The Question
As a result of low interest rates, high inventory, and tax incentives, I have been working with a lot of first-time home buyers in Louisville recently. During our initial meeting, I always try to explain the Agency Relationship and how I will represent the buyers from this point forward. I also give insight into the process of buying a home and try to answer any questions they may have.
One question that is always on their minds is ..."How do we pay you?"
Short Answer
You Don't.
Long Answer
A typical Kentucky real estate transaction works as follows. A seller places his or her for sale through an agent. As part of doing so, the seller and agent negotiate how the agent will be paid. Often, but not always, this payment is in the form of a commission. The listing agent also informs the seller that he/she cooperates with other brokerages and offers compensation to buyer's agents from those other firms. At this point, the seller and the listing agent agree to the Co-operating Commission (Co-op).
If you purchase a house listed in this manner, your cost for having a local expert help with your home search, determine property values, prepare the offer, assist in negotiations, provide contacts to trusted lenders, inspectors, contractors, and make sure all other activities in a timely manner so you can get the home of your dreams under the best possible terms is nothing, nil, nada, zero, cero, zilch, zip. You get the point. My services are paid for by the seller. Pretty good deal isn't it?
Exception
Occasionally, a home owner offers a reduced co-op (some even reduce it to zero). This most often occurs with For Sale By Owner, short sale, or some bank-owned homes. In this case, I do ask that you pay the difference up to a % or $ amount that we agree on.
Conclusion
As a Louisville buyer's agent, my services are typically free. However, in doing my job I can easily save you a significant amount of time as well as hundreds if not thousands of dollars. So, the real question is not whether you can afford to use an agent, but whether you can afford not to.
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Erik Hitzelberger is a licensed REALTOR with RE/MAX Alliancein Louisville. If you need a Louisville Real Estate agent please email me or call 502.921.3989.
I specialize in the following areas of the Metro Louisville Area: Prospect, Middletown, Jeffersontown (J-Town), Fern Creek, Okolona, Shepherdsville, Mt Washington, Hillview, Brooks and Pewee Valley. Click the following links to learn more about Louisville and Bullitt County Real Estateor to Search for Louisville Homes
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Good article, to the point. And when a buyer drives by a FOR SALE sign, and calls the listing agent, thinking they can get a better deal for the property by not having an agent -- that buyer commits two errors, 1) they think they are going to have "representation" with a dual agent (here in Oregon it's denoted as a Disclosed Limited Agent) . . . the capacity to NEGOTIATE or represent one over the other can not legally (or logically) occur, and 2) that buyer is attempting to interfere with a contractual agreement between the seller and the listing agent/broker. "Make a deal with me, since you don't have to pay the buyer's agent commission," is a contractual interference with the listing contract.
Carla - This was going to be my next post. Sign calling (while nice for listing agents) is a poor approach for buyers. The reality is that the commission paid doesn't change. The listing agent simply earns the entire amount if the buyer is un-represented or the agent serves as a dual agent. Odds are the buyer will get a worse deal in either case.
I like the way you explained it. No sure if I could have done a better job myself.
Erik - Great idea to post this and get the information out there for your potential clients. I can't count the number of times that this question has come up over the years.
Erik, I agree with Jason, its a good idea to post about this topic. I would assume the question comes up a lot. Not that people ask, but want to ask and just don't. Good explanation.
Hi Mel. Hope everything is going well. I haven't seen much of you recently.
Jason - I'm sure it is a lot. It is funny that something so fundamental to our understanding is so widely misunderstood.
John - Actually, many do ask because they have the perception it is a big deal. This was actually inspired by someone who said, "I can't afford to hire an agent."
Good explanation Erik and the basics of how we get paid to perform our job.
Buyer's agency is one of the best creation for buyers since sliced bread. Many are under the false impression that if they go with the list agent they will get a deal cut!
Bill - Thanks.
Renee - As you know, that is a dangerous assumption. The best relationship you can get from a listing agent to be treated on par with the sellers. This is not the same as having your own agent.