Q&As
- What is the difference between a real estate agent and a real estate broker?
- What steps do I go through to buy a house?
- How long does it take to buy a house?
- I want to buy a house. I know the property and the seller has an agent. Do I need my own agent or can I negotiate a lower fee if I act as my own agent?
- How much does it cost to use a Buyer’s Agent / Realtor / Broker?
- Working with FHA/203B, RD, VA, Section 184, 203K, Conventional, HELOC, and other types of financing?
- Real vs Personal Property
- Mortgages for Manufactured Homes
- What is a CMA, Appraisal, and AVM?
- Can the Buyer purchase personal property from the Seller?
- Can a mortgage be used to purchase a mobile home?
- What are the basics for handling multiple offer negotiations?
- Are husband and wife required to apply jointly for a mortgage?
- How do I prepare for a cash purchase?
- Do I need flood insurance?
- Where can I research flood maps / areas?
- To whom should I write the earnest money check?
- Should I buy a residential service agreement (i.e. home warranty)?
- Assuming you’ll be obtaining mortgage financing (i.e. not paying cash), here’s a list of steps to buy a house:
- Do I also need an attorney?
- How does the MLS help buyers?
- What is the MLS?
- What’s the difference between a Pre-Qualification Letter and a Pre-Approval Letter?
- When do I apply with a mortgage lender?
- What is Owner’s Title Insurance (OTI)?
- What is Lender’s Title Insurance (LTI)?
- What is title insurance?
- What does a title company do for Buyers?
- How can Harrah Realty help me as a Buyer?
- How much does it cost to buy a home?
- Do you work with out of town clients?
- Can you help me purchase or build a new home?
- Do you work with First-Time Home Buyers?
- What is a lease purchase or an option purchase?
How much does it cost to use a Buyer’s Agent / Realtor / Broker?
It’s often said, “It doesn’t cost the buyer anything to use a REALTOR®.”
This is because all properties listed on the MLS already offer compensation to the buyer’s broker. If the buyer of an MLS listing doesn’t have their own broker, the listing broker receives “both sides” of the compensation.
Therefore, since the seller often pays the same commission amount regardless of whether or not the buyer has their own broker, it doesn’t cost the buyer anything to have their own brokerage representation.
Long story short:
When you work with an REALTOR®, you sign a service agreement that if you buy a house, you’ll pay a commission. If the Seller pays it, there’s no additional payment from you.
A typical Broker Service Agreement states that the buyer will compensate Realtor in the amount of 3% of the purchase price, or $1,000, whichever is greater. Any amount the seller offers to the buyer’s broker (in this case) goes toward the buyer’s obligation.
Often, the seller is either already offering such compensation to the buyer’s broker, or, in the case of a For Sale By Owner (FSBO), your agent can discuss the compensation prior to scheduling the showing.
Most often, the issue of compensation won’t be brought up again after the initial discussion when signing your Buyer Broker Service Agreement. However, in the event a property you’re interested in isn’t offering sufficient compensation, your REALTOR® will let you know before scheduling your showing so you can be informed up front.
With thousands of properties available for sale, if one seller is offering 1.5% to the buyer’s broker, and another seller down the street is offering 3%, your REALTOR® will let you know, “Hey, add 1.5% to that one’s price, or you can just pursue the 3% one and you won’t need to be concerned about your real estate broker’s compensation.”
It’s that simple.
There aren’t any under the table tactics or hidden fees. If you’re ever concerned about the issue, just have a candid conversation with your REALTOR®, and it’ll just be a simple conversation. It’s just one piece of the puzzle of buying a house.
Think all this is odd? Does discussing real estate commissions make you uncomfortable? That’s okay. It’s how all real estate brokers work in Indiana. We’re just letting you know up front, and we hope you like that about us.