Buyer Side Brokerage Compensation Here’s how it works now and what about the future?

How Buyers Agency works now. 

1. Commission Split:

   • In many cases, the buyer’s agent is compensated through a commission split with the seller’s agent. The total commission paid by the seller is typically split between the listing agent (representing the seller) and the buyer’s agent.
   • The specific percentage allocated to the buyer’s agent is agreed upon in advance and is often stipulated in the multiple listing service (MLS) information.

2. Not Usual Now – Flat Fee or Hourly Rate:

   • Some buyer’s agents may work on a flat fee or hourly rate basis. This compensation method is less common but can be negotiated between the buyer and the agent.
   • In this arrangement, the buyer may pay the buyer’s agent directly for their services, regardless of the property’s final sale price.

3. Buyer’s Agent Agreement:

   • Before starting the home search process, the buyer and the buyer’s agent typically sign a Buyer’s Agent Agreement. This agreement outlines the terms of the relationship, including the commission structure and any fees the buyer may be responsible for.
   • The agreement often specifies that the buyer’s agent will be compensated through the commission offered by the seller.

It’s important for buyers to be aware of the compensation structure and any potential costs associated with engaging a buyer’s agent. In many cases, the buyer’s agent’s commission is paid by the seller as part of the overall transaction costs. However, buyers should discuss compensation arrangements with their chosen agent and clearly understand any fees or costs involved.

Now let’s compare and contrast real estate commissions in several countries, including the United States, the United Kingdom, Australia, Germany, Italy, Spain, Mexico, and France:

1. Negotiability:
   • United States: Real estate commissions are negotiable between the seller and the real estate agent.
   • United Kingdom: Commission rates are negotiable between the seller and the estate agent.
   • Australia: Commission rates are negotiable between the seller and the real estate agent.
   • Germany: Commissions are negotiable between the seller and the real estate agent.
   • Italy: Commission rates are negotiable between the seller and the real estate agent.
   • Spain: Commission rates are negotiable between the seller and the real estate agent.
   • Mexico: Real estate commissions are negotiable between the seller and the real estate agent.
   • France: Commission rates are negotiable between the seller and the real estate agent.
2. Payment Responsibility:
   • United States: Sellers typically pay the commission, which is a percentage of the final sale price.
   • United Kingdom: Sellers are responsible for paying estate agent fees.
   • Australia: Sellers typically pay the commission, usually a percentage of the sale price.
   • Germany: Sellers typically pay the commission, often a percentage of the sale price.
   • Italy: Sellers typically pay the commission, usually a percentage of the sale price.
   • Spain: Sellers typically pay the commission, often a percentage of the sale price.
   • Mexico: Sellers typically pay the commission, often a percentage of the sale price.
   • France: Sellers typically pay the commission, usually a percentage of the sale price.
3. Commission Structure:
   • United States: Commonly a percentage (around 5-6%) of the sale price.
   • United Kingdom: Commonly a percentage of the sale price, negotiable but often around 1-3%.
   • Australia: Commonly a percentage (around 2-3%) of the sale price.
   • Germany: Commonly a percentage (often 3.57%) of the sale price.
   • Italy: Commonly a percentage (around 3-5%) of the sale price.
   • Spain: Commonly a percentage (around 3-5%) of the sale price.
   • Mexico: Commonly a percentage (around 4-7%) of the sale price.
   • France: Commonly a percentage (around 4-10%) of the sale price.
4. VAT or Additional Costs:
   • United States: No VAT, but additional costs may vary.
   • United Kingdom: No VAT on commissions, but other costs may apply.
   • Australia: No VAT, but additional costs may apply.
   • Germany: VAT (around 19%) may be applicable to the commission.
   • Italy: VAT (around 21%) may be applicable to the commission.
   • Spain: VAT (around 21%) may be applicable to the commission.
   • Mexico: No VAT on commissions, but additional costs may apply.
   • France: No VAT on commissions, but additional costs may apply.
5. Dual Agency:
   • United States: Dual agency exists in most states, where one agent represents both the buyer and seller.
   • United Kingdom: Dual agency exists, but practices can vary.
   • Australia: Dual agency exists but is regulated.
   • Germany: Dual agency exists, but disclosure is required.
   • Italy: Dual agency exists, but practices may vary.
   • Spain: Dual agency exists, but practices may vary.
   • Mexico: Dual agency exists, but practices may vary.
   • France: Dual agency exists, but practices may vary.

It’s important to note that these generalizations may not capture all nuances within each country’s real estate market, and practices can evolve over time. Regulations, negotiation practices, and customary fees may vary within region.

Which countries use Buyers agents?

Buyer’s agents are commonly used in real estate transactions in the following countries:

1. United States:

   • Buyer’s agents are widely used in the United States. They represent the interests of the buyer in real estate transactions and are typically compensated through a portion of the total commission paid by the seller.

2. United Kingdom:

   • In the United Kingdom, buyers often engage with buyer’s agents, though the prevalence of buyer’s agents is not as standardized as in the United States.

3. Australia:

   • Buyer’s agents are commonly used in Australia. They work on behalf of the buyer, helping them find properties, negotiate deals, and navigate the buying process.

4. Germany:

   • Buyer’s agents are present in Germany. They assist buyers in finding suitable properties, negotiating, and facilitating the purchase process.

5. Italy:

   • Buyer’s agents are used in Italy. They assist buyers in finding properties, conducting negotiations, and navigating the complexities of the Italian real estate market.

6. Spain:

   • Buyer’s agents are commonly used in Spain. They work on behalf of the buyer to identify suitable properties, negotiate terms, and guide the buyer through the purchasing process.

7. Mexico:

   • Buyer’s agents are used in Mexico, especially in areas with a significant expatriate community or in regions popular with international buyers. They help buyers navigate the local real estate market and provide assistance throughout the purchasing process.

8. France:

   • Buyer’s agents are present in France. They assist buyers in finding properties, conducting negotiations, and handling various aspects of the property purchase.

It’s important to note that while buyer’s agents are commonly used in these countries, the prevalence and structure of their involvement can vary. In some countries, dual agency (where one agent represents both the buyer and the seller) is allowed or regulated, while in others, it may be restricted. Additionally, the buyer’s agent’s compensation is often derived from the overall commission paid in the transaction.

We think if buyers agency goes away as we know it the industry will evolve into real estate agency models taken from some of the countries contrasted.  We do believe that the current United States Buyers Agency is highly evolved, efficient and pro consumer and don’t think the evolution will be for the better.  

Further real estate commission is between the homeowner and the real estate agent. Government intrusion in the market place could impose burdensome responsibilities on real estate agents, homeowners, and hurt the consumer and, regardless, absent sufficient justification, parties should generally be left alone to dicker the terms of their private agreements without government overreach.