Who Owes the Commission to the Buyers Agent if you've Signed a Buyer Representation Agreement

The Real Estate and Mortgage Show

Hi there, I'm Walter Monteiro with The Maximum Results Team at ReMax Real Estate Centre. If you've recently signed a buyer representation agreement, you might be wondering, Who owes the commission to my buyer's agent? Well, let's break it down for you.

When you sign a buyer representation agreement, you're essentially formalizing your working relationship with your buyer's agent. This agreement means your agent is dedicated to helping you find the perfect home and negotiating the best possible deal on your behalf.

Now, you might be concerned about how much this will cost you. The good news is that in most cases, the commission owed to your buyer's agent is typically paid by the seller, not you. Here's how it works.

When a seller lists their home with a real estate agent, they agree to a commission fee, usually a percentage of the final sale price. This commission is then split between the seller's agent and the buyer's agent.

So, when you purchase a home, the commission for your buyer's agent is usually covered by the seller as part of the overall commission agreement. This allows you to benefit from professional representation without having to pay out-of-pocket for the service.

However, it's important to be cautious. Your buyer representation agreement may state that if there is any shortfall in the commission paid by the listing agent, you, the buyer, could be responsible for covering the difference.

Shortfalls can happen due to unforeseen issues, such as liens on the property or penalties and fees on the seller's mortgage that come to light at the last minute. These issues can reduce the funds available to cover the agreed-upon commissions.

To protect yourself, consider inserting a clause in your offer that states the buyer's agent will be paid from the proceeds of the transaction, but this amount will be held back from the seller by your lawyer. This ensures the commission is paid as agreed and protects you from unexpected costs.