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Finding Your New Home And Saving On Commission

Finding Your New Home And Saving On Commission

Published on  by Jennifer Valente

When it’s time for you to start looking to buy your new home, you might find yourself overwhelmed by the many costs associated with such an important purchase. In particular, you may feel confused as to how to hire a realtor, how your realtor will be compensated, and whether you can save on the commission.

Let's face it, there is no manual explaining this process in a clear and definitive way! Here is some information to help clarify this confusing issue.

 

Hire a Professional Realtor For Expert Guidance

Whether you’re buying or selling, it’s important to hire a professional realtor to represent you. Once you are being represented by a realtor, you can assume that the realtor will be compensated in one way or another.

So, how does this work? If you are a buyer, you will need to hire a “buyer's agent" who can provide you with access to homes using a special key, can help you to navigate the 25+ pages of contract paperwork that will be involved in purchasing a home, and most importantly, will negotiate the best possible price and terms for you.

Take Advantage of Free Representation

The best part about hiring a buyer's agent or representative is it almost always free to you. This is where you may be confused, because as the saying goes, "nothing in life is free." Rest assured, while purchasing a home can be expensive, hiring a realtor to represent you is almost always free. So be sure to take advantage of this valuable and necessary resource!

How Is My Realtor Compensated?

As the buyer, you may find yourself wondering, what's in it for the realtor representing you? Here’s the good news: Your realtor is compensated by the seller. When the "seller's agent" meets with the seller and agrees to list the seller's property on the MLS (Multiple Listing Service), the realtor and the seller negotiate the total amount of commission that will be granted. Within this, there is something called a "Selling Office Commission" that is offered to the buyer's representative (your realtor) when they sell that house. For example, if a seller and a realtor negotiate the standard 6% commission, it is likely that the SOC would be 3%, and therefore, both realtors would split the commission. In this way, it is the seller who compensates both realtors.

Warning: Be aware that if you hire a buyer's agent and sign an agreement with them, you will need to make sure that they agree to only be compensated through the SOC. Otherwise, you could owe compensation to your realtor at the closing.

Think Twice Before Approaching the Listing Agent 

It is never a good idea to go directly to the listing agent to buy a house. Many buyers hold the belief that they willsave money by negotiating the commission with the listing agent directly. This is simply not true, because the commission has already been negotiated in writing between the seller and the listing agent. With our example of the 6% commission, if you choose to purchase directly through the listing agent, the entire 6% will be awarded to that realtor. On top of that, you will not have the benefits of professional representation.  

 

Now you can clearly see why it is best to seek out fair, honest, and ethical representation from a qualified realtor. And besides, hiring a buyer's agent is free to you!

Feel free to share your home-buying experiences in the comments below. Happy House Hunting!

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