This is actually how commission works now

This board is full of some of the most arrogant clueless people who know nothing about real estate transactions other than their hatred of agents. And they have been responding to all the questions about commissions and agents with no actual knowledge and the worst most inaccurate advice. So here's a breakdown of how it actually works (at least in NY). Like it or not, unless otherwise stated these are all facts I've pulled from my real life experience working 50+ hours a week in the industry for 7 years BTW. I'm sure plenty of armchair experts are going to chime in to argue though.

Sellers-

Commission is negotiable and You don't HAVE to pay for the buyers agent. That said it shrinks your buyer pool to outright refuse to hear any offers requesting compensation. It's just logic. I've been seeing posts the last few weeks about deals not going through because of this and I've had buyers ask me specifically not to show them homes that don't compensate. You can still sell without it but there are less buyers with cash on hand or willingness to cover their agents fee out of their own pocket, thus you may have less interested buyers and with that less offers. With less offers is a smaller chance of a good bidding war to drive the price up. Choosing not to offer BAC may also lead to longer time on market which can make your listing stale.

Remember this is all negotiable but it's common for Listing agents nowadays have contracts that stipulate essentially;

X% to the LA

Either +Y% to the LA if they find an unrepresented buyer

Or

Y% or Z% to the buyers agent if they have one. (you can say 0 here but we can have that conversation seperately if you want more of my thoughts on this)

I think the best thing to do is leave it open and not commit to the BAC fully beforehand, be open to possibly paying it, and hear all offers then compare. Almost every offer from a buyer with an agent will include their BAC. Some will be high some will be low but it's the net price after BAC you're looking at. Obviously 100k - 3% is worse than 99k - 1%. You can then continue to negotiate on the sale price or BAC or both as well as any other terms. If you get an offer at 100k - 3% you might be able to counter at 103k - 3% to cover the BAC for example. Or just 100k-1.5% to split BAC with the buyer.

And lastly, as a stand aside to commission, if your scratching your head as to why you been on the market for x months but haven't sold its almost definitely because your ask is too high.

Buyers-

Commission is also negotiable. In order to show any homes that I haven't myself listed to a buyer NAR has mandated that I MUST have some form of buyer agreement signed. That's any agent you reach through zillows or any other sites get info or schedule showing buttons who isn't the LA too btw.

You do not need to have an agreement to look at or purchase a house. You do have to sign one if you want your own representation on your side.

-You can work with the listing agent direct without one. But that's more akin to buying from a car salesman since they work for the seller not you. Their job is to get as much as possible from you and it's likely they have much more experience than you at this. Some people will do fine on this route, most people are better off with their own agent though (this is my own personal opinion from the last 7 years of working with the public in real estate). And remember they likely have in their contract with the seller they get an extra percentage since you don't have an agent so it's unlikely you can negotiate a discount since you think the sellers are paying less commission.

-You can also get an attorney to rep you instead of an agent. But there are some caveats here too.

1. It's not super easy finding an attorney to do this. Lots don't like it. Typically buyers who seek this expect services outside of an attornies scope. Most of the attornies I know have told me they don't like to take these clients or don't take them at all.

2. They usually handle these completely transactionaly. Send offer, forward response. There's lots that they won't be experts at or won't even thing to do. They don't know the neighborhoods or their markets so they don't know how to best compete in each area. They don't do comp evaluation reports to make sure you're offering not too much or too little. They don't chase your banker, surveyor, appraisor, etc to get everyone in the same page and keep everyone moving. They'll never step foot in the house so they can't warn you about something they see that can become an issue. There's plenty more I could list but this is already getting too long.

Back to the agreement. For compensation they usually say if you purchase just this house (or Alternatively, any house in some geographic area) within X days I am entitled to W%. If the sellers are not compensating you are responsible for it or the remainder. So if you see the house with them and decide to find and then use a different buyers agent or go straight to the LA, you will still be responsible for W% to them. This doesn't mean you are in fact paying out of pocket. If you find a good agent they'll make sure you get a great home without you writing them an extra check. You can also ask them to exclude homes that will not compensate. You'd probably be surprised at how few these are. I have never once had a buyer pay me directly out of pocket and I always have a buyer agreement.

Your offer gets submitted as whatever rit is including that W%. This can then be negotiated with the seller. If the BAC the offer comes up short and you can't or won't pay the difference out of your own pocket then the deal doesn't happen and you're onto the next one. It is however possible to try to renegotiate with your BA to save it. If you agreed to 3% with them and the seller is only willing to cover 2% it's not unusual for the BA to say no big deal I'll take 2% (though they don't have to).

If you try to somehow stiff the BA they will sue you. That's the whole point of the contract. They usually aren't scared of your online reviews. They're just collecting what you agreed to pay them.

If you are calling a buyer agent to see a house it's probably a good idea to have them check what BAC that house if offering first and discuss what BAC they'll work for before you even drive out there.

Don't get mad at me, this is what all the anti agent people were celebrating after that lawsuit.

I'm sure I missed some stuff but it's 2AM so cut me some slack haha.

I'll take questions if you have any but let's not use this space to argue about whether or not you need an agent because some people do and some don't.

submitted by /u/Snatch_hammer420
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source https://www.reddit.com/r/RealEstate/comments/1fh66vx/this_is_actually_how_commission_works_now/