Understanding the New Buyers Agreement in Real Estate: Commission Flexibility and What It Means for You

If you’re planning to purchase a home, you may have heard the term “Buyer’s Agreement” thrown around. This agreement, which is a contract between you and your real estate agent, lays out the terms of how the agent will be compensated for their services. With recent changes in how commissions are structured, it’s important to understand what this means for you as a buyer — especially if you find a house where the agent’s commission is either higher or lower than what you initially agreed to pay.

In this post, we’ll break down the key points of the new Buyer’s Agreement and how commission adjustments can impact your home purchase, from lowering your purchase price to covering closing costs. Let’s dive into it.

What is a Buyer’s Agreement?

A Buyer’s Agreement is a contract you sign with a real estate agent, usually before you start house hunting. It outlines the responsibilities of both parties, including what services your agent will provide, how long the agreement will last, and how the agent will be compensated for their efforts. Traditionally, real estate commissions are split between the seller’s agent and the buyer’s agent. However, these agreements can be negotiable, especially in today’s market where commission structures are more flexible.

When the Commission is Greater Than What You Agreed To

Imagine you find your dream home, and the listing agent offers a commission that’s greater than what you initially agreed to pay your own agent. While this may seem like a win for your agent, what does it mean for you as the buyer?

In many cases, you have the option to use that additional commission to your advantage. Here’s how:

1. Lower the Purchase Price: You can apply the extra percentage of commission towards lowering the purchase price of the home. This effectively reduces the amount you need to finance, potentially saving you money over the life of your loan.

2. Apply It Toward Closing Costs: Buying a home comes with a variety of upfront costs, from inspections to title fees and appraisals. If the commission is higher than expected, you could ask the seller or your agent to use that additional amount to cover some or all of your closing costs. This can free up cash for other expenses or make the financial burden of buying a home feel a little lighter.

These options give you flexibility and could help ease the financial strain of home buying.

When the Commission is Lower Than What You Agreed To

On the flip side, if you find a property where the commission your agent receives is lower than what you originally agreed upon in your Buyer’s Agreement, you still have options.

1. Negotiate with the Seller: If the seller is offering a lower commission, you might be able to negotiate with them to cover the difference. Sometimes, a seller will be willing to pay a little more to ensure the deal goes through smoothly, especially if the property has been sitting on the market for a while.

2. Pay Your Agent the Difference: Alternatively, you can choose to make up the difference out of your own pocket. If you’re set on working with a specific agent and you really want to ensure they’re compensated as agreed, you could pay them the shortfall directly at closing. This would be done in addition to the commission the seller is paying the agent.

Commission Negotiability: What You Need to Know

It’s crucial to understand that commission rates in real estate are negotiable. While there are traditional commission structures (often around 2.5% to 3% for the buyer’s agent), the final amount can vary depending on the agreement you and your agent come to at the outset. The commission can be based on several factors, including:

• The level of service your agent provides

• Market conditions (whether it’s a buyer’s or seller’s market)

• The overall price of the home

• Local practices or brokerage policies

Since commissions are negotiable, you should have an open conversation with your agent about expectations and options before you start the home-buying process. If you’re unsure about how to structure the commission, don’t hesitate to ask for clarification or advice from your agent.

What Happens When You Write an Offer?

Once you’ve found a home and are ready to submit an offer, the commission details will come into play. Your agent will typically outline the commission being offered by the seller, and you’ll need to decide whether to use the flexibility in commission structure to adjust the purchase price or cover closing costs. This is part of the offer negotiation process and is worth discussing with your agent as part of your strategy.

For example, let’s say you agreed to a 3% commission rate with your agent, but the seller’s listing agent is offering only 2.5%. You can either:

• Negotiate with the seller to increase the commission to meet the agreed-upon 3%.

• Pay your agent the 0.5% difference at closing, which will make up for the shortfall in commission.

If the seller’s agent is offering a higher commission than you agreed to with your agent, you can choose to use the extra commission to reduce your purchase price or help cover closing costs. It’s important to communicate with your agent about your preferences, as these decisions should be made strategically to fit your financial goals.

The Bottom Line

Real estate commission structures are more flexible than ever, allowing you to get creative with how you manage your finances when purchasing a home. Whether the commission offered is higher or lower than what you agreed to, you have options. From negotiating with the seller to adjusting the purchase price or covering closing costs, understanding how the buyer’s commission works can make your home-buying experience smoother and more financially manageable.

As always, clear communication with your agent is key. Be sure to discuss commission expectations upfront, and don’t hesitate to ask for guidance when the time comes to make decisions about commissions during the offer process.

If you’re planning to purchase a home, you may have heard the term “Buyer’s Agreement” thrown around. This agreement, which is a contract between you and your real estate agent, lays out the terms of how the agent will be compensated for their services. With recent changes in how commissions are structured, it’s important to understand what this means for you as a buyer — especially if you find a house where the agent’s commission is either higher or lower than what you initially agreed to pay.

In this post, we’ll break down the key points of the new Buyer’s Agreement and how commission adjustments can impact your home purchase, from lowering your purchase price to covering closing costs. Let’s dive into it.

What is a Buyer’s Agreement?

A Buyer’s Agreement is a contract you sign with a real estate agent, usually before you start house hunting. It outlines the responsibilities of both parties, including what services your agent will provide, how long the agreement will last, and how the agent will be compensated for their efforts. Traditionally, real estate commissions are split between the seller’s agent and the buyer’s agent. However, these agreements can be negotiable, especially in today’s market where commission structures are more flexible.

When the Commission is Greater Than What You Agreed To

Imagine you find your dream home, and the listing agent offers a commission that’s greater than what you initially agreed to pay your own agent. While this may seem like a win for your agent, what does it mean for you as the buyer?

In many cases, you have the option to use that additional commission to your advantage. Here’s how:

1. Lower the Purchase Price: You can apply the extra percentage of commission towards lowering the purchase price of the home. This effectively reduces the amount you need to finance, potentially saving you money over the life of your loan.

2. Apply It Toward Closing Costs: Buying a home comes with a variety of upfront costs, from inspections to title fees and appraisals. If the commission is higher than expected, you could ask the seller or your agent to use that additional amount to cover some or all of your closing costs. This can free up cash for other expenses or make the financial burden of buying a home feel a little lighter.

These options give you flexibility and could help ease the financial strain of home buying.

When the Commission is Lower Than What You Agreed To

On the flip side, if you find a property where the commission your agent receives is lower than what you originally agreed upon in your Buyer’s Agreement, you still have options.

1. Negotiate with the Seller: If the seller is offering a lower commission, you might be able to negotiate with them to cover the difference. Sometimes, a seller will be willing to pay a little more to ensure the deal goes through smoothly, especially if the property has been sitting on the market for a while.

2. Pay Your Agent the Difference: Alternatively, you can choose to make up the difference out of your own pocket. If you’re set on working with a specific agent and you really want to ensure they’re compensated as agreed, you could pay them the shortfall directly at closing. This would be done in addition to the commission the seller is paying the agent.

Commission Negotiability: What You Need to Know

It’s crucial to understand that commission rates in real estate are negotiable. While there are traditional commission structures (often around 2.5% to 3% for the buyer’s agent), the final amount can vary depending on the agreement you and your agent come to at the outset. The commission can be based on several factors, including:

• The level of service your agent provides

• Market conditions (whether it’s a buyer’s or seller’s market)

• The overall price of the home

• Local practices or brokerage policies

Since commissions are negotiable, you should have an open conversation with your agent about expectations and options before you start the home-buying process. If you’re unsure about how to structure the commission, don’t hesitate to ask for clarification or advice from your agent.

What Happens When You Write an Offer?

Once you’ve found a home and are ready to submit an offer, the commission details will come into play. Your agent will typically outline the commission being offered by the seller, and you’ll need to decide whether to use the flexibility in commission structure to adjust the purchase price or cover closing costs. This is part of the offer negotiation process and is worth discussing with your agent as part of your strategy.

For example, let’s say you agreed to a 3% commission rate with your agent, but the seller’s listing agent is offering only 2.5%. You can either:

• Negotiate with the seller to increase the commission to meet the agreed-upon 3%.

• Pay your agent the 0.5% difference at closing, which will make up for the shortfall in commission.

If the seller’s agent is offering a higher commission than you agreed to with your agent, you can choose to use the extra commission to reduce your purchase price or help cover closing costs. It’s important to communicate with your agent about your preferences, as these decisions should be made strategically to fit your financial goals.

The Bottom Line

Real estate commission structures are more flexible than ever, allowing you to get creative with how you manage your finances when purchasing a home. Whether the commission offered is higher or lower than what you agreed to, you have options. From negotiating with the seller to adjusting the purchase price or covering closing costs, understanding how the buyer’s commission works can make your home-buying experience smoother and more financially manageable.

As always, clear communication with your agent is key. Be sure to discuss commission expectations upfront, and don’t hesitate to ask for guidance when the time comes to make decisions about commissions during the offer process.

If you have any questions please don’t hesitate to reach out.

Mel & Zack Durham

EXP Realty | PNW Homes Group

360.481.2073

melandzack@pnwhomesgroup.com