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HERE'S HOW AGENTS WORK AND GET PAID IN PENNSYLVANIA: PA ACT 112 went into effect
11/25/99 Walk into just about any real estate office and you need to understand who they are, who they work for, and how they are paid. And it's complicated! Brokers and Agents The first thing to understand... there is a difference between a broker and an agent. A broker runs a real estate office; an agent works with the broker and is generally the person that helps you buy or sell your home. Agents are independent contractors (self employed) and as such receive no salary or employee benefits from the broker. Agent income is derived only after a closing from the commission paid to the broker usually by the seller of the property, but in some cases by the buyer. In short, agents are not “hired” by the company they affiliate with, they do represent that company but they are “hired” by their clients — the buyer or the seller! The broker/company provides the agent with an office to work out of, a negotiated commission split, and often a company name that customers will recognize. In return, the agent is responsible for helping clients buy and sell houses which earns them a commission. This commission is split between the broker (to cover the brokerage overhead expenses) and the agent (to compensate them for their work). Note that agents cannot by law receive commissions or other monetary gifts such as bonus incentives directly from clients. Bonuses must first be paid to the broker and then the agent may receive them either in part or (usually) in full. The Traditional {OLD} Agency Model For most home sales, the seller hires an agent and signs a contract with the broker called an "exclusive listing agreement." This means that regardless of who buys the house (even if it's a close friend of the sellers) or who finds the buyer, the seller agrees to pay the broker a percentage of the sales price — a commission — in exchange for their help selling the home. The Listing Agent One of the listing agent's roles is to let as many buyers and other agents know about the home for sale as they can. The agent lets all the local agents know about the home through a shared information computerized database called a Multiple Listing Service. Since thousands of agents see the listing almost immediately, it is quite likely that another agent has the perfect buyer for the property. The Selling Agent That agent — who often works with another broker — is called the "selling agent." OK, that's a little confusing since this agent works with the buyer, but after all, we do park in a driveway and drive on a parkway. The selling agent is also technically known as a "subagent" of the listing agent. This means that even though the selling agent spends their time helping the buyer find the perfect house, they share the listing agent's commission. The buyer must now by PA law Act 112 sign a "Consumer Notice" and a "Business Relationship Agreement"—designating that the agent is NOT representing them in the buying process before homes are shown or any other service is rendered. Buyer consumers must understand that whoever the licensee may be, a Business Relationship Agreement is required BY LAW between the consumer and that broker/licensee. There are NO exceptions. Note: Most real estate brokers no longer recognize "subagency" and do not offer a commission to "subagents." The day of the "subagent" is virtually gone in Pennsylvania. So now, where accepted in practice there are four parties that get a 'piece' of the one commission that the seller agreed to pay in the listing agreement. You can see these parties and how they fit together below: The Commission Splits
The important points of this model: •Usually there are 2 brokers and 2 agents involved. Newer Agency Models in Pennsylvania Buyer's Representative In the traditional model, the selling agent is a subagent of the listing agent. As a result, the agent working with the buyer represents the seller, and is bound by law to get the best price and the best deal for the seller, rather than the buyer. To avoid any conflict of interest, buyers should work with a buyer's representative. In this situation, the buyer's agent is not an agent of the seller—even though they normally will get a piece of the listing broker's commission. Occasionally, under some circumstances, a buyer's broker (and agent) is paid directly by the buyer. In either case, a buyer's agent only represents the buyer. The buyer must now by PA law Act 112 sign a "Consumer Notice" and a "Business Relationship Agreement" — designating the agent is representing them in the buying process before homes are shown or any other service is rendered. A buyer should have only one buyer agent contract in effect at any time, therefore the buyer should work only with the agent they have contracted with until they either purchase a property or terminate the contract with the agent per it's provisions. Buyer consumers must understand that whoever the licensee may be, a Business Relationship Agreement is required BY LAW between the consumer and that broker/licensee. There are NO exceptions. The Usual Buyer Representative Commission Split
The important points of this model: •Usually there are 2 brokers and 2 agents involved. Dual Agency "Dual agency" is when the buyer's agent and the listing agent work with the same broker or are the same agent. This is legal in Pennsylvania, but not all states. In most cases, this will work out fine, but must be fully disclosed in writing to both the buyer and seller. "Dual agency" is coming under increased criticism and may be abolished in the future.
With dual agency, the commission is split among only two or three parties (listing agent, buyer agent and broker). This usually doesn't change the agents' commission, but could increase the broker's. An agent who lists and sells their own listing (called - double dipping) usually gets a higher commission. The buyer must now by PA law Act 112 sign a "Consumer Notice" and a "Business Relationship Agreement" — designating the agent is representing them as a dual agent in the buying process before homes are shown or any other service is rendered. A buyer should have only one buyer agent contract in effect at any time, therefore the buyer should work only with the agent they have contracted with until they either purchase a property or terminate the contract per it's provisions. Buyer consumers must understand that whoever the licensee may be, a Business Relationship Agreement is required BY LAW between the consumer and that broker/licensee. There are NO exceptions. The important points of this model: •Both agents work for the same broker... (this can also be a single agent if they
are selling their own listing.) Designated Agency In designated agency, the broker may, with your consent, designate one or more licensees from the company to represent you. Other licensees in the company may represent the seller and shall not be provided with any confidential information about you. The designated agent(s) shall have the same duties as are listed above under seller agency and buyer agency. The buyer must now by PA law Act 112 sign a "Consumer Notice" and a "Business Relationship Agreement" — designating the agent is representing them as a dual agent in the buying process before homes are shown or any other service is rendered. A buyer should have only one buyer agent contract in effect at any time, therefore the buyer should work only with the agent they have contracted with until they either purchase a property or terminate the contract per it's provisions. Buyer consumers must understand that whoever the licensee may be, a Business Relationship Agreement is required BY LAW between the consumer and that broker/licensee. There are NO exceptions. In designated agency the broker is a dual agent (as described above) and has the duty to:
•Take reasonable care to protect any confidential information you disclose
to the licensee(s) The important points of this model: •Both seller and buyer agent(s) work for the same broker... Transaction Licensee A broker or salesperson who provides communication or document preparation services or performs other acts for which a license is required WITHOUT being an agent or advocate for either the seller or the buyer. The licensee has the duty of limited confidentiality in that the following may not be disclosed:
•The seller will accept a price less than the asking price Other information deemed confidential by the consumer shall not
be provided to the transaction licensee. The important points of this model:
•The licensee represents neither party to the transaction.. is NOT an agent
to either party © Copyright 2010 by Jon DePoe "All rights reserved."
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