How a Buyer’s Agent Gets Paid

by Roy E. Grimm, PhD

“I remember the old days we all worked for the seller and everyone knew we worked for the seller, except for the buyer.” – A Real Estate Instructor on Agency

The normal practice in those not-so “good old days” was that agents working with buyers generally operated in the capacity of Sub-agents of the seller since their commissions were paid by the seller.

These days, Sub-agency is seldom seen in Arizona. About a decade or so ago most states changed their laws and now allow an agent (actually the brokerage) to be employed by the buyer, but be paid, in essence, by the seller. What’s really at work here is the practice of Co-brokerage. When the seller’s agent takes a listing, the seller usually wants the property placed with the Multiple Listing Service. It would be complete idiocy not to. The property is then made known, online, to all 700+ members of the Sedona-Verde Valley Association of Realtors and Co-brokerage is offered should one of those agents from another firm bring an acceptable contract. That means that, at close of escrow, the listing brokerage will pay a portion of their commission to the brokerage representing the buyer.

Should the buyer be “represented” by another agent employed by the listing broker, the brokerage keeps the entire commission. This is a Dual Agency situation in which the agents are supposed to work with both sides in the transaction. As rife with the potential for conflicts of interest as this dilemma may be for the agents, Dual Agency is clearly in the brokerage’s financial interest.

In the case a sale within the MLS, the buyer’s agent’s commission is paid, via the broker (agents cannot be paid directly by anyone other than the his/her broker), from the seller’s proceeds at close of escrow as a matter of course. In the case of  “For Sale By Owners,”

a buyer’s agent would typically negotiate a commission from the seller. Regardless, however, of who pays the commission directly, it can also be said that the buyer ultimately pays it indirectly as part of the cost of the property and therefore deserves full representation.

Roy E. Grimm, PhD, broker/owner of Russ Lyon/Sotheby’s Buyer Brokers Group of Sedona, is a Certified Luxury Homes Specialist and a member of Who’s Who in Luxury Real Estate.