Buyer Representation Services are* 100% FREE to the Buyer!
(*Only if the property is listed by a Realtor and they advertise to pay the same commission as the buyer’s representative is charging. FSBO Properties may not fall in this category)
In Texas, both the buyers and sellers Realtor commissions are paid by the seller from the proceeds of the sale during closing. As such, the buyer does not pay for these services.
The primary risk in a real estate transaction is on that of the buyer. Texas laws make it easier to ensure that buyers are properly represented by a real estate professional during these transactions. Today’s real estate laws and contracts can be quite confusing and when not handled correctly can result in costly lawsuits. You would not go to court without attorney representation, so why would you sign a contract that maybe hundreds of thousands of dollars without professional representation… especially when it is free!
Understanding How Real Estate Commissions Work
The Realtor commissions are based on a percentage of sales price and negotiated on the Seller’s side, between the sellers of the property and the listing agent. The entire commission belongs to the listing broker!
From there, the listing broker will advertise what % commission they are willing to share with a broker representing a buyer. If a buyer does not have the representation of a Realtor, the full commission is still due on the sale of the home, based on a prior agreement between the seller and the listing broker.
A buyer not under Realtor representation cannot receive any reduction on the sales price from the seller based on the lack of buyer representative commission, as the full commission is still due by the seller to the listing broker already defined in the listing agreement.
Example: (**NOTE - in Texas there is no standard pre-defined commission or percentage, as such the percentages used below are purely for example only**)
Seller Ann agrees to list her home with Broker Bob for $200,000 at 6% commission defined in their listing agreement. Broker Bob then lists the property in the local MLS system where they advertise they will share 3% of that commission with a Broker representing a buyer.
Buyer1: is represented by Broker Charlie and submits a full price offer on the house. At closing, Seller Ann would have to pay 6% commission and would be left with $188,000 before closing costs.
Buyer2: is not represented by a Realtor and submits an offer at $194,000 (3% lower) mistakenly thinking the seller would not have to pay the buyer rep commission. If the offer is accepted, at closing, Seller Ann would still have to pay the full agreed upon 6% commission to her listing broker and would be left with $182,360 before closing costs.