Who gets paid?

Did you know that in a real estate transaction, the seller usually pays for the Realtors? A buyer asked about this last week, so let’s spend a few minutes discussing it.

When a property is for sale, the seller signs a listing agreement with a real estate broker. Most often it spells out the total amount, as a percentage of the sale price, the seller will pay to sell the house. The listing broker usually splits the amount with the Realtor who brings the final buyer. In our area, the common compensation is 6% of the price.

In practice, it generally means that the seller’s agent gets 3% and the buyer’s agent gets 3%. That’s why as a buyer, you aren’t paying Realtor fees.

Your best bet, as a buyer, is to be in touch with your chosen Realtor before you start your home search. (You already know your loan approval should be in place even before that!) So many times we hear, “I’ll just call the sign in the yard, because that Realtor represents the seller, and they’ll cut their commission to get me a better deal.” Not so, according to several local agents. Realtors work hard to negotiate a deal that fits everyone’s needs and see it through to the end.

What if you decide not to use the Realtor you start with? There are guidelines about who gets paid for working a transaction. Each Realtor should be asking you some questions before they take you on as a client, so it’s clear from the outset who will get paid for their work. This is what the California Association of Realtors legal team suggests as of May 2016:

You should always be asked if you are working with another agent. If you are, you should be asked if you have an exclusive contractual agreement with that agent.

If you are already working with another agent, you should be asked why you left that agent, and the new agent should be in touch with the first to try and resolve the issue.

The issue is known as “procuring cause”, and I wanted to make you aware of its existence. In practice, if you choose a Realtor to help you find a home, it’s better to work with just that agent in all your shopping. They’ll get to know you and what you are looking for. If you aren’t getting what you need from them, better to have a frank conversation to end the relationship than to have Realtors in a fight over who gets paid when you do write an offer.

Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-7325 for purchase, refinance, and reverse mortgage. CaBRE #01273839 NMLS #235051