests that vary greatly from the seller's.

You may want to consider speaking with a Real Living agent who can talk with you more specifically about buyer-agent representation, commissions and more.

In the meantime, here are a few additional questions and answers regarding broker/agent commissions:

Q. How is the amount of a real estate commission determined?

A. The broker determines the standard fee and that fee is stated in the company's listing agreement. Typically, the commission is a percentage of the eventual sale price of the home. Each broker's standard fee may vary depending on operating and other costs.

Real estate brokers independently determine their costs for doing business, using both fixed and variable expenses in their calculations. In addition to maintaining their office environment, brokers incur additional costs in marketing and promoting their listed properties. Brokers may market all their company's listings through such avenues as classified ads, home books and media such as television home shows, Internet Web sites and telephone hotlines. Or they may allow their individual agents to market the properties listed with that agent.

Total operating and marketing costs can have an impact on the way the commission is determined. Regardless of how the amount is derived, be sure you know what the commission will be up front and get it in writing.

Q. Is the commission negotiable?

A. Yes. In every state and on every transaction, commission is, by law, negotiable at the time it is established. In most cases, this means that the commission is established between the seller and the agent who lists the home.

Buyers and sellers should refrain from attempting to negotiate commission at the closing table. That's because a specific fee has been established for real estate services-services that resulted in the sale of the home. Payment should proceed as it was contracted. Think of it this way: Would you ask a doctor to lower her fee after your appendix was successfully removed?

Q. Is there a time when I, as the buyer, might pay a commission?

A. Perhaps. In most states, however, it's rare to pay your agent/broker directly for help in finding and purchasing your new home. However, if you, your broker and your agent sign an Exclusive Agency Agreement you may be subject to an out-of-pocket fee (as outlined in the agreement) once you find your home and the contract for its purchase is written and accepted.

Another scenario where you might pay a commission would be if you ask your broker/agent to find a very specific house within an extremely tight window of opportunity. For example, if you needed a house overlooking a lake and featuring boat dockage and an in-law suite, and you needed the house in less than two weeks, you may agree to pay a cash incentive to the broker/agent for the extra time and effort involved in securing such a property.