Who pays the Buyer’s Agent compensation?

This really gets to the heart of why the change was made and the surrounding confusion on real estate compensation.

Where a lot of confusion came in was the fee paid to the Buyer’s agent. That money was traditionally always offered as a promised split of the overall compensation to the Buyer’s agent. So technically the Seller was paying for the Buyer’s agent, and that Buyer’s agent then proceeded to represent the buyer and negotiate “AGAINST” the Seller for a lower price, or on inspection items, ETC… So, the Seller was paying for someone to literally work on the other side of a transaction and often against them.

See a detailed breakdown of how this works HERE

Under the new rules it now becomes clear that the Buyer’s Agent compensation is part of the negotiated purchase price and it’s clear who is paying them, who they represent and what % amount of purchase price that represents.

It’s all about better transparency in the process. Agents will still be properly compensated, just everyone will be clearer on who represents who and it conforms with the law that states “ALL” Real Estate compensation is negotiable.

And honestly many Buyers and Sellers didn’t understand how that worked.

Now the Selling Office compensation offered or (SOC) will be publicly displayed and can be negotiated.

What will most likely happen is Buyer’s agents will have what’s called a Buyer’s Agency Agreement with their clients. This agreement will guarantee them a certain compensation. They will then decide to either accept the offered compensation by the seller or negotiate for a higher amount.

 The buyer’s agent may submit the offer along with an addendum asking you to pay them 2.5% of the purchase price. (On a $Million Home that would be $25,000) That addendum must be agreed to and signed off on by the Buyers as part of their offer. (So, the buyers will understand this “Ask” may affect the competitiveness of the offer they are submitting.)

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