How does the buyer agent get paid? Why am I paying his commission?

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Basically, you don’t have a contract with the buyer’s agent because you don’t know who it is yet. Your contract with USCityhomes contractually defines what the buyer’s agent receives. We use the standard TAR forms as required by Texas Association of Realtors. Listing agreements are designed this way to encourage a cooperating selling environment. When the money changes hands it all happens at closing and it is never paid to USCityhomes. You clearly see this on your settlement statement at closing.

In our industry, the listing agreement contract works like this; 1) you agree to pay USCityhomes a commission. 2)  By way of USCityhomes agreement with our local realtor’s association, USCityhomes agrees to pay the buyer’s agent the advertised percentage. 3) commissions get paid at closing. The purpose is to set in advance what the buyer’s agent can expect to earn to entice them to bring a buyer.  You cannot negotiate the buyer’s agent commission at the time an offer comes in.  

In our listing agreement, the buyer’s agent (called “another broker”) commission is set in paragraph 8.A. and 8.B. The amount is advertised for the buyer’s agent to know what they can earn. Paragraph 5.A. (2) defines your obligation to USCityhomes including the obligation to the buyer agent. Paragraph 8.A and 8.B define USCityhomes obligation to “another broker”. It is a pass-through obligation.  We are obligated to pay it to the other broker as you are obligated to pay it to us.

Your next question might be “why 3%?” It’s a standard market rate as you can see at listings of other properties in a market analysis. If you look to the middle left on an Agent Report the Buyer Agent Commission (BAC) is most often BAC: 3%. That is the advertised amount.  When listing your home, it does not matter to us what the amount is because it is a pass-through. Be aware, some buyer agents pass on showing properties that have a lower commission.

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 contact us if this is confusing.

Notice: This website contains general information about legal and financial matters. The information is not advice, and should not be treated as such. You must not rely on the information on this website as an alternative to legal or financial advice from your attorney, accountant or other professional services provider. If you have any specific questions about any legal and financial matter you should consult your attorney, accountant or other professional services provider.