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  • Writer's pictureShawn Patrick Moloney

The Effect of a Buyer Paying Commission on Their Preapproval

Homes are getting more expensive for buyers.

With all this talk about buyers paying their own share of the commission it seems there are a lot of things to think about. One of them is how the buyer is going to afford to pay them. Some have proposed the idea of seller's concessions and others talk about maybe the bank allowing them to be financed. No matter which way it turns if the buyer is left to pay the commission than buying a home just got more expensive for buyers.

We have seen this case go so far as to garner comments from the president. Joe Biden said that in fact this new settlement would bring down costs for buyers. This is wrong because home prices are going up and up until now the seller or seller's agent has paid cooperating compensation in most cases. Now with the buyer paying the commission on top of the home price they will end up spending more.

It is important as their agent and guide through the process that you speak with your client early so they understand the cost implications of working with you as their agent. If they are using a loan it is also important to talk with the lender about the effect this will have on the buyer's preapproval. Whether it be money out of pocket or seller credits it will have an effect. There is nothing fun about needing to sue a client in order to get paid.

With seller credits it simply means more money will end up on the loan amount meaning the client needs to leave room at their highest approval amount to pay you. Or if they are paying out of pocket it is important to understand the cash needed to close, the reserves the bank is basing the approval on, and any other free cash related items. No matter how a buyer pays for the home, this commission move from the seller's side to the buyer's side on the CD will have a major effect on buyers.

This topic is one that is often debated. Jump on our Facebook group and let us know your thoughts on this topic.


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