Talking with a prospective Seller today, I made the mistake we all caution each other about, often comically punctuated and capitalized; I made an ASSUMPTION. This was simply about how payments to real estate agents are generated.

Yes, they’re called ‘commissions’ and yes, they are variable. By law (and ethics) we cannot set a certain x% as a fee and talk all the other local agents into believing that it must be so. Please reference the Sherman AntiTrust Act, which basically says that brokerages cannot conspire in any way to fix prices or commission rates, or even attempt to. It’s a felony offense. This is good for Buyers and Sellers.

What I assumed was that customers understand how the real estate ‘game’ works. So here it is in basic terms, for Texas:

Talk about this with your agent before signing.

SELLERS:    You want to sell your home, and have me list it for you. We agree on a price and a commission rate that will be split between my brokerage, and the Buyers’ agent’s brokerage. Here in Texas, we write down in our Listing Agreement just what that % (or even a set dollar amount) will be to the Buyer Agent. This is how the Buyer Agent is paid.

Buyers: You sign a Buyer Representation Agreement with your agent which gives them the fidelity duties to YOU only, so they can properly sleuth out the deal on the house you want.

If you do NOT have that Agreement signed, the Buyer Agent is simply an extension of the List Brokerage, and cannot ethically ‘talk bad’ about the home for sale. No advice on what to offer, either.

In the Buyer Representation Agreement, there is a spot to fill in the amount of commission you agree to pay your Agent’s brokerage (we agents don’t get it all; it’s split up and we get ‘some’ of it). Sometimes that number is higher than the number offered by the List brokerage. Buyers then need to make up in cash that amount difference to their agent’s brokerage. It does happen.

So in a nutshell:

The Seller says they’ll pay X% or $X total. The List agreement outlines what amount of that total % or $ will be offered to the Buyer Agent brokerage.

The Buyer Representation Agreement says what the Buyer agrees their agent will make from a sale. That may not agree with what is being offered. Buyer will need to make up any difference at Closing.

Regardless of what the Buyer Agent Commission (BAC) offered on a listing is, your Buyer agent has an ethical duty to show you any home you wish to see, even if he is not offered the x% amount you agreed to pay him. You can hash that out, and perhaps the brokerage will waive the missing $$, or they may have you make it up in cash at closing.

So next time you go to see homes and wonder if your agent isn’t showing you everything you wish to see, ask about the commission levels being offered. It’s wrong of them to NOT show you that home that offers less, but I’m sure it still happens here or there, more than it ought (which is ZERO %).

NOTE: Texas law requires ALL real estate licensees to give all consumers who initiate real estate transactions the  following information about real estate services: