Do I have to pay my buyer agent's commission?
Who pays for your buyer agent's services?
Since August 17, 2024 real estate practices regarding commission fees changed dramatically. In the past, the 'standard of practice' was that the seller's commission included a "coop" sharing model. Part of the overall commission fee paid by the seller went to the buyer brokerage and that's how your realtor was paid.
The shift in how buyer agents are paid driven by NAR's lawsuit settlements generated rampant fear, misinformation and frankly absurd postings which may leave you confused. When I see articles like this recent LinkedIn editorial it brings home to me what a bad job our industry has done educating consumers about what is involved in the home selling and buying process.
As a result of the NAR lawsuit settlements, that fee structure was 'decoupled' and now each party is responsible for paying for their own representation. The basis of the lawsuits was founded on the simple business model that each party should pay for their own services and buyer representation should not be a seller expense.
Read more...
- Who pays the real estate commission and closing costs - Realtor.com
- The future of real estate commissions - Bankrate.com
Interview your buyer agent and negotiate fees BEFORE making offers
If you are working with a realtor to buy a home, the first step should be a Buyers Consultation. This is an interview, just as if you were going to list your home for sale and you interview realtors, negotiate fees, and sign a contract.
In the past, many buyer agents did not do this. They simply started showing homes and counted on their commission being paid by the "coop" fees from the seller's brokerage. You should strategize together to address how your broker fee is paid.
Do you need to finance closing costs? If so, understanding that the asking price of homes now does not factor in your broker's fee. That will be important for your offer dynamics. If there is no buyer broker fee offered, then be sensitive to the 'net' to the seller on your offer if you are asking for your realtor fee to be paid by the seller.
Unfortunately, I've seen a lot of awkward dynamics where this wasn't addressed prior to making an offer and in essence negotiations became a 3-way process hinged on the buyer broker fee vs simply between buyer and seller. In fact, I've seen several deals fall apart because the buyer and their agent had not put together a strategy before making offers.
I've also had realtors "steer" their clients towards listings where a commission is offered, completely against the lawsuit rulings. With limited inventory, it can be a competitive market. Some buyers are losing opportunities because they had not worked out their negotiations with their own agent prior to making an offer. I've seen several great offers fall apart due to this 3-way negotiation.
As realtors, we are supposed to put our clients needs first. If your buyer broker hasn't worked out their fee with you before making offers, you may be missing out on the best fit for you in today's market if they are focused on how they will be paid vs what's best for you.
Do I need a buyers agent?
Buying a home is one of the most complex, personal business transactions we do in our lifetime. Its also one of the most misunderstood.
Yes, we can blame HGTV and social media's oversimplification of a complex business. Yet it comes back home to us, the licensed professionals who live and breathe this business to paint a true picture of the real estate transaction.
Entertainment is just that - entertainment. I loved Law & Order but we all know a lawsuit isn't solved in 15 minutes.
To think a homebuyer can use AI to write a contract is as absurd as using AI instead of a lawyer. Yet we've allowed our industry to be seen like an HGTV script - look at 3 homes, pick one and done! The consultation, work and education needed to avoid potential pitfalls isn't sexy and doesn't fit in a 30 minute segment. But that story must be told!
A good buyers agent is well worth the fee! Saving you money and protecting you throughout the process. However, you are not required to have an agent. Just as sellers have sold homes as For Sale by Owner, you can be an unrepresented buyer or can hire an attorney. Many listing agents will do the paperwork for the transaction if you are unrepresented - they just cannot guide you or negotiate for you.
What you don't know can hurt you - learn from my first time homebuying mistakes
For more information about today's market and how to successfully negotiate an offer, book a time on my calendar for a private consultation. No obligations! I'm here to help.
