Real Estate

Who pays the real estate agent when a foreclosed home is purchased you might ask. The foreclosure market is big these days. Real estate investors with cash money to spend are scooping up property with a shovel. They either rehab the homes and sell them for a profit or rent them out for positive cash flow. Even first time home owners are looking at the foreclosure market for their first home.

The foreclosed properties, or as they are known in the real estate business, REO’s are the result of people defaulting on their home loans. REO stands for real estate owned. The property is now owned by the bank which took the property back because the person taking out the loan on the land could not afford to pay the monthly payment. The bank went through the legal process of foreclosure and now owns the property. The people living on the land had to vacate the premises.

The problem from a practical sense however is that banks are not in the business of holding onto and selling real estate. Banks are supposed to lend money not sell land. They need to hire a listing real estate agent to sell their land for them. Banks are not allowed to sell property directly to real estate investors or others looking to get a good deal on an REO.

This is because of a powerful real estate lobbying group in Washington. So you will not deal directly with a bank you will need to go through a real estate agent if you want to buy a foreclosed home. But in almost all cases the commission earned by the agent is paid by the seller or in this case the bank.

But for all intents and purposes everyone shares in paying out the commission to the real estate agent. The seller of course, or the bank, has to pay the agent his or her commission from the sale proceeds. But the price the buyer pays reflects the fact that the seller takes into account the amount the agent will receive as a commission.

But you also have to remember that banks can negotiate a lower percentage of commission payments with real estate agents. They might have to use an agent but they are not required to pay what an agent would receive when representing private buyers and not bank corporations. Also, banks work with only a limited number of agents or real estate brokers.

You might find agents or brokers advertising their services as REO specialists. These are agents who have the experience with working for banks and have built up a relationship with banks who turn to them to sell their properties. You will want to work with this type of real estate agent when you are looking to buy foreclosure properties.

You will also find in this market is the banks trying to inflate the market. They are holding on to many of their properties hoping to get a better price for their properties.

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