The good thing that has happened in real estate during the last few years is that a number of alternative business models with a variety of different fee structures for sellers who wish to sell or list their properties has emerged. Change in that regard has a domino impact how buyer agents are paid and what type of arrangements buyer agents have with buyers.
Roll the clock back a few years, and buyer agents were generally offered a cooperative compensation agreement by the listing broker and the details of such were included in the agentâ€™s copy of the MLS sheets. The amount paid to the buyer agent was often similar or the same from one listing to another, and buyer agents had no need to establish any type of compensation agreement directly with the buyer. It was already handled.
Today, there is a wide variation in the amount of buyer agent cooperative compensation offerings in the MLS. Because the compensation offering can range from $1 (rareâ€¦but, yes) to thousands, the buyer agent is now faced with the need to discuss and arrange compensation agreements directly with the buyer. At this time, a majority of the listings included in the MLS offer a compensation to buyer agents that buyer agents find acceptable and therefore, many do not yet find need to negotiate a minimum fee with a buyer. Other buyer agents may find the need to do so, but remain too uncomfortable doing so, since buyers have long been accustomed to having this handled on the seller side.
I am a strong advocate of consumer choice, and welcome the diverse offerings. Buyer agents have a fiduciary to their clients, and that includes showing them all properties that fit their criteria, or advising them of the properties that are being excluded. (Agents can exclude, but must inform the buyer client. Agents cannot let a buyer client think they are being shown everything, when they are not.) How does a buyer agent work for free for the buyer, when the MLS cooperative compensation is $1, and still uphold their fiduciary duty? Does a buyer agent proceed without a buyer agency compensation agreement with the buyer, and hope the buyer doesnâ€™t like the house that pays $1?
Although early stage, there is a growth in buyer agency agreements that outline the minimum compensation for which a buyer agent will work. Each buyer agent negotiates that individually, within the guidelines of their employing broker.
Typically, an agreement will read that the buyer will compensate the buyer agent â€œXâ€ and that any cooperative payment received, â€œYâ€ from the seller/sellerâ€™s agent will apply to that amount due first. When the cooperative compensation is equal to or greater than the agreement, the buyer has no out of pocket expense.
Buyer agents also frequently help buyers with FSBOâ€™s and the same agreement would apply. If the FSBO seller pays a commission or fee to the buyer agent equal to or greater than the buyer agency agreement, the buyer has no out of pocket expense.
Many buyer agents have not yet begun using buyer agency agreements. The tag line, â€œOur buyer services are free.â€ was very applicable in prior days. Today, some buyer agents still use this tag line, but some are shying away from it, given the changes.
Bottom lineâ€¦..any fees due depend upon the agreement between the buyer and the buyer agent.