Does For Sale By Owner Pay the Buyer’s Agent?

When a property is listed as “For Sale By Owner” (FSBO), the homeowner sells it directly without a real estate agent. This often raises questions about real estate commissions, particularly concerning the buyer’s agent. Understanding the payment structure in FSBO transactions clarifies who is responsible for these fees.

Understanding Real Estate Commission Structures

In a traditional real estate transaction, the seller typically pays a total commission, divided between the listing broker and the buyer’s broker. This commission is usually calculated as a percentage of the home’s final sale price, often ranging from 5% to 6%. For example, on a $400,000 home, a 5% commission would be $20,000, split between the agents’ brokerages.

The listing agent markets the property, sets a price, and negotiates for the seller. The buyer’s agent represents the buyer’s interests, assisting with property searches and guiding the purchase. While sellers traditionally covered both agents’ fees, recent changes mean the buyer’s agent commission is now negotiated directly between the buyer and their agent. Commissions remain negotiable.

FSBO and Buyer’s Agent Compensation

An FSBO seller is not legally obligated to pay a buyer’s agent commission, but can choose to offer it. Many buyers expect the seller to cover this commission, often through a concession at closing. This choice is typically determined during offer negotiations.

FSBO sellers can offer to pay a buyer’s agent commission. One method involves listing the property on the Multiple Listing Service (MLS) through a flat-fee service. While MLS listings can no longer advertise the seller will pay the buyer’s agent commission, FSBO sellers can still offer it. This compensation, typically 2% to 3% of the purchase price, incentivizes buyer’s agents to show the property.

Alternatively, an FSBO seller can directly negotiate to pay a buyer’s agent commission as part of the purchase agreement. If no such offer is made, the buyer’s agent still expects compensation. In these cases, the responsibility for the commission shifts to the buyer, as outlined in their buyer agency agreement.

Guidance for Buyers with Agents

Buyers working with agents interested in an FSBO property need to understand their agent’s compensation. A buyer agency agreement outlines the terms, including scenarios where the seller does not pay a commission. If an FSBO seller does not offer a commission, the buyer may become responsible for their agent’s commission directly, as stipulated. This fee typically ranges from 2% to 3% of the sale price.

If an FSBO seller does not offer to pay their agent’s commission, buyers have options. They might negotiate with the seller to include the commission as a concession in the sale price, potentially rolling it into the mortgage. Another option is for the buyer to pay the commission out of pocket at closing. Buyers should discuss commission expectations with their agent early when considering FSBO properties.

Strategic Considerations for FSBO Sellers

FSBO sellers decide whether to offer a buyer’s agent commission. Offering compensation can increase the property’s exposure to a broader pool of potential buyers, as many buyers work with agents. This increased visibility can lead to a faster sale and potentially a higher sale price due to greater competition. It can also streamline the transaction process.

Conversely, FSBO sellers may choose not to pay a commission to save costs, avoiding a listing agent’s fee. However, refusing to offer a buyer’s agent commission can deter agents from showing the property, potentially leading to a slower sale or lower offers. Sellers should weigh cost savings against the benefits of attracting more buyers and facilitating a smoother sale. While not obligated, offering a competitive buyer’s agent fee is often strategic.