Unless you’ve been living under a rock, you’ve probably noticed the real estate lawsuits targeting commissions recently. That said, there are three ongoing commission lawsuits against MLS, brokers and the National Association of Realtors (for example, Sitzer et al. v. NAR et al. and Moehrl et al. v. NAR et al. ). At issue is the way a buyer broker gets paid. Not everyone understands how a buyer broker is compensated, and we will clear it up.
The co-broke amount otherwise known as, the shared commission or Buyer’s Agent Compensation is paid by the listing broker to the buyer’s broker. Buyer’s agents are not paid by the seller. It is not the seller’s job to provide the buyer with representation or pay for the buyer’s representation, and that is not why the commission is offered. The commission is offered for a buyer’s agent to help get the home sold for the highest price to the seller, by offering it to as many buyers agents as possible. More buyers equal more exposure for the home and more competition to get a higher price for the seller.
How Real Estate Buyer Agents Get Paid
The buyer’s agent gets paid to bring a ready willing and able buyer to the transaction. And that commission is earned when the buyer broker is the procuring cause of the transaction. Procuring cause means, the buyer’s agent is the reason the transaction took place.
But since it is the buyer’s agent’s job to protect the buyer and get them the best deal at the lowest price, how does that correlate to getting paid by the listing broker? It doesn’t. This is why you need to get and give clarity to your client on how you are being compensated as a buyer’s agent. You need to get a buyer’s agency agreement signed. Many buyer’s agents are afraid to ask for a buyer’s agency agreement because they are unsure if their buyers would even sign one. The issue here is the buyer broker is afraid to even ask because generally buyer broker agreements are blanked agreements that last for 3 to 6 months or even longer depending on your agreement. But this doesn’t have to be the case. It is possible to represent a buyer on one deal and for one property. My State MLS has a form that allows a buyer’s agent to just name a property or a list of properties that are part of a day’s tour. If you don’t have a blanket agreement. For each property you show, get this limited BA signed. It’s really easy to get this signed too. Before showing a property, explain to the buyer how you get paid.
Try Talking To The Real Estate Buyers
Mr. and or Misses property buyer, the way I get compensated for helping you purchase a property is I usually get paid at the closing and the funds often come from an offer of cooperation and compensation by the listing agent to bring the most exposure to a property. Sometimes however my fee will not be covered by an offer of cooperation and in those instances, I will let you know before we see the property. Before we see this property today, I need you to acknowledge what I just told you and agree that I will be compensated for working with you on this property.
Isn’t The Real Estate Buyer’s Commission Part Of The Listing?
If a buyer’s agency commission is offered in the MLS, simply tell that you will be paid from a commission that is offered by the listing broker to the buyer’s broker to affect the most exposure when selling a home. If the commission isn’t as much as you require to be compensated for being the buyer broker, let them know they will be responsible to make up the difference at the closing as part of their closing costs.
After you show them several homes and they have decided they want to work with you exclusively you can tell them that they don’t have to sign this form each time if they would be willing to sign a blanket buyer’s broker agreement.
What If Commission Isn’t Listed?
If there is no compensation listed in the MLS it doesn’t always mean there is no cooperating compensation. Before you show the home, reach out to the listing broker and ask if they are cooperating and compensating buyer brokers. At this point you can get a co-broke agreement (print from the MLS resources and forms page) signed and negotiate your split with the listing broker.
