What is the Buyers Broker Commission? How is that rate set?

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What is the Buyers Broker Commission? How is that rate set?

I often get asked about commissions and specifically the buyers agent commission. The buyer’s broker commission, or sometimes called buyers agent commission, is the amount of money a seller agrees to pay the brokers agent representing the buyer as an inducement for other broker agents to show and sell your home. Typically it is defined as a percentage of the selling price and it is advertised in the agents information section of the listing in MLS. It is paid at closing and any restrictions or additional incentives are listed in the private remarks section of the listing agreement.

In my analysis of hundreds of listings in Northeast Texas it is almost uniformly 3%.  Sometimes you see bank owned foreclosure listing set at 2.5% and in a buyers market incentives offered in addition to 3%. 

What is the origin of the 3% rate. Why not something else? Nobody seems to know other than it was set when the system of sharing was instituted in the 1970’s.

 

 

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