Q&A: Let’s Talk Commission
WHO PAYS THE COMMISSION?
How are the financial arrangements configured between you and a real estate professional? Especially when you have different types of property or are the buyer or seller? Read more to find out.
NN: Jacqueline, we were talking about listing agreements and commission, who pays the commission?
J: All real estate commissions are negotiable. They are paid by the seller, the buyer or both.
NN: I always understood the real estate commission is paid by seller.
J: NO, that is a misconception. And those that state that commission is “logically paid by buyer,” because he is the one paying the price and proceed comes from closing are wrong.
NN: Please explain.
J: The commission is paid by the one that agrees to compensate the real estate professional who works for the client to find a buyer (the Seller) or to find the property (the Buyer). We are provided with formats for listing agreements and with formats for buyer representation agreements. If a seller doesn’t to compensate a buyer’s agent through his broker, based on MLS rules, that broker cannot list on the MLS. It doesn’t mean that one didn’t get the listing. It is a listing to find a buyer based not on a publiclyadvertised multiple listing system. Some call this “off-Market.”
NN: But means that no all listings go to MLS.
J: Exactly, I specialize in Off Market, and I do no list in MLS, sometimes not even at Loopnet/CoStar. I call or email my network, perhaps I place a flyer or video in my social media. I have control on my listings, and I am going to be compensated when finding a buyer, without the traditional publicity or marketing. That is standard procedure in other countries.
NN: Why in the HUD does the title company already split the commission “paid by the Seller”?
J: Because there were many problems before having the Seller’s broker compensating Buyer’s broker when the cooperating agreement was not ethically respected, and there were too many claims mandating to elaborate a special verbatim to include the compensation. Title companies always ask about compensation: Who pays it, if any administrative fee is to be charged, etc. This is done to clearly expose how much each broker gets paid and by whom. You can read that the Seller pays to their own broker, and Seller also pays to the Buyer’s broker, but also frequently the Buyer’s broker also pays a Buyer’s broker. Disclosure, always disclose.
NN: On those unsolicited offers, do you include the listing contract? Or do you always have a Buyer Representation Agreement?
J: It varies, but in the unsolicited Letter of Intent (LOI) or the Offer there is always a clause where I state how much is the rate of commission. Many times I know the buyer and the seller, so this fact is agreed individually before drafting the LOI.
…. to be continued.
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