Posted by on February 6, 2018

We’ve always placed a high value on real estate agents (well, good ones). They can make or break a deal, help you find opportunities you never could have on your own (yes, even with all the online searches in the world!), and (for investors) can give you insight into a marketplace that you could not necessarily get on your own. They’re out there, pounding the pavement, getting to know the people and the marketplace. Without the good real estate agents we’ve built relationships with over the years we definitely would not be where we are today.

With that in mind, we wanted to start a series to answer questions about real estate agents. What do they do? How do they get compensated? Etc. We have noticed that there is a lot of confusion out there around these topics and so we partnered with Downs Group to answer all your questions. Send any questions you have about real estate agents to us:

Now, let’s get started!

How do real estate agents get paid?

Buyer Agents typically get paid by the seller unless they are hired by a buyer (buyer agency agreement would be signed) to find them property, depending on the commission that the seller is paying.

Sellers Pay Agents – Listing AND Buyer
Buyers ONLY Pay Agents if they have a specific agreement in place

Example: If the commission is 2.5% (ie.  $10,000 commission) the agent then must pay the brokerage a percentage (depending on their split with the broker) it could be 30% or $3,000.

There are other fees like Errors and Omissions (insurance), Desk Fees, etc. but they are nominal so let’s call it $7,000.

Then the agent must pay Uncle Sam (who looks good in stripes?)  who then takes a maximum of 30% which takes the commission down to $4,900 net.

That does not include costs that the buyer’s agent may have paid to generate the lead (ie. pays Zillow for leads or has to pay a split to a team that provided the lead).

What kind of laws/ethics are agents held up to?

We have a fiduciary obligation to be loyal, maintain confidentiality, be accountable, and act with care on behalf of our clients.

There is a difference between representing a client as a Listing Agent and Buyers Agent.

As a listing agent we have a legal contract signed with the seller and a fiduciary obligation to obtain the highest price the market will bear.

Note: If you’re a buyer and you call the listing agent PLEASE understand that Can work against you, as the listing agent has a fiduciary obligation to the seller. As a buyer if you ask the listing agent “how much will the seller accept” the listing agent SHOULD say “FULL ASK or HIGHER”.  Their job is to protect the sellers list price and their equity.

Buyer’s should work with a professional buyer agent who will identify property, find out details about the property and negotiate with the Listing Agent.  To be properly represented, a buyer should sign an exclusive buyer’s agency agreement with the buyer’s agent of their choice.

Note: The truth: Agent’s prefer to work with loyal clients too, not buyers or sellers who work with just anyone. People want to work with people they like and trust and establishing a loyal and trust worthy relationship is key for all parties when dealing with such a huge asset. Whether you are buying your first home, first or multiple investments or selling the home you have lived in and raised your family, this is a big deal and is life changing for some. Loyalty and customer service is key, and people are important.

Have More Questions about Real Estate Agents and that Side of the Industry? Email Us!

Get to Know Downs Group:
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