For newcomers to the real estate market, there can be confusion about who is responsible for paying the agents involved in the transaction. As a general rule, the seller pays both their own agent and the agent who successfully brings them a buyer (the buyer’s agent). When a seller signs a listing agreement with a real estate agent, they establish how much the agents will be paid. While there is no set rate for real estate agent commissions, 6% is standard practice in a lot of places, with 3% going to the seller’s agent and 3% going to the buyer’s agent. This commission split is called a “co-broke.”
Among New York City real estate buyers, there is a train of thought that says “If I represent myself, the seller won’t have to pay a commission to a buyer’s agent. Therefore, I can expect to get the property for 3% less than what I would have paid if an agent represented me.” Or, “If I represent myself, I should be able to collect the 3% commission that would normally go to the buyer’s agent.” Unfortunately, there are some logistical and legal issues that prevent this from actually happening in practice.
1. Only licensed agents are eligible to collect a commission. You must be licensed in your state - otherwise it’s illegal to collect a commission on a real estate transaction. Even if you are licensed (for example, in New York state, attorneys can pay the licensing fees and legally become real estate brokers), if you don’t belong to the listing MLS, the seller’s agent is not legally obligated to extend you the co-broke.
2. Lack of an agent does not equal lowered commission. The seller and seller’s agent have a signed contract with a pre-determined commission agreement. Representing yourself instead of using a buyer’s agent usually doesn’t mean that the seller is paying a lower commission. It just means that the seller’s agent is collecting more money because they don’t have to co-broke. The seller’s agent gets to keep the full agreed-upon commission. There are situations in which the seller’s agent has agreed to accept a lower commission if the buyer is unrepresented, however this percentage generally falls in the .5% – 1% range, as opposed to the full 3% that would be paid in a co-broke situation.
The best way to insure you’re getting a percentage of the transaction is to work with a buyer’s agent (yes, such as RealDirect) who is willing to share the commission with you. In addition to representing your best interests during the buying process, negotiating on your behalf and preparing your board package, we will also give you 1% cash back at closing.