This is the seventh episode in our new video series depicting the seismic shift in the representation of buyers in 2025, and is an excerpt from the firsttuesday Buyer Representation Bonus Training™.
The Bonus Training dramatizes:
- the origin of the “same-percentage, same-split” industry custom unwound January 1st, 2025 by legislation;
- the contents of the newly-mandated buyer representation agreement to earn a fee, also called a BRA;
- critical rules surrounding retainer periods, and how buyer representation is extended or modified; and
- your practical use of the buyer representation forms as depicted through various sample transactions and scenarios.
The Buyer Representation Bonus Training™ is available to current and future firsttuesday students without charge.
What this episode adds to the discussion: See how to use the Seller’s Net Sales Proceeds form and Buyer’s Acquisition Cost Sheet form to clearly present the financial consequences of a transaction to your seller and buyer.
See Pt I of Illustrating the Fee-Math involved in a sale.
The buyer broker manages the purchase agreement transaction
Consider a buyer who hires an the agent and their broker to locate, advise and negotiate the acquisition of property they want to own, whatever type it might be.
The buyer and buyer broker enter into a buyer representation agreement, also called a BRA.
A suitable property is located with a market value of $1 million. The buyer is able and willing to make a $200,000 cash down payment on the purchase price. Mortgage financing funds the remaining $800,000 of the purchase price.
As called for in the representation agreement, the buyer broker earns a fee on a transaction calculated as a percentage of the purchase price, say, a fixed fee of 3%.
The buyer and agent agree to offer $1 million as the purchase price paid to acquire the property.
The buyer agent prepares a Buyer’s Acquisition Cost Sheet itemizing the total costs to be funded to close escrow on the purchase agreement and take title to the property. No broker fees are paid by the buyer as transactional costs. [See RPI Form 311]
On the seller’s side of the transaction, the seller broker advises their seller by itemizing the charges they will incur on the $1 million price tag and the amount of net sales proceeds on closing.
For a review with the seller of the costs disbursed from the purchase price on acceptance of the buyer’s offer, the seller broker prepares an estimate using a Seller’s Net Sales Proceeds form. Broker fees are listed as one itemized transactional cost. [See RPI Form 310 §4.31]
On closing, the seller’s net proceeds will reflect the disbursement of all broker fees — the buyer broker fee and the seller broker fee in an amount of, say, 6% of the purchase price. The result of separate negotiations by each client and their broker produces the same expected broker fees to be paid on the transaction as in the past – though the percentage amounts may well very in the future.
Under past escrow accounting procedure and now going forward, all the broker fees are disbursed from payment of the purchase price agreed to in the purchase agreement (which references the amount of the buyer broker fee) and the seller representation agreement (which references the amount of the seller broker fee).
Thus, critically, the seller today ends up with the same net sales proceeds on the same purchase price as in the past. No change from the past in accounting for broker fees in cost sheets and escrow settlement statements.
The seller’s net sheet
As illustrated, to review financial results of the price offered by a buyer in a purchase agreement, the seller broker uses a Seller’s Net Sales Proceeds form, also known as a seller’s net sheet. [See RPI Form 310]
The seller’s net sheet discloses the broker’s opinion of the offsets against the price the seller can expect on a sale at:
- the asking price agreed to in the seller representation agreement; or
- the price a buyer offers in a purchase agreement.
As a checklist, the seller broker or their agent uses a net sheet form to prepare and review with their seller the itemized sales costs and net proceeds the seller can expect on closing at the price and terms reviewed.
The amount of the seller’s net proceeds is easily determined and disclosed by the seller agent or calculated by programming for the net sheet form. The financial consequence of a sale is material information necessary as a prerequisite for a seller to agree to the price. Only when the seller has the net proceeds figure does the seller have knowledge sufficient to make a prudent decision to agree to an asking price or a buyer’s purchase price.
Simply, the seller’s net sheet displays the seller’s financial bottom line on the sale of a property. Thus, a net sheet review with a seller is part of every due diligence effort by a seller broker at the time of agreeing to represent the seller and again on receipt of a purchase agreement offer. [See RPI Form 310]
Critically, the time and effort expended to prepare a net sheet is a small due-diligence premium to pay for assurance the agreed fees, costs and prorates are not disputed at the time of closing. The seller already knows what to expect for an accounting on the close of the sales escrow.
The estimates entered on the net sheet by the seller broker or agent are based on information known or readily available to them on an inquiry of others (escrow officers or transaction coordinator (TC) programs).
Thus, the figures entered as estimates reflect the agent’s honestly held belief of the amounts the seller is likely to experience — they are not “guesstimates” which generate trouble for the broker.
Brokerage events triggering an agent’s preparation of the net sheet and review of its content with the seller include:
- soliciting or entering into a seller representation agreement [See RPI Form 102];
- submitting a buyer’s purchase agreement offer [See RPI Form 150];
- reviewing an offer to purchase an option [See RPI Form 161-1];
- preparing a counteroffer [See RPI Form 180]; and
- entering into an exchange agreement. [See RPI Form 171]
The buyer’s cost sheet
The buyer’s cost sheet is designed as a checklist for the buyer agent to consider and enter their good faith estimate (GFE) for the amount of costs their buyer can anticipate to finance and acquire a property, as well as the sources of the buyer’s funds. [See RPI Form 311]
The maximum price a buyer may offer for a property is the total funds they have available minus the acquisition costs.
Before a buyer’s cost sheet can be prepared for a buyer needing mortgage financing to fund the purchase price, the buyer agent arranges for their buyer-client to meet with a minimum of two mortgage loan originators (MLOs). The MLOs will provide the buyer with a mandated Loan Estimate statement setting out the costs and cash requirements to take out a mortgage.
When the buyer broker determines and reviews with their buyer their transactional charges and mortgage costs, the buyer is aware of:
- the price they are paying for a property;
- the amount of upfront nonrecurring acquisition and mortgage charges to be paid (and who will pay them); and
- the source of all funds needed to close escrow and acquire the property.
Once the cost sheet has been reviewed, the buyer agent – after negotiating a buyer representation agreement – undertakes steps to diligently locate qualifying properties, select one with the buyer for acquisition, and prepare and submit a purchase agreement offer. [See RPI Form 150 and 311]
Brokerage events triggering the buyer agent to prepare a cost sheet and review the costs with the buyer include:
- entering into a buyer representation agreement [See RPI Form 103.1 and 103.2];
- obtaining a Loan Estimate for an MLO’s mortgage;
- entering into a purchase agreement offer [See RPI Form 150]; and
- accepting a counteroffer. [See RPI Form 180]
Editor’s note – Stay tuned for the next episode to release 03/17/2025 which depicts countering a purchase agreement offer containing a buyer broker fee provision.
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