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We
have always glowed with excitement
at the idea of getting something of value for nothing.
Most of us realize, by the time we are adults in an American society,
that there are very few things free in commerce. The air we breathe
and the open sunlight is still free and that is because human greed has
not figured a way to tax it or make a profit on it. We have contrived
a way to charge for water, food, shelter, a place to exercise, energy,
transportation and communication. I and my family need all of these
things, so, I am in the trap of needing to charge something for the professional
services we render to Buyers of Real Estate
that we assist.
When
we have a house to sell, we call a RealtorŪ who offers to
"List" the property and to promote it in the market place to
generate offers, from Potential Buyers, as close to the
"Listed Price" as possible. That "Listing Agent"
represents the Seller and instructs the Seller that, in most cases, the
"fee" agreed upon will be split with another agent for "finding
and bringing a ready, willing and able Buyer to the transaction."
The total fee charged on the Listing Contract is agreed upon by the Seller
and the Listing Agent and is not set by any group of people outside the
transaction. However, trends and ranges emerge and become obvious.
So, some will call the fees "Normal", which
is prohibited by law. Five to seven percent of the selling price
is a number that many brokerage firms have determined is necessary to
stay in business, and those numbers frequently appear on listing and MLS
documents.
The "Listing"
Agreement provides: For services performed by and for people
(Seller, Buyer, Agents, Lender, Appraiser, Inspectors, Title and Escrow),
involved with a sale and purchase. Such things as values,
times, events and benefits are also addressed. Agency,
is addressed too and in today's world, specific laws provide
for each, the Seller and
the Buyer to be represented
by Exclusive Agency.
When an EBA is Involved, the courts have ruled that the
EBA, can accept payment for services rendered from people
on either side of the table. This is because a Buyer might
have limited funds and some proceeds of the loan might be required to
pay for many of the Buyer's services. It is customary for the Buyer's
cash down payment and the proceeds of the Buyer's loan amount be credited
to the seller and then the "fees" are shown on the HUD-1 to
be "paid" by the Seller. To do it otherwise confuses some
people at all levels of the transaction. Therefore, we presently
dance with custom and get the deal done and the people involved made happy
or at least satisfied.
The
"Fee" charged by any Agent, is usually agreed
upon as a percentage of either the "Selling Price" or with some
EBA's the "Listed Price" (removing the "conflict
of interest" factor). It can also be agreed upon as a "flat
fee", which will cover a range of transaction prices. The fees
can also be charged on an hourly basis for specific services to be performed.
Fees can be paid in advance, on a progress basis or at the closing table.
Most fees are paid at closing, as that is when the most money is flowing
in the transaction.
The
Seller pays, per the Listing Agreement.
Only the X % stated
in the Agreement computed on the "Selling Price". Is what
the Seller is obligated to pay. That portion of the "Marketing
Fee" designated for the Buyer's Agent (usually 50% of the total fee
stated) is given to the EBA at the closing of
escrow. For example, if the Buyer and the EBA
have agreed that the EBA's fee should be 3.0% of the
Listed Price, the EBA's services might conceivably
cost the Buyer 3.0% of the amount saved between
the Listed Price and the Selling Price. Conversely, if the Seller
and Its Agent is offering 3.5% of the Selling Price to the Buyer's Agent,
in such event, the Buyer would receive the difference as a "Commission"
refund on the HUD-1.
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It's a Changing World
Out There 
