Educating the Consumer
My wife started a new job this week. As she gets acquainted with her responsibilities, she is also getting acquainted with her new co-workers. One of them mentioned that she was looking for a new house. Her preference is for new construction so that they can choose what they want in the house without having to change things. My wife, after years of hearing about my business, of course asked if her co-worker was working with a real estate agent. The answer was no. But the real issue with that is that she wasn't using a real estate agent because she thought she had to pay for the services. My wife was of course quick to point out the reality of the situation. Buyers do not pay for their agent's commission (except on rare occasion - but that's another blog), all commissions are paid from the seller's side of the transaction, regardless of it being a resale or new construction.
Now, I know there are some exceptions to this blanket statement, but the consumer should realize the simple aspect of how home sale transactions are typically structured. We have an Accredited Buyers Representitive (ABR) accreditation (and one pending), but having the additional education and letters with the name doesn't mean much if the public doesn't understand what we do. So here are some basics. When a seller decides to enlist the professional services of a real estate agent to assist with the various intricacies of the coming transaction, a gross commission amount is negotiated between the Seller and the Listing agent. This commission varies but is typically found to be about 6%.
When a listing is put on the market through MLS (multiple listing service), the listing agent includes information not only about the property but how the buyer's agent will be compensated. The commission listed is called the "co-broke commission". Most of the time this will end up as half of the total commission negotiated between the seller and listing agent. So of that 6% example, 3% goes to the listing agent for the services provided including promotion of the property, negotiating contracts and much, much more involved with bringing the transaction to fruition. The remaining 3% goes to the buyer's agent for bringing the buyer to the table. Now, obviously, there is much more that a buyer's agent does, but the compensation from the seller basically is for supplying the buyer. As a buyer's agent, we have an obligation to treat all parties to a transaction with fairness and truthfulness, but we represent the buyer - not the seller - despite where the compensation is coming from.
So, if you are planning to purchase a new property, don't be afraid to engage the services of a real estate agent. It will save you time during your search, and will provide you with experience in handling the many complicated facets of a real estate transaction.
(NOTE: The example given of the commission is an example only, and many agents charge more or less, and may divide the amount differently. It is important that you have a clear and concise agreement with your agent.) As I write this, I realize that maybe a post with the definitions of the parties and agents in a real estate transaction might be helpful to further explain this. I will provide that in another post later this week.
Adam Tarr, ePro
Sharon Kotula, ABR
Your Phoenix Area Real Estate Source