Half a point between what I signed and what the listing offers. Who eats it?

Question

I've been reading up on this for six months and this part still won't sit straight in my head. My buyer representation agreement, the one I have to sign before touring anything now, has a blank for the fee my agent gets. Agent wants to write 2.5%. Fine. But the compensation is no longer on the MLS, so we don't know what any given seller will contribute until we ask.

So on a $400k house, 2.5% is $10,000. Seller's side says they'll contribute 2%, or $8,000. Where does the $2,000 come from? Three answers I've gotten from three people: I pay it in cash at close, I ask for it as a seller credit in the offer, or the agent waives it. The waiver answer makes me think the number in the agreement was never real. Anyone who has actually looked at how brokerages handle the shortfall clause, I want to know what the contract language usually says.

Rena Expert · Accepted Answer

The shortfall is yours by contract unless the agreement says otherwise, and most brokerage forms are written that way on purpose. Your agreement creates an obligation between you and the brokerage. Whatever the seller contributes is applied against that obligation, and the remainder is due from you at closing. So on your numbers, $2,000 in cash unless something else covers it.

The three answers you got are all live options, and which one operates depends on the exact wording in your form. Look for a clause that says compensation is reduced to the amount received from the seller, sometimes phrased as the fee being capped at any seller contribution. Some brokerages use that. Others say the buyer owes the difference and the agent may, at their discretion, reduce it. Discretion is not a right. Ask for the sentence to be edited to read that your obligation is limited to what the seller or listing broker pays, or write a dollar cap rather than a percentage.

The seller credit route has a constraint your agents may not raise. Asking the seller to cover your broker fee as a credit means the money runs through the transaction, and lenders limit seller-paid contributions by loan type and occupancy. Appraisal matters too, because the price has to support the credit. Confirm the current limit in writing with your lender before you write the offer, not after.

One more thing. Term length and the protection period do more damage than the rate. A twelve month exclusive covering the whole metro means you owe that brokerage on any purchase, including one you find yourself. Shorten it to a single property or thirty days if you're still deciding whether this agent is the one.

raj_mehta14 · Answer

The clause that got my attention when I read one of these forms was the protection period. Ninety days after termination, any property shown during the term still triggers the fee. So you can fire the agent and still owe them if you buy something they walked you through in month two.

aaron_fitz10 · Answer

@pike the waiver answer bothers me for a different reason. If the agent will drop 2.5 to 2 whenever the seller side comes in at 2, then 2.5 is decoration and everybody knows it. Which is sort of the point of the new rules, that the number is supposed to be negotiated up front rather than backfilled. Redfin's numbers have averages sitting around 2.4, so 2.5 isn't outrageous. I'd still rather sign a flat dollar figure so nobody's doing discretion later.

Half a point between what I signed and what the listing offers. Who eats it?

3 replies