Real Estate

Can buyer agent charge 2.5% and give the buyer 1% cashback?

  • Last Updated:
  • Aug 16th, 2020 8:46 am
[OP]
Deal Addict
User avatar
Aug 9, 2013
3411 posts
1462 upvotes
Scarborough

Can buyer agent charge 2.5% and give the buyer 1% cashback?

Is this allowed? illegal? frowned upon?

This seems like a secure way to keep a client? I'm only asking because if someone offered this to me I would take it in a heartbeat!
4 replies
Deal Addict
Mar 27, 2004
4608 posts
2247 upvotes
Toronto
Yes this normal. there's a thread on this topic already.
Full-time Realtor
Member
Oct 21, 2013
269 posts
122 upvotes
waterloo, on
Lol. Welcome to the new norm. Search for buyers agent with most cashback.
Deal Addict
User avatar
Oct 26, 2007
2013 posts
1226 upvotes
YYZ
DealsFreak wrote: Lol. Welcome to the new norm. Search for buyers agent with most cashback.
how much cashback are you giving? :)
Licensed Full Service Realtor
Jr. Member
Jun 1, 2019
157 posts
168 upvotes
OrangeBerry wrote: Is this allowed? illegal? frowned upon?

This seems like a secure way to keep a client? I'm only asking because if someone offered this to me I would take it in a heartbeat!
As a Buyer you should not pay your agent anything. There is a potential problem for you if you sign a Buyer's Representation Agreement that says that your agent is owed 2.5%. If the Seller is offering less than 2.5% to the Buyer's agent, you are on the hook for the difference, above and beyond the purchase price.

For example, lets say you buy a $1M home where the seller is offering the Buyer's agent 2%, not 2.5%. If you've signed the B.R.A. mentioned above, you owe your agent 0.5% (+ HST) of $1M, which is $5,650, to cover the difference.

You can get around this by, when signing the B.R.A., ensure that instead of "2.5%" or any specified commission amount, the commission owed to the agent is "as per MLS". This way, the commission owed to your Buyer's agent is whatever the Seller is offering, and you are on the hook for nothing. Your agent still gets paid - and paid very well, in most circumstances. You can still also get cashback as specified in a separate agreement, usually conditional on what the Buyer's agent commission is.
Full Service Realtor
Niagara / Hamilton-Burlington

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