Understanding The Real Estate Agent’s Commission For NELA Homebuyers

Particularly for first-time homebuyers the process of buying a home is complicated. A contract is signed with a broker who you may view as your shopping buddy, but you are not required to pay them anything. No matter how many hours they spend with you during the home buying process, you should never pay a commission to your agent.

It’s not difficult for an agent spend 12 hours with a client. For example, it can take half a day just to view Glendale homes. It is worth spending another few hours looking at homes in Glassell Park and Burbank.

It is the same in Northeast Los Angeles (NELA), as it is in Bel Air, San Francisco, Chicago, or New York. The actual compensation for both buyers and sellers in the American house-buying system is between 5% to 8% of the property’s sale price. The seller pays for it and the agent splits 50-50 between them, although this can sometimes be negotiated differently.

For example, suppose you purchase a Eagle Rock home for $650,000. The commission could be 6%. The seller pays $39,000 to the broker, who each receive (give or take $19,500) for their work. Nice, right? They might spend hours showing the home to many buyers (weekdays/evenings/weekends), or directing the preparation of the home. Or showing a buyer 20-30 other properties after hours of research in nearby towns (such as Mt. Washington, Hermon and Glassell Park, Highland Park and Garvanza, negotiating prices, drafting contracts, and guiding sellers and buyers through closing. Realtors also rent office space, hire administrative and marketing staff and cover marketing expenses (photography and videography, listing, staging, in some cases even staging). Brokers may also split the fees of these brokers. Brokers receive a good salary, but not as much than is commonly assumed.

Agents who are more successful have learned from their education and experiences how to accurately price a house, negotiate with sellers and buyers, and guide them through the legal, financial, and lender processes.

Sometimes a house doesn’t sell and a buyer doesn’t buy. No one gets a commission. This is how it works in real estate.

Real estate agents may try different compensation methods from time to time. There are many alternatives to this system, each with clear disadvantages.

  • A flat fee If you decide it’s worth $5,000 to hire an agent to help you sell or find a house for $750,000, However, the other party must agree to something similar. It’s unlikely that they would. This might work in cases where the person is buying a home from a friend or family member. Or not.
  • A lower fee is charged that does not provide an incentive to sell quickly. This is in violation of the principle that you get what your pay for. Will an agent who is trying to make 1% per sale be motivated enough to provide buyer or seller with prompt service? Agents are interested in making the sale as quick as possible when the fees are at market rates.
  • You pay by the hour. If the buyer’s representative agrees, the difference between the hourly fees and the 3% (more/less) of the buyer’s agent will be returned to the buyer. This would encourage inefficiency, such as viewing too many homes or bringing in too many buyers who aren’t qualified.

Talk to a realtor for more information about homes in NELA. Experienced NELA agents can outline the terms of work under traditional fee structures.