Who Should Pay the Buyer's Agent?

Real Estate Broker/Owner with Ryan Taylor Homes

Recently an offer came in on one of my listings from an experienced, seasoned, competent, and well-regarded buyer's agent from a well-known, well-respected firm. As many offers are these days, the price was low, the closing cost credit was high, and the inspection contingencies were rigorous.

On this particular listing, the seller was offering a somewhat less than standard coop to the buyer agent. When the agent expressed shock and dismay about the amount we were offering, I decided on the spur of the moment to get into it. I asked "Who are you working for?" The reply came quickly and with some indignation, "Why, the buyer of course!"

And I just couldn't help myself. "Then why should the seller pay you anything? You probably have a contract with the buyer that says the buyer will pay for your services. If you are going to beat the seller up on price, concessions, and condition, why should they pay you at all? If you were getting sued, would you expect to pay your opponent's attorney as well as your own?"

However, the paradigm that assumes the buyer agent's fee comes from the seller is so ingrained in our belief system that this agent could not conceive of getting paid any other way. I'm sure that this belief applies to many, if not all, of us.

Now before you get all militant about what I've just said I want to point out that I have great respect for the buyer's agent. Having often been one myself, I think we do a good job and provide a valuable service. My only concern is how we get paid.

I've been around long enough to remember when buyer agency first became popular. Before that, we were taught that we all worked for the seller because that's who was paying us. That principle was taught in our pre-licensing class and reinforced in the training we received from our first brokers.

When we first started admitting that we were really representing the buyer when we worked as selling agents, the BIG question was how we would be paid. Most trainers told us that, of course, the buyers would pay us. And that's how our standard buyer agency agreement is written in Northern Virginia.

Somewhere along the way, we stopped asking the question. Now we avoid pointing out to buyers that they owe us our commissions based on the buyer agency agreement. The seller calmly pays us, very often without even questioning the logic in it.

I want to question this logic. Isn't it time buyers started asking how their agent could truly represent their interests when they are being paid by the other side? Isn't it time for sellers to start questioning what they are paying for when they agree to pay a coop?

Isn't it time we told our buyers the truth about who is supposed to pay us?

Comments (8)

Matt Kofsky
Transaction Realty 500 Reno, Nv. - Reno, NV

In the mls is listed a commission that will be paid to the buyers agent.  Is that negotiable with the offer?  The offer is between the buyer and the seller, the agent is not a party in the transaction.  If they agree to pay you nothing, is that ok? 

The big problem with this is the financing.  The buyer is now buying the house for $200,000 instead of $206,000 (the difference is your commission).   The lender would have to lend more than the sales price in order for the deal to close or the buyer would have to come up with more money down.

Dec 26, 2007 05:47 AM
Larry Brewer - Benchmark Realty llc
Benchmark Realty LLc - Nashville, TN
I know that a lot of buyers I work with would stop using a buyers agent if they thought it would cost them more money than not using one. In my area, the smart sellers have been offering 4 to 5 percent for the buyers agent to get buyers to see their property. And it works a lot of the time.  
Dec 26, 2007 05:48 AM
Stacy Magid
Century 21 New Millennium - Woodbridge, VA
There are many agents that specify a percentage for commission in their Buyer Agency Agreement and if the selling side isn't paying the full amount it's up to the buyers to pay.  With this in mind many of the buyers will move on to the next home so they don't have to pay the agent.
Dec 26, 2007 05:52 AM
Joan Snodgrass
Midamerica Referral Network - Kimberling City, MO
Kathy:  You make some good and logical points, but I don't see any change happening in my lifetime.  As Larry and Stacy point out, the buyers would move on to another property rather than pay for a Buyer's Agent.
Dec 26, 2007 06:00 AM
LaNita Cates
REMAX of Joliet - Joliet, IL
I believe buyer's agents should get paid because we are bringing them a buyer to buy their home.  You can always look at it from the other side which I've heard agents say: you stick a sign in the yard and other agents (buyers agents) bring buyers. Buyer agents put way more time in their buyers than with their sellers in my opinion.
Dec 26, 2007 06:27 AM
George Bone
Prudential Woodmont Realty - Brentwood, TN

I'm one of those realtors that specifies what my fee is in the Buyer Rep Agreement as a percentage of the sales price.  I discuss upfront with my buyer clients that I work for them and that in the end that they are responsible for my fee if not covered by the seller.  I also explain that 99% of the time that the seller will cover my fee.  On the flip side, if the seller is offering more than what my fee is(whether that be a higher commission or a bonus), that excess will be used to lower the price of the house or pay closing costs.  I have had two situations where the seller offered a buyer agent commission .5% under what my Buyer Agent Agreement called for.  In both cases we were able to negotiate enough of a reduction in the price of the house that allowed the buyer to pay the .5% and still get the house substantially under list price.

I have found that discussing the agency relationship and commission responsibilities in an upfront and professional manner usually prevents any misunderstandings later. 

Dec 26, 2007 10:06 PM
Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA


I understand that the concept is really not a simple one.  I remember when I bought my first home long before I ever became a Realtor, I "assumed" that a good friends mother represented me in the negotiation of our home.....she did not and in retrospect did not get me the best deal.....this of course was pre-Buyer's Agency.

I believe in the Buyer's Agency process....I believe that if I was good enough to negotiate a deal that on paper was to pay me $10k and I got the home purchased where I was only paid $5k that I am OK with that, I did my job.  I also make it clear that I am happy if I get 3%, 2 1/2%, 2% Buyer's Agent commission....you see where i am going.  I want my Buyer to get the home they want, at the price they want....my fee is secondary to their happiness.  This has worked very well for me in the referral portion of my business.


Dec 27, 2007 01:58 AM
Steven Dean
Compass Real Estate | 202.545.6900 - Washington, DC

The multiple listing service works to our clients advantage when they are selling their homes if the listing agent is cooperating and compensating the agent that brings the buyer. This increases the chances of finding the highest and best offer by increasing demand for the property.

If the listing agent had the buyer for the property, there would be no need to enter the listing into the MLS.


Jan 18, 2008 11:08 PM