Laramie, Wyoming Real Estate: How Are Commission Rates Determined And Who Pays Them?

By
Real Estate Agent with CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming

Recently I received an e-mail from a buyer starting the search for a home.  He and his girlfriend were trying to choose a realtor and get an understanding of the process by asking a few basic, but very good questions:

How are commission rates determined?

The most important thing to remember about commissions is that they are not allowed (by law) to be set at a certain rate between brokerages.  However, brokers responsible for their own brokerage are allowed to independently set their own rates and to have their own internal guidelines regarding what those rates may be.

The commission rate may also be influenced by the type and condition of the property for sale.  Some properties, such as land, rural or commercial properties, require more time, attention and expertise than other types of properties.  As such, a higher commission rate might be office policy.


Who pays the commission?

Nobody gets paid until the property is legally sold.  At that time, a commission will be paid  to the brokerage who listed the property - the Listing Agent's Brokerage. Most, but not all, sellers authorize the listing brokerage to share that commission with the brokerage who represents the buyer in the sale - the Buyer's Agent's Brokerage.  This is common and allows buyers to have an agent represent their interests while allowing payment for this to be paid out of the seller's proceeds from the sale. 

Why would a seller agree to pay the commission of the brokerage negotiating for the buyer - against the seller?

Good question!  For one thing, there is no money paid to anyone until a sale takes place.  The seller has no sale proceeds - until paid by the buyer. No buyer, no sale, no money.
     

Another reason is that in the past, buyers were rarely represented unless they could pay up front.  This resulted in a huge disadvantage to buyers. It was finely realized that buyers needed to be assured of representation, too.  Over the last few decades this has evolved into the current practice of sellers generally paying the commissions of both brokerages.  In many states (but not Wyoming), it's the law.

Lastly, offering a commission to the agent who brings a buyer to the table gives other agents a reason to show the property.  After all, no one gets paid until a buyer is found that is ready, willing and able to buy the property.

Can a buyer pay for their own representation?

Of course!  There are buyers out there who prefer to pay their agent themselves.  This can easily be negotiated between a buyer and their own agent.


So does that mean a buyer in Laramie,Wyoming, can be assured of representation in a real estate transaction?

Unfortunately, the answer to that is Yes and No.  Yes, you can get representation - No, it is not assured.  In Laramie, Wyoming, some listing brokerages will NOT compensate Buyer's agents.  In this situation, a buyer can:
                   a) Contract to pay for a buyer's agent on their own,
OR
                   b) They can be served by an agent who will act as a Seller's subagent.
                       The buyer will be a customer - relinquishing some of the
                       confidentialities assured to a client. 

Huh?. . .  

Clear as mud, right?!  The best course of action for a buyer in Laramie is to disclose as little information as necessary until you are positive that your relationship with your agent is one that protects your best interests and includes confidentiality.  That way if you end up wanting a house that is being sold by a brokerage that will not compensate a buyer's agent 
AND you don't want to pay a buyer's agent yourself, you will still be well protected as a customer.

*
This information is intended only to provide further clarification of real estate issues in Laramie, Wyoming. I am not an attorney.  This article is not endorsed, approved or affiliated with Century 21 Real Estate Center, Inc.  Any consumer with questions about the real estate process should always consult an attorney of their own.

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Ambassador
506,104
Pat Haddad
Keller Williams Indianapolis Metro NE - Carmel, IN
Carmel IN Real Estate Expert

Brenda--You managed to make a very complicated topic understandable.  Most of the time I am glad that we in Indiana still do not use buyer agreements.  I think this is a post you should print out and include in any type of information handed to first time home buyers.

Feb 08, 2011 03:32 PM #1
Rainer
210,574
Joe Kenny
Realty Executive Midwest - Darien, IL
Better Than Your Average Joe

Brenda, great job with this.  Hopefully the comments to follow won't cross the line of anti-trust.  I ran into one a few weeks back.

Feb 08, 2011 03:47 PM #2
Rainmaker
635,808
Sheila Newton Team -- Anderson & Greenville SC Real Estate
Berkshire Hathaway HomeServices - C. Dan Joyner - Anderson, SC
25 years experience -Residential Real Estate Sales

Great blog Brenda!!! This is one of those topics that ALL buyer's agents need to read often!!

Feb 08, 2011 08:32 PM #3
Rainmaker
187,970
Christina ONeal
At Home Real Estate Group - Ripon, CA
Realtor - Ripon California

Wow, you are not kidding!!! It's as clear as mud.  Such a great explanation to a confusing (super duper) thing.  We don't have sub-agents in California, whew.  I'm glad you understand your area so well!!! Good for you :)

Feb 08, 2011 09:36 PM #4
Rainmaker
181,254
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Thank you Pat, Joe, Sheila and Christina!  I think explaining agency, especially the concept of seller subagency, is one of the hardest things I have to do.  :-)

Feb 08, 2011 10:31 PM #5
Rainmaker
256,593
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

Wow, are there really listing agencies in Laramie that don't pay a cooperative commission to buyer's agents? Really? I'd be interested to know how many buyer's agents get to the closing table before they realize they aren't getting paid...

Feb 08, 2011 10:50 PM #6
Rainmaker
181,254
Brenda Whitman
CENTURY 21 Real Estate Center, Inc., Laramie, Wyoming - Laramie, WY
Associate Broker, Laramie, Wyoming

Yes, Tim, there really are!  I know it is hard to believe.  Fortunately, this is a well known local situation - so I hope no agent has found themselves with no compensation ... though, I wouldn't know for sure . . .

Feb 08, 2011 11:38 PM #7
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Brenda Whitman

Associate Broker, Laramie, Wyoming
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