Most people don’t know how Realtors get paid.  Generally we get paid a certain percentage on every deal.  The government requires that we state that commissions are negotiable…frankly, just like everything else in life, no?  I’m not sure that I am allowed to talk about how Realtors make money in an open forum or not.  This is not to create a conspiracy or collusion…all I can tell you is my experience.  Generally the deals are done with 6 apples.  With bank owned property it’s usually 3 apples goes to the listing broker and 3 apples go to the selling broker, or the buyer’s agent.  In traditional sales, it’s usually a 3.3 apples/2.7 apples split.

I’m working on a deal right now where the listing shows 2.5 apples.  I asked the listing broker if Freddie Mac changed it’s compensation and the response was yes there has been a change.  I’m going to be in touch with Freddie Mac to see if indeed this is a corporate decision or not.

I realize many of you may not have any sympathy or appreciation for this inside baseball post, but that’s approximately a 17% reduction in the overall amount of apples the buyers agents get paid for their involvement in the transaction.  Just curious to know how many of you would feel, whether or not you are an employee or a self-employed entrepreneur if you’d appreciate a 17% cut in pay.

Fannie Mae, HUD, Bank of America, Citi, Wells Fargo, JP Morgan etc., etc., etc. make sure to compensate the buyers agents fairly and are paying 3 apples for those transactions.  Once in a while there might even be an additional $1,000 – $2,500 selling bonus for those agents.  The fact of the matter is a bank owned deal, whether it’s HUD, Fannie Mae, Freddie Mac or one of the big banks, takes a lot more work for the buyers agent than it does for traditional transactions.

It’s not a great idea to short change the sales people who are really doing a lot of work to keep a transaction together and yet that’s what Freddie Mac appears to be doing.  If that’s the direction they are going, perhaps they can just keep going and cut the buyers agents out completely.  Good luck with that one buyers.  You can deal directly with the listing agent.  If you do that, you are best to make sure you understand “The New Agency Laws in Real Estate – Understanding Agency, Dual Agency and Representation as a Home Buyer or Home Seller.”

I will do a follow up if I hear from someone directly from Freddie Mac who can officially confirm this commission change.  Sometimes there are asset management companies that try to step in between the investor owner (like Freddie Mac) and the listing broker.  I’ve seen where those guys take a referral fee or  percentage of the 6 or 7 apples which of course leaves the agents with less.

Related articles

• Freddie Mac: REO inventory declines 16% in 2011 (calculatedriskblog.com)
• Pay chopped at Fannie and Freddie (money.cnn.com)
• Top Housing CEOs Will No Longer Be Riding High (huffingtonpost.com)
• Homes.org Releases List of the Top Reasons for Using a Buyer’s Agent in Today’s Market (prweb.com)
• Potential Conflicts At Freddie Mac Draw Scrutiny (alternet.org)
• Freddie Mac Is Betting Against Homeowners (johnhively.wordpress.com)
• As Homeowners Struggle, Freddie Mac Benefits (npr.org)