Real Estate Commissions - Are they Charged Twice?

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Real Estate Agent with CIR Realty - Calgary, Chestermere, Balzac & Airdrie RW-0011398
http://actvra.in/zh

Realtor Commissions on the Purchase and Sale of Home

I have a question, in Calgary, if a Realtor helps you buy a house and also helps you to sell a house, do they charge twice?

In answer to your question, the simple answer is no.  Oh if life could only be so simple.

gold balance beam scale used to measure massFirstly, when a real estate agent represents a buyer in the transaction, the entire brokerage fee is paid out by the seller though the proceeds of the sale.  The brokerage fees are paid in trust to the listing agents brokerage.  This brokerage fee includes an amount agreed upon by the seller which will be paid to the buyer's agent upon completion of a sale. 

The brokerage fees are disbursed in accordance with the terms of the listing agreement.

The brokerage fee is secured by way of a "Charge on the seller's land".  This is generally why the buyer typically gets a "free  ride", so to speak. Some might argue  that it is the buyer who is paying the commission because they  are the ones coming to the table with the cash, in order that the brokerage fee and all other caveats against the land may be discharged.  This argument is weak as you could hardly say that the buyer is paying the seller's mortgage for the same reason.   Everyone get's a free ride on the purchase, sellers included because they will be buying next, or already have.

The money that the buyer brings to the table in the form of a  down payment and/or deposit goes toward the buyer's equity, unless they are over paying for the property which would be unlikely.  Equity is the difference between the market value of the property and what the buyer owes on it.  In effect, their entire deposit plus down payment stays on the buyer's balance sheet as an asset, and is not expensed.

More and more these days, buyers prefer to work under a written service agreement with their agent.  This is usually referred to as a Buyer's Brokerage Agreement.  In rare cases, under the terms of a Buyer's Brokerage Agreement, the buyer may have agreed to "top-up" the commission being offered by the seller to the buyer's brokerage.  They are willing to do this in order to guarantee that there is no conflict of interest with their agent, when the commission being offered by the seller is lower than the amount agreed to.  In most cases, this unusual shortfall is negotiated with the seller so that it the buyer is not burdened with it.  If they are unable to come to agreement on this, then the buyer may deduct it from the offer price or choose another property.  

I know that this all sounds pretty confusing.  The reality of the matter is, that your agent will keep you advised of your options at all times, depending on the circumstances.  Almost all of my buyers have agreed to initiate a Buyer's Brokerage Agreement for their benefit, and once agreed to, rarely needs to be even referred to again because in the great majority of cases, the seller pays the entire amount.

Again as a "Rule of Thumb", the buyer does not pay a brokerage fee.  In  rare cases, and only when  the buyer has requested to work under a Buyer Brokerage Agreement, the buyer may have to "kick-in" some "insurance money" but this is rare and the buyer is always  kept informed of the facts at all times.  I hope this answers your question.

Posted by

In Calgary, call Mike Leibel - 403-204-1111
Out of Town Clients & Agents call toll free 1-877-883-3070

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Associate Broker - REALTOR®
Executive Platinum Award
CIR Realty - Calgary, Alberta
Canada 

www.calgarymike.com

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Rainmaker
432,268
Stanley Stepak
Realtor - Avon Lake, Avon, Bay Village, Westlake,
Howard Hanna Gold- Avon Lake, OH

Great job answering that question and the bottom line is to talk to your agent and make sure you understand before moving on

January 05, 2011 09:04 AM
Rainmaker
156,031
Suzanne Gantner
GRI, E-Pro, SRES, SRS, ABR
Sky Realty, Central Texas Real Estate

Talk about a cluster...glad we have simplified all this in Texas!!

January 05, 2011 09:05 AM
Rainer
369,954
Tish Lloyd
Broker - Wilmington NC and Surrounding Beaches
BlueCoast Realty Corporation

Mike ~  You have done an excellent job of explaining the Buyer Agency Agreement with its attendant issues regarding who is responsible for the commission and any shortfall which may arise.  Your explanation of how to handle these questions is so on-point, professional and easy to understand.  Thank you -- had to lean on the button . . .

January 05, 2011 09:26 AM
Rainer
162,230
Mike Leibel
Associate Broker
CIR Realty - Calgary, Chestermere, Balzac & Airdrie

Thanks Tish, that is very kind of you to say. 

January 05, 2011 10:21 AM
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Rainer
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Mike Leibel

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