Real Estate Tips for Beginning Investors: Commissions, Who Pays Who and When?

With so many things that I do, I am an applied learner and when I started it Real Estate Investing it was no different. Talking about something is all good but it usually isn’t until I have to use the information that I get it. So, with all that I learned about real estate investing before I actually purchased a property; one thing that didn’t quite register for me was who paid who commission and when. Call me slow or whatever, but as a beginner, the bottom line is I think that there may be other new investors out there that can benefit from my admittance of not really getting this part of buying and selling of a property. What I did know was that I wanted to try to sell a house on my own so I could save the 3% commission. I didn’t really get how the buyers commission would work if I sold my property without a listing Realtor or with, for that matter. It was a commission that I omitted in my calculation and 3-6% is a costly omission when you are trying to flip a home.So let’s break this down:1. Most of us get that if you purchase a home you don’t pay a selling or buying commission for an agent, that is all paid by the seller. Your costs for buying are just the costs at the title company plus the cost of the house and any up front interest and insurance.2. If you sell the house without a realtor and list the property yourself, you pay the cost of listing on MLS, which you can find flat fee brokers who will put it on MLS from anywhere to $400-500 dollars or up to 2%.3. When you list and market a property yourself–duh–you still pay a buyers agent commission if the buyer is brought by a realtor. 4. And finally, this is the one I really didn’t get: if you have a listing agent sell the house for you and you bring in a buyer yourself, you still pay a buyers commission to your listing agent. This is something I did not realize as an investor and because I didn’t understand, I wound up embarrassing myself disputing this fact with the Realtor I was working with. I contacted a buyer that I spoken to about this particular property and they decided they wanted to make an offer if they could get some financial issues worked out. So, I told my Realtor about the buyer and he contacted them. When they made the offer and he sent it over, the offer included the commission for the buying side. I thought he was trying to make some extra cash and it turns out I was wrong! Once you have a listing agent, you pay a buyers commission on top of the listing commission no matter what!So, for those of you out there that are new at investing, I hope this helps when you go to figure out who pays what commission and when. When it comes to making a profit it is best to have these costs included up front. Good luck as you begin in Real Estate Investing!