Why did a buyer need to pay their agent’s commission?


No buyer’s agent wants to ask their client to pay a fee that the seller usually covers.

Dear David,

I was under the impression that sellers paid the real estate agents (selling and purchasing) their commission on the sale of a property. When my daughter bought her first house, she was required to pay some of her own agent’s commission, since the seller had made a deal to pay her agent less. I had never heard of this before. – CONCERNED MOM

DEAR CONCERNED: In the vast majority of home sales, the seller pays the commission for their own agent and the buyer’s agent, when the property closes.

It sounds like your daughter had a Buyer Representation Agreement (BRA) with her agent. The BRA must be discussed prior to signing and is written to protect both the buyer and the agent. This contract typically indicates what a brokerage will be paid if a client purchases a home with their agent, inside of a contractual time frame.

Sellers have agreements with their agents too, and these Listing Agreements specify what “co-operating fee” will be paid to the agent who brings them a buyer. Traditional real estate brokerages tend to compensate buyer’s agents at a competitive rate, so they are motivated to sell a client’s home.

Most sellers want to have their homes posted on MLS (the Multiple Listing Service), which provides massive market exposure and is one reason why most homes sell in a fraction of the time they did decades ago. The MLS system is rooted in co-operation. Sellers can display their listings on it, and in exchange, the listing broker shares a portion of their professional brokerage fee with the agent who brings the buyer.

Different real estate models approach this co-operating fee in different ways. Some “For Sale by Owner” (FSBO) or “commission free” companies give customers the option of paying the buyer’s agent a reduced fee, or not paying them at all. If this was the case with the home your daughter purchased, her agent’s brokerage would have looked to her to make up the difference, so that her agent could be paid what was agreed upon in the BRA. This arrangement would have been discussed prior to submitting the offer.

No buyer’s agent wants to ask their client to pay fees that the seller usually covers. Personally, I’ve never seen a seller who wasn’t willing to pay a co-operating fee, if an agent brought them an offer that met or exceeded their expectations.

PRO TIP: Your daughter was wise to sign a BRA, even though it obligated her to pay an unexpected fee in this case. Buyer Representation elevates a buyer from customer to client status, which in turn raises the standard of care their agent must provide. While a customer is entitled to information, a client is part of a loyal, trust-bound relationship steeped in professional advice – and that insight can easily make (or save) them tens of thousands of dollars. #AskDavid #Advice