How does a buyer’s agent get paid?
Dear William and Kim,
I met you at your open house. I’m looking for a house and I have been looking at some properties and I think I found a property! I called the number on Redfin app but the agent that answered isn’t the listing agent. I’m so confused. They said they will be my buyer agent but I just wanted to see the house. Should I hire a buyer agent? They said I don’t pay for their services, the seller does. Can you explain this? Now that we are in escrow, the seller wants me to do the repairs before the close of escrow and it’s been almost a month and my loan is not approved yet. I’m concerned about the condition of the house and the permits. What should I do?
Thank you,
Brenda R., Hollywood Hills
Dear Brenda,
When you go on apps to search for property, remember the app you’re on has its own business objective and that is to convert you into a transaction. The buyer agent people often reach out to are buyer agents that work for the brokerage and app you’re using. Sometimes agents pay the app for your business through sharing their commission and giving the brokerage app a referral fee which is generally 25-35% of gross commission income.
While there is generally no standard commission of it there, buyer agent commission generally comes out of the seller’s listing agreement where they agree to a total percentage of the sale proceeds that will go to the seller as a commission for procuring the sale. Sites like Redfin actually publish the buyer’s commission - often 2.5% of the purchase price.
Make sure you hire the right person for the job. If you’re wanting to reach out directly to the listing agent, look more closely in the app you’re using and it’s often hidden in the listing description where you can find the listing agent’s phone number. We think you reaching out directly is not a smart move either.
In an ideal situation, you should have contacted us instead of the link because you know that we sell in the area, the agents who work in the area know us, we understand the process and have a network of referrals for any hiccup that comes along in the transaction. We don’t want you to make what we call the $100,000 mistake. We are here to protect you from the vulgarities of the marketplace. Sometimes agents can be a problem too if they don’t have the knowledge to help you get what you want. Sometimes hiring the wrong person can cost you more than the commission from the sale. Missed repairs, permits, understanding contingency timelines and negotiations can impact the bottom line hundreds of thousands of dollars - sometimes millions. As much as the seller is paying for the buyer agent commission, the reality is you’re paying the total bill so be prepared to buy a house with an agent you want instead of clicking on an app!
In regards to permits and inspections and repairs, we never encourage sellers to do any repairs prior to the close of escrow because it puts them in a place of liability should the repair not remedy the problem short term. Credits are better in this scenario because the buyer can hire the people you want to get the job done to your expectations. This is another small example of a big missed opportunity.
Hire us next time:)
William & Kim
310-388-2448