Who Will Pay the Buyer's Agent

By
Residential Home Builder with Retired

Who Will Pay the Buyer's Agent?

I’ve seen a few posts recently counseling buyers not to worry about the cost of hiring a realtor since the seller normally pays the buyer’s agent fee. Historically this is the way it has always been done. A featured post just asked listing agents not to negotiate the fee for the selling agent. We can get away from that.

Shoes

There was a time when a buyer had to go to each real estate office and ask what they had for sale. This is pretty common in commerce. If you didn’t like the shoes that Tom McCann offers, then you were free to go to Nordstrom’s. The public knows this is the case and many people still don’t get the concept of a multiple listing association where realtors in a given location pool their listings and agree to share commissions in cross company sales. According to Wikipedia this sharing of listings and commissions has been going on since the late 1880’s.

In the mid 1990’s a new concept arose and took hold. There was a lot of resistance at first, but today the norm is that buyers are represented by buyers’ agents and sellers are represented by listing agents. Still, the seller is asked to pay the entire cost of getting his home sold. I don’t for the life of me know why that cost is shoved on the seller, other than tradition. Yes, the seller was in a contract to sell a property for a fee and the real estate brokerage took it upon itself to share that fee with cooperating brokers.

Listen to me here. Do you, when you get a call from the phone company that wants you to bundle services for a discount have any doubt about whom the person talking to you is being paid by, and who they represent, and why? Do you, when you buy a new or used car from a dealer have any doubt about whom the salesman is working for when he says, “I’ll see if we (meaning you and the salesperson) can get that?”

The IRS allows for certain costs in selling to be deductible. One of those costs is to pay for the services of the real estate broker. The commission is considered a cost of doing business.

Here is a new concept that banks will one day embrace. Part of the cost of buying a home necessitates hiring a broker to represent the buyer and also the cost of hiring an inspector to inspect the home. We know they already consider the loan financing cost as part of the transaction. When will they open their eyes to the rest of the costs of being a responsible buyer, and consider that to be financeable? At that time we will be able to proceed with buyers paying the agent they want to work with a negotiated fee, and sellers will continue to pay the listing agent of their choice, the fee negotiated for the services offered.

Ravenna bridgeWhat will happen? Fees for buyers’ agents will plummet at first. There are companies already rebating much of that fee. Eventually companies that don’t charge enough will go out of business. But, it won’t be a fixed fee coming from the sellers any more. It will be negotiated. And then buyers will start to learn what a good agent is worth and that fee will become acceptable. I don’t know what it will be. I don’t know if it will be a percentage of the sale price, or a flat fee. But buyers (and sellers) will, after a considerable amount of time, come to realize that there is value in paying for great service.

Using a buyer's agency contract for every buyer makes just as much sense as using a listing contract for every seller. They give us a chance to thoroughly educate each buyer. They make us more professional. Buyer contracts make us wear the shoes we claim to be wearing when we walk a client accross the bridge to home ownership.

Shoe Photo curtesy of Photo Daisy

 

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Glenn Roberts
Retired

 

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Re-Bloggged 2 times:

Re-Blogged By Re-Blogged At
  1. Bill Burchard 01/07/2011 12:02 PM
  2. John Axt 01/08/2011 11:09 AM
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Rainer
369,654
Tish Lloyd
Broker - Wilmington NC and Surrounding Beaches
BlueCoast Realty Corporation

Glenn ~  Not only am I late to the party -- I missed it completely.  This is a matter near and dear to my heart and, Brother, you have nailed it!!!

"The IRS allows for certain costs in selling to be deductible. One of those costs is to pay for the services of the real estate broker. The commission is considered a cost of doing business."

Cost of doing business in a fully disclosed and professional manner -- can't spell out our fiduciary responsibility any clearer.  Here's hoping and looking to the future . . .

 

January 11, 2011 11:28 AM
Rainer
62,378
Peter Van Deusen
Riverview Properties

Glenn,

 Five or six years ago, Fannie Mae was working on a loan platform to include an amount in the loan to pay for buyer agent sevices - supposedly ready to go. Unfortunately, my source retired, leaving me with no updates. I have no idea why this has not been rolled out, but would welcome it heartily! Any serious buyer should expect to pay for service, and many (particularly first-timers) ask what they will pay for my help. It would be just as easy to say "Your loan will take care of me" as it is to point to the seller.

January 11, 2011 11:45 AM
Rainmaker
311,284
Glenn Roberts
Retired

Tish - It's been fun. Thanks for stopping by. Peter's comment #134 has some information and some lenders have mentioned it in passing. There's hope.

Peter - I'm glad there's been a start. Perhaps we can get the ball rolling again here on AR.

January 11, 2011 12:11 PM
Rainmaker
214,815
Patricia Beck
Colorado Springs Realty
RE/MAX Properties, Inc., GRI, CDPE

Interesting post and discussion here Glenn.  In Colorado we are required to use the Buyer Agency with clients but I see your point about sellers having to pay both agents.  Things will probably change some day.  Broker Bryant's comment was interesting, I haven't thought of that.

January 13, 2011 11:59 PM
Rainmaker
124,583
Matt Robinson
Pensacola Real Estate (850) 292-4000
ERA Emerald Coast Realty

I would say that in nearly 99.9% of all transactions, the buyer's agent commission is paid for by the seller.  So, I don't see any problem in agents writing blogs for their local market explaining that buyers should not hesitate to contact an agent to represent them, because it doesn't cost them anything.  I have had numerous buyers ask me how much it costs for me to help them, and the answer is nothing.  In nine years, I've never had a buyer pay me one red cent for my services.

Until your new fangled world of real estate occurs, when buyer's agents are paid by buyers (whether that fee is financed or brought to closing) I would think the blog posts regarding how realtors get paid is completely relevant.  (In full disclosure, I've never written such a post, and so I am not trying to defend or rationalize my own actions).

August 22, 2011 12:47 PM
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Rainmaker
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Glenn Roberts

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