Who Pays the Real Estate Commission in Texas?
One of the questions that I’m frequently asked is, “Who pays the sales commission in a real estate transaction?” That’s a good question! Here’s the answer…
Typically, real estate sales commissions are paid at the closing table by the home owner (or builder). The title company disburses two checks out of the Seller’s proceeds from the sale: one to the Listing broker (such as a RE/MAX or Coldwell Banker) and one to the Buyer’s broker (in our case, Keller Williams Southwest). Then the Seller’s broker splits their sales commission with the Seller’s agent (also known as, the Listing Agent). And the Buyer’s broker splits their sales commission with the Buyer’s agent (Sheila Cox)–after deducting certain transaction costs, such as “Errors and Omissions Insurance.”
Please note that practically all real estate agents are independent contractors…not employees of the broker. In fact, real estate agents are usually required to pay certain fees to their broker for the privilege to work at that brokerage. Plus all expenses, including gas and mileage for taking you on home tours, refreshments on tours, paper and ink for contracts, phone fees, computer fees, etc. are paid by the individual agent and are not reimbursed.
About MLS Membership
What many people do not understand is that most real estate agents are members of the Multiple Listing Service (MLS). This is a membership where real estate brokers agree to share their sales commission with member agents who help them obtain a buyer for their listing. When a listing agent puts a house for sale on the MLS, the agent agrees to pay other agents a set commission…which may vary depending on whether the agent is a “Buyer’s Agent” or “Subagent.”
The MLS is the tool real estate agents use to find houses to show to buyers. It is the source database for most homes listed for sale. This is the source that other websites use (such as Zillow and Trulia) to show homes for sale as well. (Which means that an agent’s MLS search gets the data first!)
By the way…real estate agents are NOT (usually) paid employees…they are “straight commission.” They do not receive an hourly or salary paycheck from their Brokerage for showing houses to people for fun. Almost all real estate agents are Independent Contractors who only earn a living by receiving sales commissions for selling homes. Plus, they pay all their own expenses. So professional agents are careful with their time and only show houses to clients who are ready, willing, and able to purchase a home. Isn’t that what you would do?
So how do I earn the sales commission? I have a very detailed “To Do List for Buyer Clients” that has over 100 tasks that I may perform for you…and only one task is “Show properties until one is found.” So even if I show you 30 houses, that only represents one of the 100+ line items on my To Do list! Trust me when I say that there is a lot more to my job than “just showing houses.” I’m looking out for you every step of the way and keeping my eye on the Listing Agent, the Seller, the builder (if applicable), the lender, the inspector, the title company…I’m always watching out for you because I’m your agent.
Now you need to understand one more important thing:
How I Work to Protect You
My job is not “just” helping you find a house to buy…I’m helping you buy a house. There are over 100 tasks that I perform for you during the purchasing process! I’m looking out for you every step of the way and keeping my eye on the Listing Agent, the Seller, the builder (if applicable), the lender, the inspector, the title company. I’m on your side because I’m your agent. Not only do I help you find a house, I help with price analysis and negotiation, legal paperwork, inspections, repair negotiations, home warranties,compliance inspections, hazard insurance, surveys, appraisals, title commitment, and so on.
And take a look at a sample House Report that I do for my clients. NO other agent in the world does this! Check out p. 27 regarding the Flood Map info I provide to you.