Buyer Agent Commission Negotiations - Are You Making Mistakes?

Buyer Agent Commission Negotiations: Are You Handling Them Correctly?

In the changing landscape of real estate, buyer agent commission negotiations are becoming a hot topic. As a Realtor, understanding how to navigate these conversations effectively is crucial for your success. Mike Ferrante, Team Leader of the 21 Mike Team at Century 21 HomeStar, alongside Broker/Owner Tony Geraci, delves into the intricacies of these new negotiations, offering insights for both buyer agents and listing agents on how to handle commission conversations professionally and strategically.

The Current Issue: Zero Commission on Buyer Agency Agreements

One of the significant challenges that agents are facing revolves around the buyer agency agreement and commission expectations. Tony Geraci, with over three decades of experience in real estate, including purchase, sales, title, and mortgage, weighs in on this issue.

“Agents are getting confused when filling out buyer agency agreements,” says Geraci. “Some agents are incorrectly putting a zero on the buyer agency form, assuming that they’ll negotiate commission from the seller later. That’s a big mistake.”

The new rule mandates that to represent a buyer and show them properties, a buyer agency agreement must be signed upfront. This agreement should clearly outline the commission the buyer agent expects to earn. By putting a zero on this form, you are effectively stating that the buyer agent will earn nothing, even if the listing offers a commission.

Tony explains further: “Whatever number you write on that agreement is the maximum amount you can earn. If you write zero, that’s the most you can get, even if the listing agent offers commission.”

This means that agents must determine their value upfront and negotiate that amount with their buyers. By doing this, they are not only protecting their interests but also ensuring transparency in the transaction.

Why Buyer Agents Should Embrace This Change

This shift in how buyer agents approach compensation actually puts the control back in the hands of the agents. “If you don’t love this change, you’re insane,” says Mike Ferrante. “You now have control over how much you get paid for your services.”

In the past, many buyer agents simply accepted whatever the listing offered, often feeling like they had no say in their compensation. Now, buyer agents can clearly define their value, negotiate it with their clients, and ensure that they are fairly compensated for the work they do. As a buyer agent, you decide how much you charge for your services, and it’s crucial to communicate this effectively with your clients upfront.

Handling Conversations with Listing Agents

Another critical area that agents are struggling with is how to handle conversations with listing agents, especially when the listing offers zero or negotiable commission. Ferrante and Geraci emphasize that it’s important to have these conversations upfront to avoid any surprises later in the transaction.

“You’re going to encounter listing agents who tell you the seller is offering nothing or that the commission is negotiable,” says Ferrante. “It’s crucial that buyer agents know how to navigate these conversations effectively.”

Tony adds, “Some listing agents will even say, ‘Why should you get paid more than me?’ That’s not a valid argument. Listing agents shouldn’t be involved in determining what a buyer agent gets paid. It’s between the buyer agent and the buyer.”

In these cases, it’s essential for the buyer agent to stand firm on the agreed-upon commission amount, which should have been clearly defined in the buyer agency agreement.

The Importance of Setting Expectations with Sellers

One of the most vital aspects of these changes is educating sellers about the role of buyer agent commissions. Many sellers, particularly in the current market, may believe they don’t need to offer a buyer agent commission. However, this can significantly shrink the pool of potential buyers for their home.

Ferrante shares a recent story: “An agent had five inquiries on a listing. When the buyers’ agents called to ask about the commission, the listing agent said it was negotiable. Two of the five agents canceled their showings. That’s 40% of potential buyers lost.”

By offering a clear commission upfront, sellers make their property more attractive to buyer agents, which in turn, increases the likelihood of selling their home faster and for a higher price. The commission isn’t just about paying agents—it’s about ensuring a smooth transaction by compensating the professionals who bring the buyers to the table.

Final Thoughts

Buyer agent commission negotiations are now an essential part of the real estate process. By setting clear expectations with both buyers and sellers and communicating openly with listing agents, you can navigate this new landscape successfully.

As Tony Geraci wisely notes, “Sellers need to understand they’re not just paying the buyer’s agent to sell their house—they’re compensating them for all the work they’ve done to bring that buyer to the point of making an offer. That could be months or even years of work.”

If you’re a Realtor in Cleveland, Northeast Ohio, or Columbus, navigating these changes is critical for your success. The 21 Mike Team at Century 21 HomeStar is here to help. Schedule a time to talk with Mike or Tony today to ensure you’re handling these changes the right way and staying ahead in this competitive market.

Contact Us

Need help navigating real estate in Ohio? Visit 21Mike.com or schedule a time to chat with Tony at tonytalk.net. Let the 21 Mike Team be your one-stop shop for buying and selling real estate in Greater Cleveland and beyond!

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