Who is responsible for paying a commission when one is represented as a buyer’s agent?
The seller usually pays the commission for both buyer and seller. If the property is listed through the MLS, the seller pays the buyer’s agent commission.
Actually technically speaking, the seller pays the commission to the listing brokerage who then pays the selling brokerage the commission that was advertised in the MLS listing. On the other hand, if the seller is a FSBO (for sale by owner), then the seller only pays the buyer’s commission if the seller agrees to do so.
In the recent few years, the options of seller representation diversified and this has rolled over to how buyer agents are, and will be compensated. In recent years, there is great diversity in the compensation offerings made via listings in the MLSs, FSBO sellers, FSBO via flat fee listings, and sellers who are not listed at all, anywhere. As a result, the buyer agent job is no longer clearly defined and neither is compensation. Buyer agents pick up more responsibilities and liability when bringing a buyer to a FSBO, or flat fee listing. Moving forward, we will probably see more and more buyer agency agreements executed that define compensation and duties.
Most FSBOs will also cooperate with a buyer’s agent and pay a commission in order to be able to sell the property, but it’s not automatic. If a buyer’s agent wants the FSBO to pay the commission, the agent needs a written commission agreement with the FSBO. Otherwise, the agent will have to look to the buyer for compensation. If the agent does not have a written commission agreement with the buyer or the seller, the agent is out of luck. This does not happen a lot, but it could happen.
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