This is one of the most common questions we get in the NAEBA office. Unfortunately, the answer isn’t as simple as it seems.
The simple answer: Exclusive Buyer Agents (EBAs) get paid the same way traditional buyers agents do. The real difference in an EBA and a traditional agent is since an EBA doesn’t take listings, they have no vested interest in which house you buy, avoiding a potential conflict of interest. The fee structure, though, may be identical or similar.
The detailed answer: In a typical transaction, the commission is split between the listing (seller’s) agent and the buyer’s agent. For example, if a house is sold for $200,000 and the commission paid on the sale of the house is 6%, then the listing agent would get $6,000, the buyer’s agent would get $6,000, and the seller would get the remainder. The buyer pays nothing out-of-pocket directly to the buyer’s agent.
In today’s market, however, many different types of fee structures are being offered so not all transactions are “typical.” For example, a buyer’s agent may offer a flat fee or sliding scale fee. In this case, the buyer would be responsible for any amount not covered in the commission paid or would get a refund of any overage. Using the same example from above, if the buyer’s agent contract specified that the buyer would pay a flat fee of $5,000, then the listing agent would still get $6,000, the buyer’s agent would get $5,000, the buyer would get $1,000, and the seller would get the remainder.
The opposite, though, could also be true. If the buyer’s agent fee was $7,000 and the commission only covered $6,000, then the buyer could be responsible for the additional $1,000. Another deviation is when the house is being sold directly by the owner with no listing agent involved (For Sale by Owner or FSBO). A savvy seller will have already calculated the buyer’s agent commission into the sales price of the home and offer that as part of the package. Often, though, the buyer’s agent will have to negotiate their commission as part of the sales price of the house and in some cases, the buyer may have to pay part of the commission out-of-pocket.
The best answer: Since all brokerages set their own fee structure, you’ll have to ask.
1. Interview several agents. Ask them about their prices, but also ask about what you get for the price. Make sure they will represent you throughout the transaction. If you hire an EBA, you know that they don’t have listings and will represent you throughout. If the agent isn’t an EBA, find out what happens if you become interested in one of their brokerage’s listings (i.e. ask you to consent to less or no representation or refer you to another buyer’s agent).
2. Work with the one that is the best fit for you. Be sure that you understand their pricing and how the agent gets paid. If signing a representation agreement, be sure it has an expiration date and that you understand the terms as spelled out in the agreement. If you’re unsure about something, ask.