Should I Pay The Buyer’s Agent’s Commission?

Dear Phyllis,
My son will be selling his Santa Clarita condo and I believe he is no longer required 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 was never “required” 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 opt 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 can attract more buyers since most work with agents who expect compensation. Buyers might feel more confident in making an offer on a property if they know their agent is being compensated through the transaction rather than worrying about paying their agent out-of-pocket. While an attorney is typically paid by the hour, remember that both agents are not paid until the close of escrow.

My niece is an active buyer in Westlake Village. She and her fiancé struggled with coming up with their down payment. They instructed their Realtor that they could not pay buyer compensation and to not show them any homes where a commission was not paid to their Realtor. This limits her options and might cause her to miss out on potential homes that otherwise meet her criteria. So many listings have bidding wars because they are aggressively priced, which attracts 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.
Best regards,
Phyllis