Representation & Commissions Explained

How Agency Works

Definitions from NAR (National Association of Realtors):

• The seller’s representative (also known as a listing agent or seller’s agent) is hired by and represents the seller. All fiduciary duties are owed to the seller, meaning this person’s job is to get the best price and terms for the seller. The agency relationship usually is created by a signed listing contract.

• The buyer’s representative (also known as a buyer’s agent) is hired by prospective buyers to and works in the buyer’s best interest throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer’s rep may be paid by the seller or through a commission split with the seller’s agent.

• A subagent owes the same fiduciary duties to the agent’s customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. The subagent works with the buyer to show the property but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer customer can expect to be treated honestly by the subagent.

• A disclosed dual agent represents both the buyer and the seller in the same real estate transaction. In such relationships, dual agents owe limited fiduciary duties to both buyer and seller clients. Because of the potential for conflicts of interest in a dual-agency relationship, all parties must give their informed consent. Disclosed dual agency is legal in most states, but often requires written consent from all parties. [This is not legal in Texas.]

How Commissions Work for Buyers & Renters

• Earned when a  sales offer gets accepted or a lease application gets approved.

• Payable at closing. My broker sends an commission authorization to the title company or invoice to the landlord/owner.

• I am usually/almost always paid by the listing broker, builder, owner, landlord, or property management company.

• If the listing broker/builder/etc. ever pays less than my commission amount or nothing at all, then my client is responsible for the difference at closing. I will let clients know if that is case & they can decide on whether they want to tour the home and go through the rest of the buying or renting process. Clients can even instruct me in writing not to show them anything that won’t pay my full commission. 

  • If the listing broker/etc. doesn't pay my full commission, I may be able to help clients find the funds pay it. Other parties can fund the fee like family gifts, lender credits, & some closing cost assistance programs.

• No obligation to buy or rent. Clients don’t pay anything upfront unless we've discussed only offering limited, one-time services for a specific task. The latter is rare. If a sale or rental never occurs, I don’t get paid! I don’t get a salary or reimbursed for expenses like gas and my professional time. I assume a lot of risk upfront!

• Visiting a builder or for sale by owner- I must register you as a client and/or tour with you.

• For requested limited services or unique situations, I could charge you a set fee or retainer based on the scope of work. See my homepage section on limited one-time services for more info. 

As of April 9, 2024 in the City of Austin 91.6% of listing agents were offering my full buyer compensation amount! In cases where it's not being offered, I can try to negotiate for it to be paid with my client's permission in writing. So it's unlikely there would be a cost to buyer or rental clients.

New MLS rules require that we have an employment agreement signed before touring a home, even a virtual tour.