The California Association of Realtors have published the latest contract that you need in order to purchase a home with an agent that requires this form (which is most of them). San Francisco has it’s own form.
This was published after the settlement with the realtors (NAR) and the plaintiffs in the lawsuit that say NAR must eliminate the buyer broker from the MLS.
But, not the contract!
There are two places they can get commission paid.
1 – Seller Credit. Seller can give a credit towards closing costs and prepaid up to the amount of the actual costs and to not exceed lender guidelines.
Conventional Lender guides for credits from interested 3rd parties (sellers , agents and lenders) as a percentage of the sale price.
90.0-100% LTV 3%
70-90% LTV 6%
under 70% LTV 9%
So, if they are charging you 3% of the sale price for a commission, then you’ve got it covered. But, you still then have to pay closing costs so it is costing you 3% more.
2 – Ask the seller to pay it. Let’s say a seller wants to net $500k before adding your buyer broker fee. Let’s say it is $15k. What is done is that the $15,000 is added to the seller’s net so the price is $515k and now you borrow a percentage off the $515k and not the $500. So, you pay more for the home, higher real estate taxes, a higher mortgage amount.
Be sure and negotiate your agent’s commission because you are paying for it. You were paying for it in the price before, now it’s just disclosed!
3 – Get the lender to help you by raising the interest rate. Lenders pay your closing costs in exchange for you taking a higher rate.
4 – Grants. Depending on your income/location, etc., you may be able to get a grant. Talk to a mortgage professional to get details.