Who Pays the Buyer’s Agent Commission When the Seller Pays Less

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

Who Pays the Buyer’s Agent Commission When the Seller Pays Less

Dear Phyllis,

I have been working with my real estate agent for several months. We made two offers that were not accepted. Fortunately, our third offer was accepted. However, the seller agreed to pay our agent only a 2% commission.

Then, just before closing, Escrow informed us that we had to pay our agent an additional 1% because of the buyer-broker agreement we had signed. This came as a complete surprise. Can you explain why we are responsible for this additional commission? Confused Buyer

Dear Buyer,

I understand why this caught you by surprise. The rules surrounding buyer-agent compensation have changed, and these agreements can be confusing. First, when you signed your buyer-broker agreement, you likely agreed to a specific amount of compensation for your Realtor’s services. For example, if the agreement called for 3%, you agreed to that amount.

However, the seller does not necessarily have to pay the entire amount. In your case, the seller agreed to contribute 2%. Therefore, if your agreement required 3%, you may have been responsible for the remaining 1%. Importantly, your Realtor may not have added a new fee at the last minute. Instead, your signed agreement may have already required you to pay the difference. Escrow was simply following the terms of that agreement when it identified the amount due at closing.

I understand your frustration if you did not realize you could be responsible for that difference. That is why buyers should carefully review the buyer-broker agreement before signing it. In particular, ask what happens if the seller offers less toward your agent’s compensation. Going forward, buyers should also discuss this issue when making an offer. This approach makes everyone aware of the potential cost before the transaction moves into escrow.

I am sorry you felt blindsided by this charge. Closing should not bring unexpected costs. A clear conversation at the beginning could have prevented this misunderstanding.