How the buyer agency fee is usually set
This topic of negotiating buyer-agency fees is not discussed as much as negotiating listing-agency fees because buyer-agency fees are usually specified in the listing agreement. Most listings include an offer of cooperation to buyer’s agents. The offer for a specific amount or for a specific percentage of the sale price is made by the listing broker and approved by the seller. The amount is part of the listing contract between the seller and the listing agent.
Why you might want to negotiate
Here in the Hudson Valley and lower Catskill Mountain region, the most frequent offer of cooperation is a specific percentage of the sale price. Occasionally, the offer will be a half percent less and occasionally it will be a half percent more. So, let’s call those typical offers 1 (for less), 2 (for most frequent), and 3 (for more). As a buyer, you might agree that offer 2 is reasonable, but you might take issue when your buyer agent gets 3 or more. After all, those are dollars that are taken out of the sale proceeds — if the seller didn’t have to pay them, he or she might have accepted a bit less. The price range in which you are shopping and the level of service you require might also influence this decision.
How you might negotiate a fee that has already been set
If the buyer is willing to enter into a buyer-agency contract, one part of that agreement could be to set limits on the buyer-agent compensation. Buyer and agent could agree to a specific dollar amount or to a specific percentage. If the buyer-agent compensation is greater than agreed, the difference could be credited to the buyer or the seller at closing and the buyer could bring that many fewer dollars to the closing table.
However, the arrangement can cut both ways — if the buyer-agent compensation is less than agreed, then the buyer will be expected to make up the difference at closing. Remember also, compensation will not be discussed in a vacuum. Your buyer’s agent will grant you compensation limits and the obligation to perform specific duties, but he or she will also have expectations for you that could include your loyalty and cooperation.
If you think you might want to negotiate buyer agency fees, be sure to do that at the same time you ask a buyer agent to show you a property or search for listings. Buyer agency contracts are a good idea — they specify expectations and obligations, including compensation, that are often taken for granted by agents and clients alike.
What usually happens
Partly because buyer agency is often undertaken without a formal contract, most buyer-agents simply accept the offer of cooperation specified with the listing, and their buying clients do not attempt to negotiate that figure. It can be a significant disruption when either buyer or agent attempts to negotiate a figure that has already been specified or that should have been negotiated earlier.
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