Who should be responsible for the Buyer's agent fee?

Question

I have been in contact with a local realtor in my area who has brought me a couple of deals off the MLS. We are trying to put an offer in on a duplex and in the wording on the contract it says, "the selling firm is authorized to accept partial or complete payment if selling firm's fee from the seller of listing firm." But then it also says the buyer is obligated to pay the selling firm's fee. We asked her to change the wording since we want the seller to pay this fee. She said she cannot change the wording. Is this normal or a red flag? I don't want to get stuck in a bad situation with an extra 3% fee.

Filipe Pereira · Answer

Hey @Breanne Lancaster, this is something that can be negotiated, @Mason Hickman is spot on.

I certainly wouldn't trip over dollar bills to pick up pennies. In other words, if this is a good enough deal and you think the relationship is worth paying the fee, pay it and don't sweat it. It will be money well spent. When I bought my first MFR here in CT my agent at the time (I'm now licensed myself) was able to find me an off market 4 family in East Hartford for 200K. I wrote him a $5,000 check out of my own pocket. Did I have to? No, not really. Was it worth it? 1000% !

Mason Hickman · Answer

@Breanne Lancaster

You don't mention what state you are in. If you add that, it will help you get local answers.

First and foremost, have you signed a an Exclusive Buyer Agency Agreement? If so, this should dictate where compensation will come from. Oftentimes when dealing with FSBOs, a Buyer's agent can negotiate with the seller to pay their fee because the Seller is still saving 1/2 of the commission by not paying for a Listing Agent. Also, It benefits the Seller to have someone involved in a real estate transaction that closes properties on a regular basis. (Remember, not everyone lurks in the forums of Bigger Pockets all the time haha!)

For reference, this is the excerpt in the Massachusetts Exclusive Buyer Agency Agreement that dictates the commission:
(b) Success Fee. The parties agree that compensation equal to (insert percent of purchase price or other amount) shall be due BROKER upon successful completion of this Agreement or in the event that, within days following the term of this Agreement, BUYER or any person acting for or with BUYER purchases, leases or otherwise acquires an interest in the real property after becoming aware of the availability of the real property or receiving information about the real property during said term. The parties agree that BROKER shall first seek compensation, if any, offered by the listing agent or otherwise from the transaction(listing broker/seller). If obtained, such amount shall be credited to the amount of the Success Fee. If such fee cannot be obtained in whole or in part from the transaction, BUYER agrees to pay BROKER the Success Fee, due at the time set for closing.

Joe Splitrock · Answer

@Breanne Lancaster if you are making an offer, the paperwork should state who is paying commissions. You can offer $100K for the property and have the seller pay 3% to your realtor or offer $97K and you pay $3000 to your realtor. The math is the same either way. Put it in the contract so there is no surprise. I would actually get agreement from the seller prior to even writing the offer. Have your agent ask the seller "do you plan to pay 3% buying agent fee". Your offer is just based on who is paying what.

Also be aware that the NAR (National Association of Realtors) put a ban on pocket listings. It sounds like your agent is doing something prohibited, assuming they are a realtor. If they are just bringing you publicly advertised FSBO (for sale by owner) deals, those would be on Zillow so you don't even need an agent in that case.

Lynn McGeein · Answer

It sounds like buyer's agent is stating that they'll attempt to get their commission from seller, but buyer will agree to pay it if seller does not.  If off market and seller refuses to pay your agent, you can request seller adjust purchase price up to cover the agent's fee to solve the problem if you feel it's worth the higher sales price.  Some sellers refuse, but most will agree.  I just closed one off-market where buyer and seller split my fee 50/50 at settlement.  I think it does depend on loan type as well, so check with lender to make sure it's ok before agreeing to pay any commission.

Caleb Brown · Answer

If it is listed in the MLS they should the commission percentage in the listing, seller is the one paying it. Off market wise buyers usually pay my commission when I find a deal for them. If I find a good deal then the commission is worth it.

Allan Smith · Answer

Felipe of course is making the right point, but additionally, at least here in CT, even finding ON MARKET deals where you don't have to give away the store seems to be rarer and rarer. So with an off-market deal, paying an agent to facilitate the process has additional value as well, because you may not have found something that made sense (or been able to get your offer accepted) without them.

Breanne Lancaster · Answer

Thank you Filipe for your advice! We will run the numbers again. It seems average but less competitive since it is off market and better than market prices. So we will have to see if there is room for an extra fee. I definitely don't want to send the wrong message.

Breanne Lancaster · Answer

Thank you for your response. We have not signed anything yet. We definitely want the realtor to get paid for their work, but want it to be the seller's responsibility. Thank you for the Massachusetts reference. It seems like it is a pretty normal thing but that it could be negotiated more.

Who should be responsible for the Buyer's agent fee?

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