One thing that really frustrates me is when I hear real estate agents say “a buyer doesn’t pay commission”. When I bought my place, this commonly used phrase was used on me and I still feel like I was deceived to this day.
The way commission is currently handled in residential real estate, really makes no sense to me. For most transactions that take place these days, the seller sets the commission that both his/her realtor and the other agent (known as the cooperating commission) will receive. So essentially, it appears as though the seller is paying another company to come negotiate against themselves. Since the seller never has to hand over any money unless a sale actually happens, they really aren’t actually paying anything. The commission is taken from the proceeds of the transaction and split amongst the buyer and seller’s realtors.
If you really think about this, the buyer is actually paying commission to their own realtor in this example, because if there was no cooperating commission then they could realistically argue for a lower sale price. On the seller’s side, they are also paying commission because if they were to sell the house on their own, there wouldn’t be an obligation of commission to a listing realtor.
As you can see, both parties are really paying commission on every transaction and nobody is getting a “free ride”. The next time a realtor tells you that you don’t have to pay commission as a buyer, ask them to put it in writing and ask them how they will be paid. If they tell you that it will come out of the purchase price then guess what, YOU ARE paying. Might be time to look for another realtor.