How does the buyer agent get paid? Why am I paying his commission?
Basically, you don’t have a contract with the buyer’s agent because you don’t know who it is yet. Your contract with DFWCityhomes contractually defines what the buyer’s agent receives. We use the standard TAR forms as required by Texas Association of Realtors and that is how the contract is written in our cooperating selling environment. When the money changes hands it all happens at closing and it is never actually paid to DFWCityhomes. You will clearly see this on your “HUD” settlement statement you will receive for your approval prior to closing.
In our industry, the listing agreement contract works like this; 1) you agree to pay DFWCityhomes the percentage commission. 2) By way of DFWCityhomes agreement with our realtor’s association (MetroTex), DFWCityhomes agrees to pay the buyer’s agent the advertised percentage 3) all fees are paid at the same time at closing. The purpose is to set in writing the expectation of what will be paid to the buyer’s agent to entice them to bring a buyer and to avoid negotiating the buyer’s agent commission at the time when a contract for sale is received.
In our listing agreement, 3% defined in 5. A. (1) goes to the buyer’s agent (called “another broker”) as described in paragraph 8.A. and 8.B. The 3% is what we advertise for the buyer’s agent to earn. Paragraph 5.A. (1) defines your obligation to DFWCityhomes. Paragraph 8.A and 8.B define DFWCityhomes obligation to “another broker”. That is why it shows the way it does. It is a pass through. In a full service listing 5.A.(1) might be 6% and 8.A. is 3% leaving the spread of 3% for the Listing agent.
Your next question might be “why 3%?” That is considered a standard market rate as you can see advertised for the other active properties in the CMA. If you look to the middle left on an Agent Report the Buyer Agent Commission is shown as BAC: 3% (Buyer’s Agent Commission). That is the advertised amount. When listing your home, it does not matter financially to us what the percentage is because it is a pass through. Even though it is clearly unethical, I do know some buyer agents will pass over properties that have a lower commission or show them last.
The buyer agent fees are always confusing. Real Estate is the only industry I am aware of that the Seller sets and pays the representation fee for the Buyer. Our industry compensation system was developed to encourage cooperation between Brokers and promote fairness. With this system cooperating agents can know what earnings to expect without becoming a party to a transaction and negotiating a fee each time they represent a buyer.
Don’t hesitate to call us if this is confusing.
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