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View Poll Results: Poll: Buyer's Agent Commission - Who pays for it?
Seller pays - all commission cost is paid by the seller and the buyer's agent commission is just part of that 38 54.29%
Buyer pays - the overall commission amount is rolled into the house price so the buyer bears the cost of the agent who represents them 13 18.57%
Seller's agent pays - seller's agent agrees the overall commission with the seller and is sacrificing part of to the buyer's agent so he/she is paying 14 20.00%
I don't really understand who pays for buyer's agent commission 5 7.14%
Voters: 70. You may not vote on this poll

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Old 08-07-2017, 11:04 AM
 
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Given an identical set of properties I don't believe the market value would change dramatically, if at all, if one involved buying and selling agents and the other was strictly sold by owner. Therefore seller pays as part of the convenience of having selling and buying agents bringing the transaction together for him.

When someone does a for sale by owner and wants no agents involved they are trying to minimize the costs of selling while still trying to get market value out of the house. If they want a broader audience they'll often offer buyer's agent commission, but again that doesn't generally impact the market value.
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Old 08-07-2017, 11:23 AM
 
Location: Central Texas
20,958 posts, read 45,178,837 times
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Let's look at this in a slightly different way.

Seller hires Listing Agent to sell the house. Listing agent charges a commission to do so. Listing agent pays Buyer's agent a portion of that commission to bring a buyer and do the work on the buyer's side of the deal (and take liability for that). Buyer purchases house, and the seller receives the proceeds from the sale and out of those proceeds pays the person they hired to get the house sold and closed.

Business hires sales rep to sell their product. Sales rep sells product to store, who hires sales clerk. Purchaser buys the product. Who pays the sales clerk's salary?

Person takes car to auto shop for repair. Auto shop pays mechanic to repair the car. Person pays auto shop for the repair, and auto shop pays mechanic for doing the repair.

In all cases you could technically say that the buyer/customer pays the agent/mechanic/clerk. However, no one ever brings that up in anything but real estate. One has to wonder why.
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Old 08-07-2017, 11:31 AM
 
Location: Florida -
10,213 posts, read 14,742,287 times
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Ultimately, the realtor commission/s (selling and buying) come out of the seller's closing statement/funds. Of course, those funds originate from the funds paid by the buyer for the house, but, there is no independent commission transaction for either the buyer or seller.

Further, unless a buyer (who has no RE agent) makes a special provision to reduce the cost of the home by a typical buyer's agent commission, the entire 5-6-percent commission fee will accrue to the selling agent, as stipulated under their listing agreement.
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Old 08-07-2017, 11:35 AM
 
Location: Denver CO
24,204 posts, read 19,026,046 times
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I would have put that both buyer and seller pay if that had been an option. Buyer is the one bringing money to the table with a price that includes the commossion so they are paying. Seller is getting less because some of their proceeds go to the buyer's agent so they are paying. It's not cut and dried enough to say that just one side pays.

Quote:
In all cases you could technically say that the buyer/customer pays the agent/mechanic/clerk. However, no one ever brings that up in anything but real estate. One has to wonder why.
Because the amount to cover paying the mechanic is wrapped into the price of the service, along with the rent on the shop and the electricity and the tools, etc. It's discussed in real estate transactions because it's explicitly called out during the transaction itself. If I had to sign something when I took my car into the shop saying that the repair was going to cost me $1000 and I acknowledge that X% of that $1000 goes to the mechanic, I'm betting that there'd be a lot more discussion about what the mechanic gets paid for a car repair.
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Old 08-07-2017, 11:35 AM
 
17,103 posts, read 11,943,054 times
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Quote:
Originally Posted by jghorton View Post
Ultimately, the realtor commission/s (selling and buying) come out of the seller's closing statement/funds. Of course, those funds originate from the funds paid by the buyer for the house, but, there is no independent commission transaction for either the buyer or seller.
I sold a house where the mortgage was pretty much right at the price we could sell it for. So at closing I as the seller had to bring a check to cover closing costs including the commission. So again, seller pays.
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Old 08-07-2017, 11:36 AM
 
Location: Cary, NC
43,028 posts, read 76,529,724 times
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Quote:
Originally Posted by TexasHorseLady View Post
Let's look at this in a slightly different way.

Seller hires Listing Agent to sell the house. Listing agent charges a commission to do so. Listing agent pays Buyer's agent a portion of that commission to bring a buyer and do the work on the buyer's side of the deal (and take liability for that). Buyer purchases house, and the seller receives the proceeds from the sale and out of those proceeds pays the person they hired to get the house sold and closed.

Business hires sales rep to sell their product. Sales rep sells product to store, who hires sales clerk. Purchaser buys the product. Who pays the sales clerk's salary?

Person takes car to auto shop for repair. Auto shop pays mechanic to repair the car. Person pays auto shop for the repair, and auto shop pays mechanic for doing the repair.

In all cases you could technically say that the buyer/customer pays the agent/mechanic/clerk. However, no one ever brings that up in anything but real estate. One has to wonder why.
Sure. But, retail and sales are really quite different from real estate brokerage for a client.

The clerk or mechanic do not make a business arrangement with anyone but the employer.
But the agents have a business arrangement dictating how the buyer's funds will be handled and paid back for the buyer to the buyer's agent.
And the buyer's agent and buyer have a business arrangement stipulating how the buyer's funds will be provided to the agent, and how the agent may claim funds from the buyer if they are mishandled.

The real issue is in three parts:

1. Buyers cannot finance their fees directly with lenders. So payments are made indirectly, usually through the closing agent/attorney to the buyer's agent.
This also allows an accounting construct that demonstrates the flow of funds for Underwriting acceptance.

2. Like many people, buyers want a freebie, and the COE lie tempts them to believe they are getting it. This is capitalizing on misleading buyers.

3. Minus a buyer's agent's commission, as above, the seller can net the same amount, while the buyer saves money. And, this is very common.
What could illustrate and support the truth more than pulling out the buyer's commission expense and buyer saving money?
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Old 08-07-2017, 11:47 AM
 
Location: Lakewood Ranch, FL
5,663 posts, read 10,671,870 times
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Alrighty then....soapbox time!!!!

Actually, there is a correct answer and only one correct answer. Anything else is just rationalization.

Seller contracts with listing broker for x% and acknowledges that listing broker will share some portion with a cooperating broker if there is one. Buyer buys property and pays seller money at closing. Seller owes the listing broker a commission and pays that broker using seller's funds. It doesn't matter where the money came from...it is the seller's money and the seller is paying a bill with it.

Similarly, if there's a cooperating broker, the listing broker pays that bill using the listing broker's funds. If no other broker is involved, the broker pays the agent or agents in his/her brokerage using his/her money. It is only a matter of convenience that it shows on the closing statement as two separate payouts.

It's really very simple. Saying the buyer pays for commissions (unless there's an additional contract requiring it) is just a fiction. It may feel that way or sound reasonable but it is wrong.

IMHO...

Last edited by bbronston; 08-07-2017 at 12:16 PM..
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Old 08-07-2017, 11:49 AM
 
Location: Cary, NC
43,028 posts, read 76,529,724 times
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Quote:
Originally Posted by bbronston View Post
Alrighty then....soapbox time!!!!

Actually, there is a correct answer and only one correct answer. Anything else is just rationalization.

Seller contracts with listing broker for x% and acknowledges that listing broker will share some portion with a cooperating broker if there is one. Buyer buys property and pays seller money at closing. Seller owes the listing broker a commission and pays that broker using seller's funds. It doesn't matter where the money came from...it is the seller's money and the seller is paying a bill with it.

Similarly, if there's a cooperating broker, the listing broker pays that bill. If no other broker is involved, the broker pays the agent or agents in his/her brokerage using his/her money.

It's really very simple. Saying the buyer pays for commissions (unless there's an additional contract requiring it) is just a fiction. It may feel that way or sound reasonable but it is wrong.

IMHO...
You've been around CD for years and should know:

Never be humble when you are wrong!
Takes all the fun out of it!

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Old 08-07-2017, 11:55 AM
 
Location: Central Texas
20,958 posts, read 45,178,837 times
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Quote:
Originally Posted by emm74 View Post
I would have put that both buyer and seller pay if that had been an option. Buyer is the one bringing money to the table with a price that includes the commossion so they are paying. Seller is getting less because some of their proceeds go to the buyer's agent so they are paying. It's not cut and dried enough to say that just one side pays.


Because the amount to cover paying the mechanic is wrapped into the price of the service, along with the rent on the shop and the electricity and the tools, etc. It's discussed in real estate transactions because it's explicitly called out during the transaction itself. If I had to sign something when I took my car into the shop saying that the repair was going to cost me $1000 and I acknowledge that X% of that $1000 goes to the mechanic, I'm betting that there'd be a lot more discussion about what the mechanic gets paid for a car repair.
But the cost paying the buyer's agent IS wrapped into the "price of the service"; the seller pays the listing agent for selling the house, and the listing agent, out of those proceeds, pays for the costs of marketing, open houses, transaction coordinator, and other services they use to accomplish the service of selling the house, and that includes the portion paid to the buyer's agent. So technically the listing agent pays the buyer's agent out of their funds. The buyer pays for the house, the seller gets a certain amount for the house, out of that they pay for a service of dealing with the myriad of details of selling the house, and the listing agent pays the buyer's agent for bringing a buyer and chasing all the cats necessary on the buyer's side to get the deal to closing. So it IS wrapped into the price of the service.
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Old 08-07-2017, 12:03 PM
 
Location: Denver CO
24,204 posts, read 19,026,046 times
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Quote:
Originally Posted by TexasHorseLady View Post
But the cost paying the buyer's agent IS wrapped into the "price of the service"; the seller pays the listing agent for selling the house, and the listing agent, out of those proceeds, pays for the costs of marketing, open houses, transaction coordinator, and other services they use to accomplish the service of selling the house, and that includes the portion paid to the buyer's agent. So technically the listing agent pays the buyer's agent out of their funds. The buyer pays for the house, the seller gets a certain amount for the house, out of that they pay for a service of dealing with the myriad of details of selling the house, and the listing agent pays the buyer's agent for bringing a buyer and chasing all the cats necessary on the buyer's side to get the deal to closing. So it IS wrapped into the price of the service.
You are conflating things. This isn't about what services are included in the commission, it's about the fact that when a seller signs a listing agreement, the fee they paid is explicitly set forth as a percentage of the selling price. To keep with your analogy, when I take my car to the shop and sign a work order, there's nothing in there about what the mechanic is going to get paid.

And even a buyer's agreement, if they signed one, will mention that the agent will earn a fee even though it will be paid by the seller.

It's not about saying an agent shouldn't get paid for the work they do (although a separate but reasonable discussion to have is whether the current pricing structure remains valid as the real estate selling process changes), it's just that most transactions do not break it down in this manner even when the cost of the salesperson is baked into the price.
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