Real Estate Buyer Agent Commission Explained

by | Mar 2, 2018 | 0 comments

The last blog post touched on Buyer Representation agency relationships and how they’re defined in the state of South Carolina. Now, let’s move on to the topic of how your associated licensee/brokerage, your representation, earns a commission through the transaction.

A majority of the general public always asks, “what commission do you charge?” Well, there’s a difference between how a buyer’s agent and seller’s agent earn their commission. We’re going to focus strictly on how a buyer’s agent earns a commission. Every state is different when it comes to fee/commissions earned. Since I practice real estate in South Carolina, this blog will be South Carolina specific.

To start, when you sign a buyer’s agreement with your agent, the form most brokerages encourage their potential clients to sign is The Exclusive Right to Buy Agency Contract. This form basically means you, the buyer, will work exclusively with the Broker and associated licensee during the term of the agreement. According to this contract there are 3 ways to earn a fee/commission:

  1. Retainer Fee
  2. Service Fee
  3. Brokerage Fee (Most Common)

The Brokerage Fee is the most common way a brokerage earns a fee/commission. This type of compensation is split between the listing brokerage and buyers brokerage. There’s no set percentage standard for listing fees but typically in the Upstate it’s 6%. So, the fee/commission is split 50/50 between brokerages. Thus a buyers agent is paid 3% of the 6% listing fee in a typical real estate transaction.

The Exclusive Right to Buy Agency Contract form is used by 99% of brokerages here in South Carolina. A brokers fee/commission will be deemed earned when a Buyer is under contract to purchase a property presented by broker or negotiated by buyer. This fee/commission is due at closing OR if buyer defaults. Buyers need to be aware that if they default on a contract, not related to any contingencies currently set forth by the contract, they will pay the brokerage fee/compensation. For example, if the buyer has satisfied all contingencies pertaining to the contract but decides to back out and not buy the home, this indicates a buyer default. According to The Exclusive Right to Buy Agency Contract, the brokerage fee has been earned and the total fee/compensation that would have been due to Broker will be due payable immediately in cash FROM THE BUYER.

Below is section 5 taken directly from The Exclusive Right to Buy Agency Contract. Section 5 lays out the language and 3 ways the Brokerage compensation is earned. The example below is how 99.9% of my contracts are filled out.

Read these contracts. If you initial at the bottom of the pages, this indicates you’ve read the page. If your unsure about anything on the contract, ask questions. We are not attorney’s, therefore we cannot give any legal counsel or interpret these contracts.