Should Sellers Pay Buyer Brokers?

Should Sellers Pay Buyer Brokers?

Sellers are not required to offer a commission, as the recent NAR settlement makes clear, but SHOULD THEY is the question here. As nice as it would be if costs to sell a house plummeted, there is a logical reason that the buyer’s broker fee was built into the price of the house.

Buyers Need to Save a Lot to Buy a House

Buying a house is a financial plunge. In many cases buyers have been saving for a good portion of their lives to make this investment. They need to assemble a down payment for the mortgage, as well as the costs of borrowing. They must pay half of the title and escrow fees at closing. Buyer’s closing costs can run 2%-3% of the cost of the home, over and above their mortgage down-payment - a good chunk of change!

Most buyers out there have enlisted the pro help of a real estate Broker. In fact, since the NAR settlement over a year ago, buyers now must be in contract with their Brokers spelling out that if the seller is not offering a Selling Office Commission for buyer’s Broker, the buyer will need to come out of pocket to pay that. The fee for buyer broker services is negotiable, so there is no way to quantify it for you here, but let’s just agree it probably won’t be zero! In most cases the fee is substantial.

Luckily, a large portion of the homes listed for sale ARE offering a commission to the buyer’s Broker, so when buyer Broker services are being talked about, the likelihood of buyer needing to pay that fee is low. It has a “just in case” feel to it. Even if the seller is not offering a commission, there is the option of making an offer requesting the seller to pay it - effectively building the commission into the price so that it can be paid over 30 years rather than as a lump sum (the way it already was).

Sellers ought to make a business decision and look at the bottom line

Sellers should thing about what they would walk away with after all the various taxes and fees. Getting hung up on a line-item on the settlement statement may be counter-productive. The seller might just have a pet peeve about paying a Broker that is not representing their interests? It is possible to find sellers who just can’t get past the idea of this. In those cases, buyer WOULD have to pay their agent, or else move on to a different house.

Think About ALL Repercussions of Refusing to Include Buyer Broker Commission

The buyers that might move on to another house are problematic, but we shouldn’t stop there. I want to focus on the buyers reckoning with a question mark. The mere grayness of the situation is problematic all by itself. If a buyer considers viewing a home that is offering 0% commission for their Broker, they are likely to pause in the presence of this unknown. It's possible these folks may never even view it; may not progress to the point where you are aware of them moving on. They move on in silence, maybe never seeing the house in person.

Let me make a comparison. A Realtor in my office recently marketed a house. There was a view, but not really. A house will eventually be built on the adjacent lot. It wasn't priced as a view home, so the lot should not have mattered, but it DID! The buyers couldn't get past the question mark of what would be built and how much that would obscure the Puget Sound view. That question mark was worse than if there was never a view to begin with. Buyers hate uncertainty!

Buyers are likely to ask themselves: Will I be able to buy this house, or is the commission going be a stumbling block? It’s likely going to require awkward conversations at the very least. Buyers can prioritize listings that are crystal clear about how their agent will be compensated. Maybe the seller WOULD have agreed to pay their Realtor at the right offer price, but this hypothetical buyer moves on just because of the uncertainty.

What Would a Realtor Do on Their Own House?

So, in effect, offering no Selling Office Commission may seem like a good idea, but it is LIKELY to depress showing activity by some amount. I don’t know exactly what that amount is, but I do know that exposing a home to the broadest possible swath of buyers is a good strategy for maximizing the final sales price. I believe offering 0% commission leads to a smaller bottom lines. If I were selling my home today, I WOULD offer a selling office commission, because that is the best strategy.

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