If you’re buying a home, there’s a good chance your real estate agent will ask you to sign a Buyer Agency Agreement before you begin making offers.
And if I sent you this article along with an agreement, this is your next step.
The goal is simple: understand what you’re agreeing to before you sign it.
A Buyer Agency Agreement explains the relationship between you, your agent, and the brokerage representing you. In Pennsylvania, the Buyer Agency Contract is the agreement used to establish exclusive buyer representation.
The agreement typically spells out things such as how long the relationship lasts, the geographic area it covers, what the brokerage and agent will do for you, and how the brokerage will be compensated.
Does Signing It Mean I Have to Pay the Entire Buyer-Agent Fee Myself?
Not necessarily.
This is one of the most common questions buyers have.
Your agreement will state how your brokerage is to be compensated. But that does not automatically tell us where all of that compensation will ultimately come from in a particular transaction.
Before preparing an offer, I can find out whether compensation is being offered by the listing brokerage and what the seller may be willing to consider.
If the amount being offered covers the compensation stated in your agreement, there may be no difference for you to cover.
If only part is being offered, we may be able to ask the seller to pay some or all of the remaining amount as part of the offer.
Under Pennsylvania’s current standard forms, seller payment of buyer-broker compensation can be negotiated separately from more traditional seller concessions for closing costs.
Could the Offer Price Be Adjusted?
Sometimes another option may be to structure an offer so that the purchase price is increased and the seller is asked to use part of the proceeds toward the buyer-broker compensation.
That can potentially reduce the amount the buyer needs to pay separately at settlement.
But it is not automatic.
The seller has to agree to the offer. The lender has to approve the structure. And the property still has to support the purchase price through the appraisal.
That’s why this is something to work through with your Realtor® and lender using the actual numbers for the property you’re considering.
Buyer-Broker Compensation and Seller Assist Are Different
It’s also helpful to separate these two ideas.
Buyer-broker compensation pays the brokerage representing the buyer.
Seller concessions, sometimes commonly referred to as seller assist, may be used toward eligible buyer closing expenses such as lender fees, title expenses, prepaid taxes and insurance, or other permitted costs.
Pennsylvania’s current Agreement of Sale provides separate ways to negotiate traditional seller concessions and seller payment of buyer-broker compensation.
If a buyer wants help with both, they need to be addressed appropriately when the offer is prepared.
What Should You Do Before Signing?
Read the agreement and pay particular attention to:
- how long it lasts
- the geographic area it covers
- the compensation section
- anything you don’t understand
Then ask questions.
When I’m working with a buyer, I want these conversations to happen before we begin writing offers, not when someone is already under pressure to make a decision.
The agreement itself controls the relationship between you and the brokerage. This article and video are meant to help you understand the general concepts so you know what questions to ask.
Have questions?
Whether you’re buying, selling, downsizing, helping an aging parent, or just trying to understand your options, I’m happy to help.