Main Line Homes Blog


Frequently asked question: Who pays you?

Frequently asked question: Who pays you?

One of the questions we get often is who pays you? Many consumers are aware that a real estate agent gets paid and it is a percentage of the purchase price of the home but is there a difference if you are a seller or a a buyer? Many buyers still believe they as a buyer are going to pay the commission in some way.

Well in reality as a buyer you do because you buy the home and fund the transaction either with cash or through a mortgage. If you don't buy and close on the contract then no one gets paid. As I have explained previously, real estate agents get paid for success and nothing else, although that may change in the years ahead. For example, how about paying your buyer agent a retainer fee, which is brought to settlement if you purchase a home, but is non-refundable if your plans change or you cancel your buyer agent contract.

However, as a seller you may also believe you are paying the commission paid to everyone because the listing contract specifically mentions the levels of commission being charged and to whom it is going to be paid for a successful transaction.

To make matters more confusing, many larger brokerages also charge a flat fee element of commission which they charge buyers and sellers. So, in fact a buyer does pay a commission fee which shows on the HUD settlement sheet on the buyers side of the sheet.

In the future the whole of the commission paid to the buyers broker may show on the buyers side and be accepted by the mortgage companies as a transaction cost that is mortgage-able.

However, currently the commission on the HUD settlement sheet shows the seller pays both the listing broker and the buyers' broker as per the listing contract. But, what if you end buying a For Sale by Owner property? Your buyer broker may negotiate with the seller that they pay their commission as "normal" or you will need to refer to your buyer agency contract to see how you will be paying the buyer broker. One way we have handled this in the past is that the negotiations with the seller focus on the net price the seller will receive. Then the contract uses a gross figure to include a seller assist which is used to pay the buyer broker commission but which nets the seller the agreed price. In other words the purchase price is increased to cover the buyer broker commission. The seller still receives the amount he thought he was going to get and the buyer purchases a home which appraises for the purchase amount.Obviously this can only be done where the buyer broker commission increase to the purchase price will appraise.

In today's market. as explained it is accepted that the seller pays the brokers involved in the transaction, other than the flat fee portion many brokers charge their buyers which is paid by the buyer directly. As mentioned this may change in the years ahead. But for now, it allows many buyer agents to offer their services for "free" and avoid having to explain their value and what they are bringing to the table.

Over the years we have obtained higher than average sale price to listing price ratios for sellers putting moremoney in their pockets and have saved our buyers many hundreds of thousands of dollars through negotiations. On top of this we have saved many transactions which were falling apart and got them to settlement because of our experience and our contacts with mortgage providers, contractors and attorneys who we can call on at short notice.

So, if you are buying or selling on the Main Line and want an experienced agent to represent you give us a call 610-203-4543 and let's discuss how we can help you.


If you are buying or selling on or around Tredyffrin Easttown or along the Main Line we can help you,  contact us or connect

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Comment balloon 0 commentsNick Vandekar, 610-203-4543 • January 12 2015 10:06AM


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