Have an agent represent you at no cost
Hi there, it's Peter Boscas, broker and owner of Red Cedar Real Estate and today we're going to talk about how you can have a real estate agent help you with the home buying process at no cost to you. Oftentimes, when I'm working with first time home buyers or home buyers that come into town from another state, one of their concerns is how much is it going to cost to have an agent help them with the purchase process. You already have additional closing cost. We have fees that you pay the lender the entire company, that kind of thing so to have another fee that you'd have to pay a real estate agent on top of that starts to get overwhelming. So the good news is you can actually have an agent represent you in Maryland without it costing you a penny and today I'm going to explain how you can do that.
Home buyers typically don't pay the real estate agent's commission
So there are typically 2 different ways that real estate agents get paid in Maryland. The first one would be through a real estate commission and the second one would be through some type of fee. So let's talk about the commission first. Typically the way the process works in Maryland, a home seller will hire an agent to assist them with the home selling process and that agent is known as the listing agent because they're the ones that list the property for sale. Their agent, who's the seller, will offer them some type of lump sum commission. So to make things easy let's just say $5,000, although, it's typically a percentage of the home sale. We'll just use $5,000 for informational purposes. So typically what would happen then is that listing agent when they list that property for sale will also note in their listing that they're offering half of that commission, so let's say $2,500, they're offering that to whichever buyer's agent happens to bring a buyer to purchase that house. So, if this is a fee that is indirectly paid by the seller but is a lump sum that the listing agent receives and then we'll split with the buyer's agent so in this situation, the buyer is not actually paying any of the commission. It's actually the seller who is indirectly paying the commission.
Sellers typically pay the agent's commission in almost all types of transactions, including new home construction
So one thing to keep in mind with these commissions is that it's per universal principal here in Maryland that the seller will pay those commissions so it doesn't really matter what type of sale you're going through whether you're doing a traditional home purchase, whether you're buying a short sale or foreclosure or even if you're buying new construction, most builders will actually pay a buyer's agent a commission as well and so it's very possible to buy a new construction and have that representation without it costing you anything.
Don't pay admin fees!
So then that leaves us with the other way that real estate agents get paid and that would be through fees. Sometimes these are called administrator fees, processing fees, and that kind of thing. I've seen them ranging anywhere from a couple hundred dollars to $1,000 or sometimes even more than that but realistically, as far as I'm concerned, they're just junk fees. Your agent is getting paid throughout the process to assist you with administrative tasks so the attack on another fee of a few hundred dollars for performing fees that they're already getting paid for through the commission seems a little excessive. They're not required by law so the first that I would do if you're working with a real estate agent is ask them upfront the first time you meet with them if they charge any kind of administrative or tacked-on fees. Most of the time, these are actually negotiable so if you do happen to meet an agent and you get along with them very well and you would really like to use that agent throughout the process but they have one of these administrative fees, you can always ask them to not charge it. They are negotiable just like anything else is and so that's the easiest way around having to pay that fee.
Myth: You will save money on your home purchase if you don't have an agent
One thing I would caution against would be listening to a listing agent that tells you you're better off not having an agent represent you during the process. In fact, they're probably looking out for their own best interest in that situation. Going back to the example that we used earlier, when a seller would give their listing agent a lump sum commission and our example is $5,000, if you as a buyer go to buy a property and you don't have an agent representing you, the listing agent would actually then be able to keep the entire commission so instead of them having to split that $5,000, they would be able to keep the entire $5,000 for themselves so obviously it's in their best interest that you don't have an agent represent you during the process because it's more money in their pocket. It's also going to be better for their client who would be the seller during the negotiation process because you as a buyer might not know the ins and outs in the real estate industry, might not know how to properly structure a contract or an offer and that kind of thing to maximize the amount of money that you're going to save on the process which works out better for the listing agent and for the seller. A lot of buyers think that they can somehow negotiate a better deal without having an agent represent them but that's because they don't understand that the agreement between the seller and listing agent says that the listing agent can receive the entire commission if the buyer does not have any kind of representation so you're always better off having an agent represent you. Again, it doesn't cost you anything if you follow the examples in this video and that way you can have the expertise of somebody that's in the industry without having to cost you anything.
Make sure your contract with your agent specifically states that the commission will be paid by the seller and there are no admin fees
So hopefully, now that you understand that you can actually have an agent represent you during the home buying process without actually costing you anything, it'll make you a little less apprehensive about working with an agent and hiring one to help you with the process. As you learn in future videos coming up, having an agent represent you could save you thousands if not tens of thousands of dollars and a lot of headaches during the process and so since you don't have top pay them, and there's really no detriment to you for having one, it is a good idea to hire one to help you with process.