With the Internet becoming adopted as buyers' destination in real estate, the discount is shove in the front line. The question is, is this really an advantage for consumers?

How Is a Buyer Agent Commission Amount Determined?

Let's start with the question of who decides how much a buyer's agent is paid. Is the MLS listing a point of reference with regards to the fee of the buyer's agent? No. Many people think it is, but the buyer agent commission is definitely not settled on by the amount a seller is willing to put on toward a buyer's agent commission.

The compensation a buyer's agent receives (at least in Texas) is resolved entirely between the buyer and the agent he hires, as set forth in a Buyer's Representation Agreement. Practically saying that the buyer pays his agent his salary. It is the Buyer Rep Agreement that dictates the buyer agent's compensation amount, not the MLS Listing.

The buyer assents to the 3% pay for our job done as agreed upon on the Buyer Rep Agreement. We will receive that amount for our services regardless of the amount offered in the MLS listing, and this is explained to each buyer we work with. The compensation amount is first asked for from the seller usually a done-in deal but if the seller gives less than 3% through the MLS Listing, the buyer is obligated to pay the discripancy if not opts for a different home. On the flip side, if the seller is offering a buyer agent bonus, or more than 3%, we rebate that to the buyer so that our motivations and advice can never be attributed to a commission amount.

So far so good with only one MLS listing out of 30 closed deals where a seller offered a 2.5% commisson for the buyer's agent. The seller on that listing offered 2.5% commission. We wrote up the offer to contain the 0.5% difference in paragraph 12 of the sales contract, where the seller assumes payment in some of the buyer's closing cost to which the seller agreed. The buyer was going to pick different home if the seller had not consented. So in this case,

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the seller gave the other 0.5% commission to the buyer, who in turned paid us the 0.5% gap at closing. Our buyer could afford the difference and the seller didn't actually "save" anything by offering a lower commission.

Do Realtors Avoid Listings That Pay Less Than 3%?

The claim by consumer groups and others that agents will steer clear the listings of discount brokers is preposterous to me. There is nowise the agents can do that. Since we have the expertise to set up an Internet search portal, any buyer signing up with us or any Austin gets informed through email each day of new catalog matching their requirements. We do this for every buyer. I'm not sure what percentages of other agents in Austin do the same, but it's a priceless devise for us and our buyers, and it's given as part of our MLS system at no added cost.

Search engines do not recognize the commission amounts offered on specific catalog. Buyers can browse listings suitable to their criterion. To say that realtors evade or ban listings that give less than 3% is gibberish. The system inhibits sorting out and keeping from buyers those listings.

When the buyer gets all listings and new ones that come up in the system about properties that complement their criteria they notify us and in return we show all listings of good candidate material.

That is all I have time for now but check out part 2 of How Discount Realtors Work.