Commission, compensation for Realtor can be negotiated

I would like to take this opportunity to thank everyone who attended the Greater Las Vegas Association of Realtors Home Buyers Seminar held June 28 at Cashman Center. I also want to thank the Las Vegas Review-Journal for co-sponsoring the event. It was a real success, and we look forward to putting this event on every year. We had some great questions from the attendees, one of which is addressed below.

Q: If you're buying a home, do you have to pay a Realtor some sort of commission? - Richard C., Henderson

A: Let me first say that commission, compensation, fees or other items of that sort are all negotiable. Every real estate company, dependent on their business model, sets their prescribed fees.

So first, with any company, find out what their fees are and the amount they are willing to work for right from the outset. Because of the structure of each particular business, some may have more room for negotiation than others.

In many cases, the compensation to the buyer's agent comes from the seller's proceeds. This occurs when a home seller puts his or her home on the market with a Realtor who agrees to offer compensation to the agent representing the buyer.

The Multiple Listing Service creates an agreement between the listing agent's company and the buyer's agent's company to compensate them an amount as stated in the MLS database. The negotiations for fees have already been done ahead of time between the seller and the seller's agent, prior to the home going into the database.

This system works extremely well in that it is cost-effective for buyers, and sellers know ahead of time what their costs will be. Likewise, sellers open their home to 17,000 Realtors, any of whom may have a buyer for their property.

With new homes, many builders work in a similar fashion, paying the buyer's agent from their proceeds. Again, this is cost-effective for buyers and allows them their own representation. When this occurs, builders generally build the compensation they pay to buyer's agents into their pricing.

So what happens when you are working with either an unrepresented seller or a builder who does not compensate your agent? In these situations, within your negotiations you certainly can ask for the compensation of your agent to come from the seller's proceeds. One of three things can happen: They agree to pay the whole fee. They agree to pay part of the fee. Or they will not pay any of the fee.

This is where your prior negotiations with your agent are vital. You should decide in advance with your agent how to handle these scenarios. You as the buyer can pay your agent his or her negotiated amount, or the difference from what the seller agrees to pay. If you choose, you may also instruct your agent to not show you any properties where you as the buyer would have to compensate some or all of his or her fee. The choice is yours.

Many agents today require the use of a Buyers Brokerage Agreement. This sets out the contractual arrangement between you and your agent. Items addressed in this agreement should include what types of properties your agent is agreeing to show you, the amount of compensation to be paid to the agent, where that compensation is to come from, any additional fees, and the length of time covered by your agreement.

As I always like to stress, do your homework. Know what services your agent is providing and the fees being charged for providing these services. From there, negotiate where possible and get a contractual agreement stating the necessary terms.

Devin Reiss is the president of the Greater Las Vegas Association of Realtors and has worked in the real estate market for more than a decade. GLVAR has more than 17,500 members. To ask Reiss a question, e-mail him at ask@glvar.org. For more information, visit lasvegasrealtor.com.