How Is a Buyer Agent Commission Amount Determined?

Let's start with the question of who determines 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? Absolutely not. Not in any way is it decided by how much the seller is putting in for the agent's fee as opposed to popular belief.

The recompense a buyer's agent receives (at least in Texas) is resolved entirely between the buyer and the agent he hires, as instructed in a Buyer's Representation Agreement. Practically saying that the buyer gives his agent his salary. It is so ordered in the agreement that buyer pays the agent a particular amount, not the MLS Listing.

In our Buyer Rep Agreement, a buyer agrees to pay us 3% for our assistance as buyer agent. We get the 3% without considering the MLS listing as made clear to the buyer. The compensation amount is first asked for from the seller usually a closed deal but if the seller gives less than 3% through the MLS Listing, the buyer is obligated to pay the difference if not decides to pursue 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, out of almost 30 closed deals, we've encountered only one listing that our buyer wanted that offered less than a 3% commission to the buyer agent. The seller on that listing offered 2.5% commission. In that instance, we knocked off the offer to include the 0.5% gap in paragraph 12 of the sales contract, where the seller accedes to pay some of the buyer's closing costs, and the seller agreed. The buyer was going to get different home if the seller had not agreed. The 0.5% variance paid for by the seller afforded the buyer to complete the 3% commission for us. The buyer's capacity to pay the gap was without question nor can the seller save for that 2.5% offer.

Do Realtors Avoid Listings That Pay Less Than 3%?

I find absurd the claim that agents will steer clear of the discount brokers' listing by consumer groups and others. There is no way the agents can do that. When a buyer signs up with us, or any other Austin realtor, we have the capability to assemble an Internet search portal that notifies the buyer via email each day of new catalog that match that buyer's criteria. We do this for every buyer. I'm not sure what percentages of other agents in Austin do the same, but it's a useful tool for us and our buyers, and it's provided as part of our MLS system at no extra cost.

The search engine is ignorant and unaware of 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 ban listings that pay less than 3%, that's pure crap. The system does not allow sorting out and hiding buyers those listings.

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

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