Real Estate commissions: how exactly do we get paid?
A common misconception I see regularly with first time homebuyers and sometimes repeat buyers is that they don’t understand how and by whom real estate commissions are paid. The graphic below shows how commissions are paid in a typical real estate transaction.
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As you can see in this model and in a typical real estate transaction, the Buyer pays no commissions. Yet, it seems every day I encounter Buyer’s unwilling to hire a Buyer’s agent for fear that it may cost them money.
Often, the Buyer thinks that if they only have one agent representing both the Seller and Buyer that they will be saving money. However, in this scenario the agent would often collect both commissions and represent both the Buyer and Seller in the transaction. This is called limited agency and it can present many potential problems as you can imagine. Does the agent have the Buyer’s best interest in the transaction? Is the agent impartial to which home the Buyer purchases? Limited agency is illegal in many states although it is legal here in Utah. As you can see a Buyer with the best of intentions can potentially put themselves in a less than ideal situation.
Date: 2008-02-15 20:25:07
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