Should I pay the buyer’s agent’s commission?

Ask Phyllis: a blog series of frequently asked real estate questions.

Should I pay the buyer’s agent’s commission?

Dear Phyllis,

My son will sell his Santa Clarita condo, and I believe he no longer needs to pay the buyer’s agent.  He interviewed several Santa Clarita Realtors, and they gave him different advice. He and I are more confused than ever before. I told him that I would check with our local real estate expert. Can you help answer his question: Should I pay the buyer’s agent’s commission?

Donna

Dear Donna,

To clarify, the seller never had to pay the buyer’s Realtor.  In California, the former listing agreement specified the total commission and the portion that goes to the buyer’s agent. However, the compensation structure could always be negotiated, and this has not changed.

What has changed is that buyers can now choose to be unrepresented.  This means they will have to write their own offer, find an inspector, decide which inspections to conduct, etc. In completing their offer, they may need to pay an attorney to draft the initial offer and review and draft any additional counteroffers. If they have questions regarding the disclosures, as the listing agent is not representing them, the listing agent must be very cautious in answering any questions to an unrepresented buyer.

Paying the buyer’s agent attracts more buyers since most work with agents who expect compensation. Additionally, buyers feel more confident making an offer on a property when they know their agent is compensated through the transaction, rather than worrying about paying their agent out-of-pocket. In contrast, while an attorney typically charges by the hour, both agents only get paid at the close of escrow.

My niece recently purchased a home in Westlake Village. She and her fiancé struggled to come up with their down payment. They instructed their Realtor not to show them any homes where a commission was not paid to their Realtor, as they could not pay buyer compensation. This limitation might have caused them to miss potential homes that otherwise met their criteria. Many listings have bidding wars because they are aggressively priced, attracting more buyers. Attracting more buyers leads to higher selling prices. Considering these dynamics and the specific market conditions is crucial when deciding on compensation structures.

I hope this helps clarify the situation for your son.