Source: BUYER AGENCY - Your Competitive Edge in Real Estate: Second Edition: Gail Lyons & Don Harlan
SETTING THE FEES
Fees are always determined by agreement between the client and broker.
Fees are never discussed outside of the client/broker relationship.
*There are a number of different methods for determining the fee of a BUYER'S AGENT.
If an hourly fee is charged, it should be set on the basis of what the market will bear, and the amount will vary substantially from market to market. It could be compared to what other professionals such as Lawyers, Accountants and Appraisers receive and would be graduated on the basis of experience and qualifications. ONE WORD OF ADVICE: do not underestimate your value. If you price yourself too cheaply, your Client may not believe you are as good as you really are.
FIXED FLAT FEE
You may wish to calculate a straight fixed fee that does not vary with final sales price. This can be roughly equivalent to the average Selling Percentage for a house in the BUYER'S desired price range. The agreement can include some provision for an adjustment if the price of the house the BUYER purchases is way outside the original price range. Once the Fee is agreed upon, it can be paid either by the BUYER or as a Co-Op Fee by the Seller.
This could be simply a percentage of the Sales Price or the offered Co-Op Fee. The problem with the straight percentage is that it creates a disincentive for the BUYER'S Agent to get a lower price for the BUYER, since a higher price generates a higher fee for the BUYER'S Agent. As a result, most percentage fees create a conflict of interest that must be discussed with the BUYER'S Client. As with any conflict of interest, the only way to deal with it is to disclose its existence and then determine a solution acceptable to both you and your Client. There are FOUR (4) possible solutions.
#1 The Flat Fee.
#2 A Fee based on the list price rather than the sales price.
#3 A bonus incentive based on a percentage of the difference between the List and Sales prices combined with a relatively low percentage Sucess Fee.
#4 A conversation designed to place the conflict in perspective.
The topic of compensation is not only one of the most important but also the most misunderstood and controversial. In areas where BUYER Agency has not been well accepted or its use is not prevalent, it can cause some disruption in the marketplace. However, time seems to diminish a lot of the confusion.
The adoption of "subagency optional" is also having
a profound influence on the payment of fees to BUYER Agent.
TYPES OF FEES
A fee which is conditioned upon the successful completion of the contract. An example is the traditional listing fee which is due only if the property is sold or exchanged.
A fee which is earned independent of the successful completion of any transaction. Examples of non-contigent fees are contract acceptance fees and transaction consulting fees.
These fees are accepted at the time the listing contract is signed but are designed to be used to reimburse the broker for future expenses incurred in promoting the property under contract, or in seeking a property to be purchased. In some states, the Department of Real Estate sets strict controls on how and when the funds actually become available for disbursement to the broker. Usually, these fees are credited to the total fee due under the contract.
A fee paid to a professional to engage his future services. The retainer fee is usually considered as a prepaid reserve from which the professional draws his fees. This reserve is usually replenished periodically in order to maintain a level of prepaid fees.
Buyer Broker Fees
FORMS OF PAYMENT
Your attorney should review your contract with respect to your own state's regulations.
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