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Attorneys, Appraisers, CPAs, Inspectors, and Contractors are all licensed business entities. All are independent contractors. All charge for their professional services "up front". All are considered professionals just like licensed real estate agents or Realtors. We always pay for before mentioned professional services up front. I don't see why more licensed real estate professionals don't charge at least an "I'm serious" retainer fee that could be rebated to their represented buyer at closing.
I think many Realtors are accustom to doing things the way they have always done them and don't question the suitability of their system, given modern times or they don't place enough value on their service or their time to charge an up front fee or maybe their "I hope you are serious about buying a home – pay me later" system simply works for them and that's great, for them. It does not make anyone more or less a professional. It's your service that does that.
I've seen it work both ways. I would appreciate if those of you that are screaming "bloody murder" would refer to your state's law of contracts or your state's promulgated buyer's representation agreement. You will likely find a reference to some form of optional up front fee or retainer fee there
. Just because someone operates on another level (not higher or lower –just different) does not make them a crook.
Although most buyers think of the agent who took them around as "their" agent, in reality, both that agent and the listing agent were paid by, and had a fiduciary duty to, just the seller. So both were obliged to tell the seller everything the buyers said about their plans and negotiation strategy. This is how it used to be which introduced agencies which now typically spell out contractually what sort of relationship they have with the buyer -- a good reason to read all paperwork you're given very closely. Plus, a new kind of agent emerged over the years, the "exclusive buyer agent," who is responsible to the buyer alone and doesn't list homes. I highly recommend that buyers seek out such agents, as they'll not only keep your confidence, they'll also drive you around, give you valuable insight into market conditions and negotiate hard on your behalf -- without any possibility of a conflict of interest.
But like everyone else, buyer agents don't work for free. At first glance, it seems like the seller pays them, since most are paid at closing from the commission costs that the seller pays, just as in the past. In reality, buyers pay for everything, since sellers routinely factor these costs into the asking price for the home. The typical real-estate commission ranges between 5% and 6%, split between the buyer and seller agents. Since the median price of an existing home is currently $208,400, that means a buyer is effectively paying between $5,210 and $6,252 for representation in a typical transaction.
But not every agent works this way, and flat fees are an acceptable form of compensation -- in fact, they're sometimes a bargain, if you compare $395 with the figures above. Be sure you understand and agree with what you will be getting for your money, though. Will the team be finding for-sale-by-owner and distressed properties for you, as well as those listed on the multiple listing service? How often will listings be sent to you, and in what form? Will somebody be available to show you properties that interest you, at your convenience? How much help and advice will you get to secure financing? Who will do the negotiating when you present an offer, and who will shepherd you through closing? Is there a provision in the contract that says that the flat fee is all that will be paid to the agent on closing, and that he will forego any commission? What happens if you are dissatisfied with his service -- can you cancel the contract before the year is up and hire someone else? I hope this helps you understand it doesn't matter the price of the home it is the service being provided to the client/buyer.
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