I keep hearing that we’re in a “buyer’s market.”
I’ve even seen buyer’s agents use that as a reason to ask a seller for higher compensation.
But that raises a bigger question for me:
How should a buyer’s agent’s compensation actually be determined?
I frequently hear agents say, “I’ve been working with these buyers for two years,” as part of the explanation for why they need a certain amount of compensation.
I understand the frustration. We can spend months — sometimes years — showing homes, answering questions, writing offers, and helping a buyer finally get to the closing table. Honestly, that’s the part I actually enjoy. Spending that much time with someone means getting to be part of such an intimate stretch of their life.
But I struggle with the idea that the length of that relationship should determine what a seller is expected to contribute toward the buyer’s agent’s compensation.
The seller didn’t choose that buyer.
The seller didn’t hire that buyer’s agent.
And the seller had no control over whether the agent showed that buyer five houses or fifty.
So why should the amount of time an agent has worked with a buyer determine what we’re asking the seller to pay?
There’s another side to this that doesn’t get discussed very often.
That buyer may eventually have a home to sell. That buyer could become a future listing client. The relationship an agent builds with a buyer may result in more than one transaction over the years.
That’s part of building a real estate business. It isn’t necessarily part of the seller’s transaction.
None of this means buyer agents shouldn’t be well compensated. Buyer representation has real value.
And there can absolutely be good reasons for a seller to agree to pay some or all of a buyer-agent compensation request. Doing so may make the property financially accessible to more buyers, strengthen an offer, or simply make sense as part of the overall negotiation.
But that’s the key: it’s part of the negotiation.
It’s a financial term of the offer that the seller can evaluate along with price, concessions, financing, inspection terms, closing date and everything else the buyer is proposing.
The money involved in a real estate transaction ultimately has to come from somewhere. A buyer brings purchasing power to the transaction through cash and/or financing, while the seller decides whether the net proceeds from an offer make sense. Buyer-agent compensation can be negotiated within that larger financial picture.
That is very different from saying a seller owes a particular amount because an agent has spent two years working with a buyer.
And then there’s the phrase “buyer’s market.”
Are we really in one?
Market conditions aren’t uniform across an entire metro area. One neighborhood can favor buyers while another still has limited inventory and strong seller demand. Price point, condition, location and how a home is priced against its competition all matter.
A market label can help describe negotiating conditions.
It shouldn’t determine what an agent believes they are entitled to be paid.
Maybe we’re mixing together two questions that should remain separate:
What is buyer representation worth?
And who should be responsible for paying for it?
Those aren’t necessarily the same question.
And perhaps compensation should be negotiated for what it is — compensation for professional representation — rather than justified by how long it took a client to buy a house.
Transparency Series Real Estate, Done Personally.
Transparency Series #22
Real Estate, Done Personally.