Who pays the commission?

Hello welcome to Todd Miller TV. It’s a day after Christmas, and I wanna go over something important called: Who pays the Agents? Where does that money come from? There’s a lot of people out there that believe that the buyer somehow pays the/for the agents. And I’m gonna explain how it isn’t the case. So first we’re gonna look at where all the money goes ;in the Real Estate Transaction. So we’ll say it’s a $100,000 house. And we’ll just say for our purposes that the buyer takes a $100,00 and puts it in an Escrow to pay for the house. Now, of that money %6 is gonna go to the agents: 3% to the Listing agent, 3% to the buyer agent; 92% about, it goes to the seller, so about $92,000, this is what we refer to as “Net Proceeds.” And 2% is gonna go pay for other things like Title, Escrow, prorated Taxes, HOA and thing that the seller is paying for in behalf of the buyer. Okay? So that’s where all the Money goes. Now, the question you have to ask yourself is, well the buyer says, a lot of buyers out there will say “Well I pay for the agents because I pay for that through here because I’m the one who brings the money to Title. I mean if I’m bringing the money to title, I’m paying.” Well let’s look at a scenario where there are no agents. So the $100,000 goes in to pay for the house. Let’s say it was the first sale by owner, and it’s $100,000. The seller, ’cause they didn’t pay commission, they just get 98% so they get $98,000. So they’re not really saving any money. The buyer’s not saving any money. It’s the seller’s the one that saving the money so the seller is the one paying for the service. Because in this case they would get $98,000 they would get more money. Question you have to ask yourself is: Are they capable of doing that? Most sellers aren’t so they hire an agent. So, there’s a way that buyers try to prove this all the time. They call us, some would say “I want the house but I don’t wanna pay, I don’t wanna have representation in the buyer side. I don’t wanna pay for that.” I’m like “No problem.” So they say “Okay $100,00 is gonna be the thing” And then when it goes to record, they realize that the listing agent is now getting 6%. They go “Whoah! Wait a minute, I don’t want representation. Why are you charging me 3 more percent. And I say “Well I’m not charging you, it’s coming from the Seller.” And then they go “Yeah but I can get a $3,000 discount on the house if i didn’t get an agent.” Here’s where the fallacy lies: because all of this, takes place absent of this piece right here. And I’m gonna circle it. And this why: This here is the most important part. What this is, is this is the exclusive agreement between the seller and the listing agent. And what happens is when the seller is gonna sell a house, the listing agent will say “I want an exclusive agreement to sell your house and I’m just gonna throw a number out there and you can pick a number between a buck and a 100%, right?” So what you say “it’s 6% to sell a house.” This is exclusive. I’m gonna put… that means it doesn’t matter how this house sells, this agent’s gonna get paid 6%. Period! It doesn’t matter if the buyer shows up and knocks on the seller’s door and say “Let’s just go down to title and make this deal happen” that agent’s gonna show up and go “Here’s my exclusive agreement title, the house’s sold, I want my 6%.” This here proves it doesn’t matter what happens to the buyer. This 6% is seven stone at the listing appointment when the Listing agent and the seller meet. The way it works is this, if there is no buyer agent, this 3% here, just turns into 6% for the listi8ng agent. He’s already negotiated that commission. Now what a lot of people are saying, that they come to me and say “Well Todd, I wanna re-negotiate with the seller.  This what you thing is/ you’ll only get 3%.” I go “hey, it doesn’t matter, I’ve already got agreement writing. he can’t go back and cancel it now that I procured the buyer” He’s gonna pay the whole amount, he’s gonna pay 6%. It’s too late, if you don’t wanna pay Mr. Seller, that’s fine. Don’t sell the house we’re just gonna wait for the listing agreement to expire and then you can wait you know, maybe another year after that because anybody procured during the time when the listing was active, the agent’s still gonna earn a commission on it. So you have to be careful about that one. What this shows is that the buyer doesn’t actually pay for the agent. They only pay for the agent if they enter into an agreement with the agent that’s showing the houses to pay some money. That’s the only way they’re actually gonna pay. Buyers agent commissions have already been negotiated by the listing agent. The buyer agent actually gets paid not from the seller but from the listing agent directly. The listing agent’s brokerage company pays that other agent, what’s called the co-op commission. Okay. So the moral of the story is, if you’re a buyer, and you believe somehow you’re paying the agent, the buyer agent, you’re not! It’s a free service for you essentially. The one thing I do get all the time is “Well since you’re not representing me, I don’t have to pay that 3%.” Well, you wan’t to sell the house, don’t you?” and I say “Well guess what?, 2,000 listings over the last 4 years, they’ve all sold, it’s not like they’re not gonna sell, this isn’t 1980, Okay? It’s not worth 30% of the houses are gonna sell and if we don’t sell, Oh darn!” So in that model maybe you can negotiate with the agent a little bit, but here today it’s not gonna work. The houses are gonna sell no matter what. Once we have the listing signed it’s a done deal.  We’re gonna sell it. So re-negotiating at that point, why would I wanna do it? Why will I gonna re-negotiate something I already know I’m gonna get? It doesn’t make sense. So I just wanted to sort of dis-spell where it comes form. There’s still a lot of people out there doing this and there’s so much misconception. I think the biggest thing is people take what they learn or what they experienced in the market in the 90’s or the 80’s or in some other market place. bring it to Las Vegas and today’s market, today’s prices, and today’s economy, and try to change it to how they wanted and get frustrated when that doesn’t work. So anyway, I just thought I’d explain how that works. That is my update for today and hope to see you on another video. Thanks!