The Million Dollar Question: Who Pays Buyer’s Agent?

In other words, is this going to cost me anything?

Briefly, it’s not going to cost you anything extra.  If you compare buying a house to buying a plain pizza, working with an exclusive buyer’s agent is like the pizza sauce: it’s included in the price, it doesn’t cost you anything extra.  Also, you don’t get a “no sauce” discount if you want to eat your pizza without the sauce. Similarly, if you don’t use a buyer’s agent , you will not get a “no buyer’s agent” discount. 

In case you don’t like pizza, let me explain it another way.

The way your buyer agent will be paid is included in your buyer’s agent agreement   In Colorado, these are the options included in the contract:

1)     Success Fee

2)     Hourly Fee

3)     Retainer Fee

The most common way is a Success Fee, also known as “commission,” also known as “cha-ching.”   If this is the method used, the buyer’s agent will only be paid if you successfully buy a house.  If you don’t buy a house, the agent does not get paid. 

An hourly fee is pretty self explanatory.  There would be a set amount, determined in the contract that you would pay your agent per hour.  This is pretty rare. 

A retainer fee would be a dollar amount set in the agreement that you would pay when you sign the contract.  I think of it kind of like putting a deposit on something.  Again, not common.

How much is the success fee?

In the Colorado Buyer’s agent agreement, there are two options:  A flat percent of the purchase price, or an adjusted amount.  The most common is a percent, which is typically 2.8% of the purchase price of the home. 

Who pays buyers agent success fee?

As described before, this is usually (almost always) paid by the listing broker, or the seller.  In other words: you do not pay the success fee, the seller pays buyers agent success fee.

Let me repeat that.

You do not pay the success fee!  🙂  (Triple threat, bold, italics and underlined- just to drive that home for you.)

There is not a “no buyer’s agent discount.”

This is a part of the contract that the person selling the home signed with their listing agent.  Usually, if the buyer does not have their own agent, the listing agent will represent both the seller and the buyer.  So, the listing agent gets that 2.8%.   Bottom line, you’d still be paying the same price, you’re just going to pay someone that wasn’t working exclusively for you.  This is the root of the conflict of interest, and a really important difference between a buyer’s agent and a traditional real estate agent.

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Posted in EBA Basics, Working With A Colorado Buyers Agent
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