Do I have to pay a buyer’s agent commission? This home seller doesn’t feel like the buyer’s real estate agent has done anything to deserve commission.

Q: I am a seller who has an agent that claims he has a buyer for my property. He wants to do a pocket listing. I am absolutely outraged by this. The man is not going to spend one dollar on advertising or pay any Realtor multiple listing service fees or other fees. He is not going to spend one minute working or do any work of any form.

He just wants to collect my hard-earned equity of approximately $6,000 for the pocket listing when I am the one that is selling the house to him and his buyer. Therefore, I should be my own listing agent, right? 

Why does he have the right to take my equity for doing nothing? Why is this not racketeering?

Do I Have to Pay a Buyer’s Real Estate Agent Commission?

A: You sound incredibly upset for someone who is about to receive what we imagine is a full-priced offer for your property. We’ll get to this in a moment, but you don’t actually have to accept this offer.

But let’s back up for a moment: There could be a number of things going on behind the scenes. 

Are you selling by owner? Often, when a real estate agent has a buyer for a property marketed by a seller as “for sale by owner,” the real estate agent will ask the seller whether the seller is willing to cooperate with the agent and pay a commission to that agent. We suspect you might be a seller trying to sell a property without the services of a real estate agent.

Which is fine, by the way. We think some sellers are quite capable of selling their own homes. Here’s how it works: You list your home on one of the many online listing sites or put up a sign in your yard. Potential buyers call you directly, so you never deal with real estate agents and you and your buyers work things out until the property settlement or closing.

How Real Estate Commission Works

However, many homes listed by sellers will ultimately sell with the aid of a real estate agent. The agent will see that you’ve listed your home yourself and bring you buyers in exchange for a sales commission. 

Typically, the going rate for a real estate commission is between 4 to 7 percent, depending on where the property is located. If real estate commissions are typically 6 percent in your neck of the woods, a real estate agent with a prospective buyer might come to you and ask that you pay a 3 percent commission to that agent if the buyer winds up purchasing the property. The agent would have you sign paperwork that would have you agree to pay that commission on this deal at the closing.

But, this isn’t known as a “pocket listing,” and your use of the term strikes us as odd because we were under the impression that the National Association of Realtors had passed a rule that took effect earlier this year that did away with pocket listings. It was a controversial decision and there has even been litigation on the issue.

How Pocket Listings Work

Pocket listings are situations in which a broker signs up a seller to sell their property but they have the seller specifically waive the listing agent’s obligation to put the listing on any multiple listing service for a period of time. During that time, the real estate agent can go to prospective buyers or other real estate agents in that agents office and offer the property to them on a first come first serve basis. 

Now, if you were interviewing brokers to sell your home for you and found one that wanted to list your property but asked to have a pocket listing period before putting the home on the wider market, the issue is slightly different. Whether it’s a pocket listing or any other type of listing, when a real estate agent finds a buyer for your property, the listing agent should be paid the commission that was in the listing agreement.

Pocket Listings vs Multiple Listing Services

We understand that it’s tough to give away any of your equity, but if you use the services of a real estate agent and that agent gets the property sold, you have to pay the commission. Sometimes it takes an agent a short period of time to sell the home, while other times it takes months or even years. The agent would love to sell all properties instantly – as would the seller – but that’s not always the case.

Last year, we saw quite a number of listings that started out as a pocket listing but ended up in the local multiple listing service. In one particular instance, the pocket listing agent was trying to sell the property for way more than what we thought it was worth. A couple of months later, the broker wound up putting the property on the multiple listing service for quite a bit less, and even then, the property took months to sell.

How to Proceed with the Home Sale

The thing to do now is to have a heart-to-heart conversation with the agent. Try to figure out what the agent really wants to do for you and then decide whether you should take this offer. If the property is listed with a local brokerage company, and you don’t believe the agent is acting ethically, call the managing broker of the firm, make an appointment and discuss the issue. You would be well within your rights to ask to switch to a different agent, if you’re not happy with this one. 

If you’re listing the property yourself, you don’t have to pay the agent who is bringing you a buyer, but that agent will likely take the buyer elsewhere. Which is also fine. Unless you have a very unusual house that is priced incorrectly, another buyer should be along soon enough.

The real estate market in the U.S. is very hot at the moment. In most places, there are too few homes for sale and many buyers who want them. Prices are rising and homes are selling quickly. If there was ever a time to try to sell your home “by owner,” it might be now.

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