How Do Realtors Make Money on Buyers?
Real estate agents and brokers do not directly receive any funds from home buyers. Every agent must work for a state-licensed broker. The seller pays a real estate broker fee at closing and the broker passes on a percentage of the fee to the listing agent. If the buyer uses an agent, the fees are split equally between the selling broker and the buying agent's broker.
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Typical Costs
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Normally, brokers charge a 6-percent fee for sales involving residential homes, though some firms charge only 5 percent. If two firms are involved, each receives 3 percent. Brokers have contractual agreements with real estate agents that specify how much of the fee the agent will receive. Large firms that enable agents to use office space and provide marketing support tend to take a larger cut of the fee than firms that offer minimal agent support. Commissions paid to agents are often between 50 and 80 percent of the total fee.
Indirect Expenses
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If a seller decides to sell a home without the help of a listing agent, the seller may raise the asking price when receiving an offer from a buyer who does use the services of an agent. In effect the buyer pays the fee because without an agent, it would not exist. Additionally, some brokers require sellers to sign contracts that stipulate that they should receive more than the normal 3-percent share of the commission. This often causes the sale price to rise if the buyer also uses an agent who expects a 3-percent fee.
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Other Considerations
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In some states, real estate agents make prospective buyers sign contracts. State laws entitle the agent to a commission if the buyer buys a home within a specified period of time, even if the transaction does not involve the agent. Some listing agents require prospective buyers to pay retention fees for using their services. The fees cover expenses that the agent incurs whilst assisting the buyer, such as the cost of buying gas.
Benefit Of Buying Agents
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Although buying agents cause direct and indirect costs associated with buying a home to rise, their knowledge of the housing market enables them to help buyers avoid future pitfalls. People who do not use agents usually have to pay real estate attorneys to draw up the sales contract. The attorneys' fees are often substantial and people who attempt to agree sales without agents or attorneys often run into legal issues further down the line. Additionally, most real estate agents have much greater knowledge of neighborhoods and market trends than the average consumer.
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