Homebuyers: How Your Buyer Representative Now Gets Paid

Hiring an Experienced and Highly Skilled Agent is More Valuable Than Ever

By now, you may have heard about the change in how buyer representatives (agents) are compensated in residential real estate sales. Here’s a breakdown to help clarify the new requirements:

Prior to the recent NAR lawsuit and settlement:

1. The listing agent (on behalf of their Broker) negotiated a fee with the seller to list and sell the property.

2. The portion of that fee intended to compensate the agent representing the buyer was disclosed to the seller in the listing contract.

3. Since the seller knew up front what they would net after cost of sale, they could price their property accordingly to obtain their desired/acceptable net proceeds at closing.

4. The buyer’s agent fee was then paid directly from the listing broker’s fee upon closing.

Current practice:

1. The listing agent will negotiate only the fee for the listing brokerage. While the seller may choose to pay for the buyer’s representation if the offer is acceptable (knowing they may attract a much larger pool of buyers), the fee no longer flows through the listing broker but is paid by the seller through escrow in the form of a concession (credit) to the buyer.

2. If the buyer wants the seller to cover, or share in the buyer representative fee, the buyer must request and negotiate this concession up front in the Offer to Purchase.

3. If the buyer cannot cover the additional closing cost (cannot come up with funds to cover the down payment, closing costs and buyer representation) and seller will not agree, the buyer will either need to move on to another property, or could ask the seller if they would an unrepresented buyer or allow, and if and the listing agent would agree to provide assistance.

Please reach out with any questions. I’ll be happy to talk through various scenarios with you. Thank you!

Tamara