Awkward Legal Construction

One of the more confusing parts of the standard Minnesota Buyer Rep agreement — the contract governing the relationship between a home Buyer and their Realtor — is the two-part section discussing compensation.

The first part states that the Buyer will pay the agent a to-be-specified retainer fee.

That sure would be nice . . . . but practically, that’s not how Buyers’ agents get paid.

The second part says that the Buyer will pay the Realtor the greater of:  a) a specified percentage of the house purchase price; or b) a flat fee.

Devil in the Details

But wait — doesn’t the Seller pay the Buyer’s Agent??

Keep reading:

The very next paragraph explains that any commission that the Buyer’s Broker receives from the Seller or Listing Broker acts as a credit against the amount that the Buyer would otherwise owe their Realtor.

Translation:  if the Buyer promises to pay their agent 2.7% of the home’s purchase price (a commonly used number), and the home they ultimately buy has at least a 2.7% payout (what the Listing Broker is offering Buyers’ Agents) — they owe their agent nothing.

Which is how it works out the vast majority of the time.

P.S.:  Bonus Question — if the payout is more than the specified percentage, is the Buyer ever entitled to a rebate?

No, because the payout arrangement is between the Listing Broker and the Broker that the Buyer’s agent works for — not between the Buyer and their agent.

In legal jargon, there’s no “privity” between the Buyer and the Listing Broker.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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