When buying a property, one of the least-discussed yet essential topics is buyer’s agent commission. While most buyers won’t pay this fee directly, certain situations may vary, making it important to understand how compensation works and what options exist if the seller’s offered commission doesn’t align with our agreement.
In this post, I’ll explain the typical process for buyer’s agent compensation and outline alternative solutions for scenarios where adjustments may be needed.
How Buyer’s Agent Fees Work in a Typical Transaction
In most real estate transactions, the seller pays the buyer’s agent commission through the listing brokerage. This payment, typically factored into the sale price, is arranged upfront by the seller and their agent to encourage buyer representation and ease the transaction process. Once the sale is complete, the agreed-upon commission is paid to the buyer’s agent.
This standard arrangement allows buyers to access professional services without additional costs. However, there are exceptions, especially when a seller is not offering the full commission agreed to in our Exclusive Buyer Representation Agreement or when dealing with a For Sale By Owner (FSBO) property where no commission is offered.
Homebuilders and New Construction
Homebuilders do not fall under the same compensation structure as realtor-represented listings. If you’re working with a real estate agent and are interested in new build or preconstruction options, it is essential to take your real estate agent with you on your initial visit to the homebuilder. By registering with the builder at that first meeting, your agent can represent your best interests, ensuring proper compensation through the builder and avoiding any potential out-of-pocket costs to you as the buyer under our exclusive buyer representation agreement.
When Seller Compensation Differs from Our Agreement
If the seller’s offered commission doesn’t match what we agreed upon in the Buyer’s Brokerage Agreement, the agreement gives me the right to negotiate the fee directly with the seller. Here are the most common options we may explore:
Negotiating with the Seller
In many cases, I can work with the seller or their agent to negotiate the agreed-upon commission, which allows you to avoid covering the difference out of pocket. This negotiation helps ensure that my services remain accessible to you without added expense, even when the seller’s commission offer is lower than expected.
Modifying the Agreement
Occasionally, we may choose to adjust our Buyer’s Brokerage Agreement to accept the lower commission offered by the seller for a specific property. This option can be a practical solution, particularly when the difference is minimal or when the property meets your needs well. Modifying the agreement in this way helps avoid any additional costs to you as a buyer.
Buyer-Paid Commission
If neither negotiation nor modification works, you may be asked to cover the difference between the seller’s offered commission and our original agreement. This scenario, while less common, may arise when a seller is unwilling or unable to pay the full commission. By considering this possibility in advance, we can avoid surprises later and move forward with clarity.
Key Takeaway: What to Expect
For most buyers, commission fees are covered by the seller, making the buyer’s agent services effectively free of charge. However, if the seller’s compensation differs from our agreement, we’ll review your options and select the most suitable approach—whether that’s negotiating with the seller, modifying the agreement, or discussing the possibility of a buyer-paid commission.
By having these conversations early on, you’ll have a clear understanding of potential costs and gain peace of mind knowing that your interests are well-protected.
Have Questions? Let’s Chat!
Understanding commission and compensation can be complex, but I’m here to make the process transparent and stress-free. If you have any questions about how commissions work or want to explore your options in more detail, please don’t hesitate to reach out. Together, we’ll ensure your home-buying experience is smooth, professional, and tailored to your needs.
