Friday, January 28, 2011

Who pays the Realtor?

This question has been asked millions of times by first time home buyers. So let me just throw the answer out there for all to see and know. Realtors work for commissions and the commission is typically paid by the seller. The commission is a percentage of the sales price. If there is no sale, there is no pay.

The seller signs a listing agreement with a Realtor when they decide to sell their home. Part of this agreement is terms for paying the Realtor's commission at the closing of the sale. When a buyer offers on a property and they have their own Realtor representing them, the agents split the commission (usually 50/50). Each agent is responsible for representing their own client through the transaction in exchange for half of the pay.

The list agent's job is to list and market the property to buyers and other Realtors. Then negotiate on the sellers behalf to get as much money as possible for their property as quickly as possible with as little work as possible from the seller. They receive commission at closing for performing those duties.

The buyer agent's job is to narrow the selection and show properties to potential buyers, negotiate on the buyers behalf to get as much house for the money as possible as quickly as possible in the best condition as is possible for the buyer. When closing occurs, each agent is paid 50% of the agreed upon commission on the property from the seller's proceeds.

Specific to HUD properties, HUD pays up to 6% commissions. They offer 3% of the purchase price to the listing agent and 3% to the selling agent. Believe me when I say, both agents earn every penny of their commission in every transaction.

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