Maybe you heard on the news in the last few days about the biggest change in the US real estate industry in its history. It took effect August 17 and it has to do with how real estate agents get paid. As a mortgage douche, I always wondered how come the feds always fuck with us but leave the realtor douches alone. When I started in the loan business in the 80's we were allowed to charge 15 or 20 points commission per loan. I never went that high myself, 10 points max, 5 points were customary, Thru legislation we are down to 2.75% , ex loan of $500,000 X 2.75% =$13,750 commission.
Realtors get paid in two ways, 1) Listing Agent- Finds an Owner who wants to sell, puts the sign on the lawn and gets 3% of the sales price as a commission.
2) Sellers Agent- Finds Buyers, shows them houses listed for sale, makes an offer collects a 3% commission .
Now here is the rub in the deal, THE SELLER PAYS BOTH AGENTS COMMISSIONS. Not no Mo'.
After the monopoly called the National Association of Realtors had to pay a billion dollar settlement to SELLERS, the rules have changed. Now the Buyer has to pay his own agents commission instead of the Seller. Whoa. So the Buyer has to pay his part of escrow, his loan costs, property inspections AND his agents commission? Wow. OR dump his agent and work straight with the Listing Agent. But the Listing Agent works for the Seller, will the Buyer get screwed in negotiations? YES, the dumb Buyers will get chewed up. Even the smart Buyers if they are not careful. Always be ready so you dont have to get ready.
It is very easy to get screwed in a real estate transaction if you are not careful. Lucky for you guys I'm h ere to show you the ropes.
This compensation change has the potential to save Sellers a lot of money when they hire an agent to sell their house. But if you have read my advice, Don't hire an agent, sell the house yourself. FSBO (for sale by owner)
Honestly, with the way things are just docusigned now, listing realtors are not needed. They are no different than the landscape designer that peddles the "3-D plan" for 10 Grand, you know the same plan they used for the last schlub and then you have to go find someone to do the work. You clean up the place and hose down the concrete, and they fly a drone for a couple of aerial pics, outsource a website to a webdesigner for the property and then just go to the wine bar to complain about how hard they worked.
Let's say that a property that is free & clear sells for $500,000. Commission is 5% for both sides, after closing the seller nets somewhere around $468,000. The sellers receive their proceeds through escrow after all fees have been paid & the buyers get their closing statement. Escrow pays the commissions for both agents from the sellers side, so again, who is bringing in the monies to pay the seller & commission for each agent. The buyer. The buyer has applied for a home loan by his lender of choice & it is through this that everyone gets paid. Translation, if there are no buyers, nobody gets paid if a house doesn't get sold.
Actually nothing has changed. Technically, the buyer is paying the commission for both listing & selling agents because they are funding it through their new mortgage. Once escrow disburses the funds & the sellers receive the money they pay all of their fees which also includes the commission for both sides.