Buyer Beware: This real estate commission plan could have your agent working against you.

If you're in the market to buy a home you should definitely be aware of this potentially problematic commission plan that could have your agent working against you. This two-minute video explains how, or review the transcript below.

Transcript

Home buyers occasionally ask the question, how does a real estate agent get paid to help me buy a home?

And in this province, in most cases, the real estate commission that the buyer's agent earns is paid for by the seller or generated by the transaction, and in most cases, it's a percentage of the sale price.

Commissions are problematic in the sense that, as a buyer's agent, I'm charged with the responsibility to help you get the lowest price, but I actually get paid more money if you pay more for a house. So you can see how that can be problematic.

In Saskatchewan, most real estate listings pay on a declining scale, though, so I might earn 3% on the first $100,000 of the sale price, 2% on the second $100,000, and 1% on the balance, so ultimately, if you pay an extra $5000 for a house, I make an additional $50, and I would say, for most people, that's probably not enough to influence them to bad behavior.

But not all commission programs work that way. In fact, there are some properties on the market from time to time that work on an inclining scale, and an agent might be offered 20% on the final portion of the selling price. So if you pay an extra $5000 for a home, they get an extra $1000 in their pocket, and you should know that.

So when you're ready to write an offer on a home, ask the real estate agent, what is the commission being paid on this home? You have a right to know that, you have a responsibility to know that, so that you can understand whether or not there might be some biases at play there, that you should take into account when you're deciding how much to pay.

Ask.

You have a right to know.

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Norm Fisher

Royal LePage Vidorra