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February 14, 2019

Real Estate Compensation and Disclosure

Compensation and disclosure are considerations when working with brokers.

Compensation

As a buyer or seller, you can pay agents the normal percentage of commission in your area, negotiate a reduced percentage of commission, pay agents an exact amount which you specify, or pay agents on an hourly basis for the work they do. Are you concerned about paying agents an hourly wage, say $50.00 an hour? 

If you were selling, would you bat an eyelash if an agent came in and made a listing presentation on your property worth $200,000?  Would you worry when the licensees ask you to pay them a five percent commission, which is worth $10,000?  That is equivalent to 200 hours at $50.00 per hour!  You probably have no problems paying them $10,000 to sell your property. Why do you hesitate to pay them $50.00 per hour on an hourly basis for the exact same expertise? 

If licensees work for you for nothing, licensees have to charge sellers twice as much.  This ends up costing you anyway because remember, you are the person who really pays the commission.  If licensees charge you an hourly rate, you usually will end up paying less.  In addition, you will be represented to the best advantage in the transaction.

Agency Disclosure

Ask the licensee who she represents currently and who she will be representing throughout the transaction.  Although the licensee should make it clear at all times who she is representing, you do not want to find out too late that the licensee is not representing the party you thought she was representing.  A licensee may say that she

  • Exclusively represents you throughout the transaction.  The licensee may say she will exclusively represent you in the transaction.  In this case, the licensee should not represent the sellers at any time.

  • Exclusively represents the seller throughout the transaction. The licensee may say that she will exclusively represent the seller in this transaction.  In this case, you are not going to have any representation from that licensee.

  • Exclusively represents you but may change to dual agency. The licensee may tell you that for the time being she represents you exclusively but if someone in the same office brings in the seller, the broker may become a dual agent.

  • Exclusively represents the seller but may change to dual agency. The licensee may tell you that she represents the seller exclusively but since you want to buy a property listed in the same office, the broker will become a dual agent. 

Loyalty

The benefits of having a licensee working exclusively for you is that you have his or her undivided loyalty. Loyalty is a two-way street.  You feel comfortable because you know the licensee is loyal to you.  The licensee feels comfortable because he knows you are loyal to him.  The loyalty along with the understanding that he will be compensated allows him the freedom to be able to help you do what is best for you. 

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