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HomeBuying A HomeHow are buyer's agents compensated?

3. How are buyer's agents compensated?

It used to be that seller-only agency was "customary" in residential real estate. The real estate commission was paid by the home's seller and deducted from the proceeds at the time of closing. Real estate agents (and the brokers with whom they were licensed) represented the interests of the property's seller. The buyer, however, was unrepresented in the transaction - and usually not even aware that this was the case! With the advent of buyer agency, this need no longer be the case. Home buyers are now able to be fully represented by a real estate agent in the purchase of property. The buyer and real estate agent come to terms on which services the buyer-client is seeking, and the manner in which the agent will be compensated for providing those services. In most cases, a fee or commission is derived from the sellers proceeds of sale and shared between the seller's (listing) and buyer's (selling) agents. In some cases, the buyer makes a direct payment to his or her agent. Buyers sometimes pay their agent/broker directly for services in finding and purchasing a home. If a broker charges buyers a direct fee, it should be outlined in an exclusive agency agreement that the buyer signs when engaging the broker. Payment arrangements vary, depending on market conditions, customary practices and consumer expectation. Some eager home buyers choose to offer an "incentive," giving their real estate agent additional motivation (generally a cash bonus when title transfers) to find them the "right" property. Any of these options may be attractive to a home buyer in a specific marketplace. The law of "supply and demand" predominates in real estate. So, as you interview prospective agents and weigh their respective services, consider which compensation options will move you toward your home ownership goal with terms and conditions appropriate to your individual needs.

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