How Is a Buyer Agent Commission Amount Determined?

Let's start with the question of who settles on how much a buyer's agent is received. Is the MLS listing a point of reference with regards to the commission of the buyer's agent? Definitely not. Neither is it determined by how much the seller is contributing for the agent's fee as opposed to popular belief.

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

In our Buyer Rep Agreement, a buyer agrees to pay us 3% for our services as buyer agent. We receive the 3% without regardless the MLS listing as explained to the buyer. The fee 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 duty-bound to pay the difference if not go for a another 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 this year 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. In that case, we upfated the offer to include the 0.5% gap in paragraph 12 of the sales contract, where the seller agrees to pay some of the buyer's closing costs, and the seller agreed. The buyer was going to pick different home if the seller had not consented. The 0.5% variance paid for by the seller provided the buyer to complete the 3% commission for us. Our buyer was not out of pocket for the gap 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 absurd to me. I don't see how they can. Since we have the expertise to assemble an Internet search portal, any buyer signing up with us or any Austin realtor gets notified 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 an invaluable tool for us and our buyers, and it's provided as part of our MLS system at no extra cost.

The search engine is not knowledgeble about the commission amounts being offered on any particular listing. Buyers will see ALL listings that fit their aptness. For those who say that realtors avoid or blacklist listings that pay less than 3%, that's hogwash. The system inhibits filtering 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 properties considered to be good buy.

This is all for now but part 2 of How Discount Realtors Work needs to be checked out.