Smarter Deals, Happier Clients: Let’s Talk Commission Strategies

Let’s clear something up right away: this isn’t about short-changing anyone or pulling a fast one on the system. It’s about structuring deals in a way that makes financial sense for everyone involved—buyer, seller, and yes, even the buyer’s agent. But let me tell you, explaining this to some buyer’s agents has been… an experience.

Recently, I’ve had a handful of cash buyers demanding that sellers cover their agent’s commission through concessions. On paper, it seems fine. But in reality? It only benefits the agent while keeping the buyer and seller on the hook for higher taxes. When I tried to explain this, the indignant responses made me wonder if I was speaking in Morse code.

So, let’s break it down in plain English. Here’s why paying commissions smarter makes everyone’s lives—and wallets—better.

1. Property Tax Savings

Here’s the deal: property taxes in California (and most places) are calculated based on the recorded purchase price of the home.

When the buyer pays their agent’s commission directly, that amount doesn’t factor into the recorded purchase price. That means the buyer’s property tax basis is lower, saving them money year after year.

Example:

• If a home sells for $2,000,000 and the buyer’s agent’s commission is 2.5% ($50,000), paying that commission separately lowers the recorded price to $1,950,000.

• The lower recorded price = lower property taxes every year.

Over time, these savings really add up.

Smarter Deals, Happier Clients: Let’s Talk Commission Strategies

Let’s clear something up right away: this isn’t about short-changing anyone or pulling a fast one on the system. It’s about structuring deals in a way that makes financial sense for everyone involved—buyer, seller, and yes, even the buyer’s agent. But let me tell you, explaining this to some buyer’s agents has been… an experience.

Recently, I’ve had a handful of cash buyers demanding that sellers cover their agent’s commission through concessions. On paper, it seems fine. But in reality? It only benefits the agent while keeping the buyer and seller on the hook for higher taxes. When I tried to explain this, the indignant responses made me wonder if I was speaking in Morse code.

So, let’s break it down in plain English. Here’s why paying commissions smarter makes everyone’s lives—and wallets—better.

1. Property Tax Savings

Here’s the deal: property taxes in California (and most places) are calculated based on the recorded purchase price of the home.

When the buyer pays their agent’s commission directly, that amount doesn’t factor into the recorded purchase price. That means the buyer’s property tax basis is lower, saving them money year after year.

Example:

• If a home sells for $2,000,000 and the buyer’s agent’s commission is 2.5% ($50,000), paying that commission separately lowers the recorded price to $1,950,000.

• The lower recorded price = lower property taxes every year.

Over time, these savings really add up.

2. Transfer Tax Savings

Transfer taxes—those pesky fees paid when a home is sold—are also based on the final recorded sale price. When the recorded price is lower (because the buyer pays their agent separately), the transfer tax is reduced, saving the seller money.

Example:
Using the same $2,000,000 home with a 0.75% transfer tax:

• On a $2,000,000 sale, the transfer tax is $15,000.

• On a $1,950,000 sale (with the buyer paying their agent separately), the transfer tax is $14,625.

That’s a $375 savings for the seller. Sure, it’s not enough for a yacht, but why leave any money on the table?

3. Let’s Get This Straight: It’s NOT About Reducing the Agent’s Fee

This isn’t some scheme to stiff the buyer’s agent. They still get their full commission—no less, no more. The only difference is who cuts the check.

Traditionally, the seller pays both their agent’s and the buyer’s agent’s commission from the sale proceeds. In this approach, the buyer pays their agent directly, and the recorded price reflects that adjustment.

Why does this matter? The buyer saves on long-term property taxes, the seller saves on transfer taxes, and the agent walks away with their full commission. Everyone wins.

4. A Better Deal for Everyone

Here’s the bottom line:

• Buyers enjoy lower annual property taxes.

• Sellers get to keep more of their proceeds by saving on transfer taxes.

• Agents still walk away with (almost) the same paycheck.

It’s a smarter, more efficient way to structure the deal. The only people who lose out are the ones who don’t take the time to understand it.

For the Indignant Agent

If you’re still shaking your head, let me make it crystal clear: this isn’t about cutting your commission. It’s about giving your client—the person you’re supposed to represent—the best financial outcome. And when you’re the one introducing this savvy strategy to the table, you look like a rockstar who truly knows their stuff.

At the end of the day, this approach isn’t just about saving money—it’s about doing right by everyone involved. And while we might not all agree on every deal, one thing’s for sure: the numbers don’t lie.

If you’re ready to dive into a deal that works for everyone (or just need someone to explain it a little more patiently), I’m here to guide you—buyers, sellers, and yes, even indignant agents—with heart, integrity, and experience.

Let’s make your next transaction a win for everyone!