The Wall Street Journal gets it right on commissions

I wonder if anyone else will notice? From today’s Real Estate Journal:

But like everyone else, buyer agents don’t work for free. At first glance, it seems like the seller pays them, since most are paid at closing from the commission costs that the seller pays, just as in the past. In reality, buyers pay for everything, since sellers routinely factor these costs into the asking price for the home. (ed. note: and the buyers are the ones getting the loan) The typical real-estate commission ranges between 5% and 6%, split between the buyer and seller agents. Since the median price of an existing home is currently $208,400, that means a buyer is effectively paying between $5,210 and $6,252 for representation in a typical transaction.

The buyer’s agents who advertise their services as “free” seem to be attempting to fool someone – themselves, their clients or both.

Who can blame them, though? That’s the way it’s always been, so why change?

From the NAR Code of Ethics (archived: 2010):

Standard of Practice 12-2
REALTORS®may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time. (Amended 1/97)

To learn more about divorcing the commissions start here and here.