Should a Bay Area Home Seller Pay a Buyer's Agent's Commission?

If you’re planning to sell your home in the Bay Area, you might be wondering about the changes in how you pay a buyer’s agent now that the real estate landscape has shifted regarding buyer agent compensation. With the recent settlement of the Sitzer/Burnett lawsuit against the National Association of REALTORS, the rules have changed, and you may be asking yourself whether or not you should offer a commission to a buyer’s agent. Let’s break down what you need to know.

The real estate industry has seen some significant changes in the summer of 2024, resulting in some pretty significant changes to the way buyers agents are compensated. The California Residential Listing Agreement, the standard contract sellers sign when they list their homes, no longer includes any mention of compensating a buyer’s agent. In the past, sellers would pay a total commission, part of which was designated for the buyer’s agent. Now, that’s no longer required.

However, don’t worry—this doesn’t mean you can’t offer a commission if you choose to. Many real estate brokerages, including mine, have introduced an addendum to the listing agreement that gives sellers three options:

No commission: You can decide not to offer any compensation to the buyer’s agent.
Conditional commission: You might offer some compensation depending on the offer.
Blanket commission: You can provide a blanket offer of compensation to the buyer’s agent, regardless of the offer.

Many sellers may be inclined to offer no commission, thinking it’s a straightforward way to save money. However, this decision isn’t always so simple. Some sellers might prefer to keep their options open by choosing to review offers first before deciding on compensation. Others might opt for the traditional route of offering a set commission to attract more buyers.

It’s important to understand that, regardless of the option you choose, the buyer’s agent will now be compensated according to the buyer’s broker agreement. This means the buyer has already agreed to pay their agent a certain amount at closing, raising the question: who actually foots the bill—the buyer or the seller?

Here’s where the negotiation gets interesting. There’s a new form called the SPBB (Seller Payment to Buyer Broker) that the buyer can include in their offer, asking the seller to cover some or all of the buyer’s agent’s compensation. The seller can then negotiate this in a counteroffer, deciding whether to pay all, part, or none of it.

For instance, if a buyer offers $1 million but wants the seller to pay $25,000 to their agent, the seller might counter with a higher offer, or refuse to cover the agent’s fee. But if the seller refuses to pay any commission at all, the buyer may well decide to offer less, with the difference going to pay his own agent. Ultimately, the net amount the seller receives remains the same—$975,000 in this case—whether they pay the buyer’s agent, or if the buyer pays their own agent.

In the Bay Area, where many buyers have substantial cash reserves, we might see more offers where the buyer handles the agent’s payment themselves, keeping the purchase price lower. But there will still be plenty of cases where buyers ask the seller to cover this cost, and that’s perfectly fine as long as it makes financial sense for both parties.

At the end of the day, what really matters to sellers is the net cash they receive at closing. Whether or not you decide to pay a buyer’s agent should come down to what nets you the most money. Even in For Sale By Owner situations, most sellers end up offering some compensation to the buyer’s agent because it helps move the sale forward, which is ultimately what every seller wants.

So, when a listing agent presents you with that addendum and asks whether you want to offer a buyer’s agent compensation, remember that it’s all negotiable. Whether you choose to offer no compensation, negotiate it based on the offer, or make a blanket offer, the focus should always be on maximizing your net proceeds at closing.

Selling your home is all about making the right decisions to get the best possible outcome. And as always in real estate, everything is negotiable. So, take your time, consider your options, and work with your agent to make the choice that’s right for you.

That’s the inside scoop on the latest changes in the real estate market. If you’re curious about more tips and tricks for selling your home, check out some of our other popular posts. Happy selling!