Should a Bay Area Home Seller Pay a Buyer's Agent's Commission? - Seb Frey, Silicon Valley + Bay Area REALTOR

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. As of December 2024, the amount that the buyer would like the seller to pay for the buyer’s agent’s compensation has been written into the California Residential Purchase Agreement which most REALTORs use throughout the Bay Area. Paragraph 3G(3) now allows the buyer to specify that the seller is 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. In fact, in actual practice, we are seeing that almost all buyers, regardless of purchase price or cash reserves, are asking the sellers to pay the buyer’s agent’s commission. It seems people find it easier to to wrap their heads around one price to pay (the price of the property), not two (the price of the property, plus the price of their buyer’s agent compensation).

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.

Arguments In Favor of Offering to Pay the Buyer’s Agent Commission

Even though it is now required for a buyer to explicitly request that the seller pay their agent’s compensation in the purchase offer, some REALTOR®s still argue that sellers should continue making these offers voluntarily. Personally, I don’t think that it makes any difference, since the buyer and buyer’s agent must already have a written agreement specifying how much the buyer’s agent will be paid, regardless of what the seller may or may not be offering. It is, in all cases, negotiable.

However, here are the strongest arguments in favor of doing so:

1. More Buyer Agents Will Show the Home

Buyer agents typically guide their clients to homes that align with their needs and offer competitive compensation. If a seller doesn’t provide a buyer’s agent commission upfront, agents may be less motivated to show the home, knowing their client may need to pay their fee out of pocket. While buyer agents are required to act in their clients’ best interests, financial incentives do impact behavior, and homes with clear compensation may get more attention.

Of course, an offer to pay the buyer’s agent’s compensation cannot be made through the Multiple Listing Service, which is where buyer’s agents would have found this information very easily in the past. Some brokerage websites will display an offer of buyer broker compensation (for example, Compass.com will), but most non-Compass agents won’t even know to look there.

2. Reduces Friction for Buyers

With the new system, many buyers will now have to negotiate and pay their agent’s fee separately, adding to their closing costs. This could discourage buyers from considering homes where no buyer’s agent compensation is offered, especially first-time or lower-budget buyers who are already stretched thin. By making a blanket offer of compensation, sellers remove this potential financial hurdle, making their home more attractive.

This is not so much an issue in the Bay Area, as virtually all sellers are open to compensating buyer’s agents. This may be more of an issue in the hinterlands of California or perhaps nationwide, where prices are lower and sellers are not sitting on mountains of home equity, as they often are in the Bay Area. The word is out that most sellers are open to paying this, so their is a presumption among buyers and agents that they most likely will.

3. Keeps the Buyer Pool as Large as Possible

Sellers benefit most when their home is exposed to the widest possible group of buyers. If some buyers hesitate to work with agents due to added costs, or if agents are hesitant to show homes without clear compensation, it shrinks the buyer pool. A smaller buyer pool often means longer time on market and potentially lower offers. Offering buyer-agent compensation helps ensure maximum competition.

This is a good argument, because the bigger the buyer pool (the greater the demand), the higher the sale price. However, in the Bay Area, I doubt the buyer pool would be increased much, since buyers and agents are, by and large, expecting the seller will be open to paying the buyer’s broker compensation, with an acceptable offer price.

4. Can Lead to Higher Offers

If a seller does not offer buyer agent compensation, the buyer may have to factor that cost into their offer. For example, if a buyer needs to pay their agent 2.5% out of pocket, they may reduce their offer price accordingly. By including compensation upfront, sellers avoid this issue and help buyers make their strongest possible offer.

This is indeed the case, since there’s no such thing as a free lunch. Almost all buyers will work with agents – and certainly, the buyers willing to pay the highest price will have agents on their side. But if a buyer has to pay their own agent, and they know that most sale prices have a payment to the buyer’s broker baked in, they will in most cases reduce their offer price to offset the compensation they will then have to pay to their own broker.

5. Provides Transparency and Avoids Last-Minute Negotiations

Without an upfront offer of compensation, negotiations over buyer-agent fees could become more complex. Buyers and their agents may try to include commission requests as part of the offer process, leading to delays, counteroffers, and potential deal friction. An upfront offer simplifies the process and keeps negotiations focused on the home price and terms.

By making a blanket offer of compensation, there’s just one less thing to haggle over. And even when that offer is made, there’s nothing that says the buyer has to accept it. The buyer is always free to reject that offer and specify that the buyer themself will pay some or all of their agent’s fee.

6. Levels the Playing Field with Competing Listings

In a competitive market, sellers who offer buyer agent compensation upfront may have an advantage over those who do not. If similar homes are available, but one makes it easier for a buyer to work with their agent without additional costs, buyers may prioritize that listing. This could be especially important in markets where homes are taking longer to sell.

At the end of the day, a commission is an incentive to sell. That’s what it’s there for. With no commission offered to a buyer’s agent, there is obviously less incentive for the buyer’s agent, and when other listings are offering that incentive, it shouldn’t be a surprise that agents would work harder to show those listings to their buyers, and encourage them to write offers on them.

Conclusion

Ultimately, whether a Bay Area home seller should pay a buyer’s agent’s commission comes down to strategy, market conditions, and the seller’s goals. While the recent changes in commission structures give sellers more flexibility, offering compensation to a buyer’s agent can still be a smart move—helping to attract more serious buyers, avoid negotiation hurdles, and potentially secure a higher sale price. In a competitive market, providing a clear offer of compensation could make a listing stand out. The key is to understand the market dynamics, evaluate the competition, and make an informed decision that maximizes your home’s exposure and final sale price.

If you’re considering selling your Bay Area home and need expert guidance on pricing, marketing, and negotiation strategies, don’t hesitate to reach out.