Offer him 3%. He still has a lot to do to make this deal happen on their end. He probably has an "exclusive right to represent" contract. If the contract is written that the buyers have to compensate him if there is no commission paid to him (which they won't want to do), it could cost you the sale. Just a thought.

Do they have a contract with a Realtor? If not, they, and you, owe nothing if they do not use the Realtor. They can use a good Real Estate Attorney for the contract. Regardless of whether or not they use a Realtor, should use a RE attorney going forward (and you should too).

If they do have a contract the contract dictates what they owe the Realtor for a house the Realtor is involved with, and what is owed for a house the Realtor is not involved with (and don't be surprised if the costs are the same). If there is a percentage-fee see what that is and offer to cover it if the commission is 3% or less of the PP as it may result in a sold sign on your house.

"Who" found the house first does not matter here; most of the agent's work starts now. If they have a Buyers Agency Contract, then the agent is due his commission, preferably coming from the seller. Like mentioned above, if you try to cut the agent out, likely, with todays market, the Buyers and the agent will move on to the next house. There's just too many good ones on the market to waste time.
If there is no contract, it is up to the Buyers on how they deide to handle it. In my experience, they move on with the agent.
99% of FSBOs that I run in to agree to co - op a fee to me for bringing them a pre screened, able, ready, and willing buyer to them.

If someone told you he had an attorney to handle, oh, just anything where you stood to make money, would you try to get him to ditch his attorney?

What are you going to do if you pry these people away from their Realtor, & then a few years down the road you get a letter from an attorney stating that you're being sued because you exerted undue influence to get them to pay more for the house, or to keep them from knowing their rights, or to hide comparable sales in the neighborhood that would have indicated a lower value?

Your goal is to sell your house.

How the buyers handle their end of it is not your problem.

If you can't accept whatever price & terms they offer through their agent, make a counter-offer.

A few years ago I was selling FSBO and also had very serious buyers that had signed a buyer's agent contract with an agent. They came twice to look at my place, both times without their agent. Then they came back a third time, very serious about an offer. Their agent told them he had to have the 3% if they bought our place.

I ladly offered to pay 1.5% of this(approx $5k), and the buyer could pay the other 1.5% or negotiate that part with their realtor. I discussed this with the buyer, since the agent never talked to us and never called us and left the buyer to arrange the showings and such.

The buyers didn't want to pay the other 1.5%, so no offer was given. We were fine with this because we were in a sellers market. We quickly sold to another party that did not have an agent.

It totally depends on what their contract says, if they even have one. I never had a written contract with the buyer's agent I used.

I don't think you can compare an attorney to an agent. The buyer pays for their own attorney, but the seller would be paying for the agent. If the agent didn't bring the house to the buyer and the buyer doesn't use the agent for any work on it (P&S, etc.), then why should the agent get anything UNLESS the contracts says otherwise?

When we sold FSBO, we had an offer from a buyer with an agent. Though it was our highest offer, we netted more by accepting an offer from a buyer with no agent.

The buyer with the agent would have offered higher, but as if was, we weren't sure if our house would even appraise for the amount she originally offered.

Now that you have suggested to your prospective buyers that they re-read their contract with their RE agent, I wouldn't do anything more to encourage / discourage them from using him. It is their decision, and surely they are aware that if you have to pay the RE commission, you will take that into account when evaluating their offer?

I am an agent and you want to know the Truth?
IF you decide to engage the BUYERS AGENT:

1)Pluses:
-the agent will do all the paperwork and guide you what to do next. The paperwork DOUBLES when you use a realtor. Remember, they have to get paid, and the realtor has to be protected in case of a lawsuit. This creates extra paperwork.
-you have a ready buyer. Probably pre-qualified. I would ask to see their bank letter, first.

2)Minuses:
-the agent represents the BUYERS, NOT YOU. He/she will protect their interest, NOT yours.
-It will cost you 2.5-3% commission. I would actually negotiate it down to a lot less, just for writing up the contract.
-ANY problems that can( probably will) arise, he/she will be in their corner. You still have to watch your own hide, and continue talking to their realtor yourself.
-You will have to be on your toes in the RE steps until closing, which is prepared by your attorney or a Title company.

IF you have an attorney, you could just get a contract from him/her and just deal with these buyers. This way, BOTH of you are on an equal footing. ALL the paperwork could be done by your attorney for a fraction of the cost. That is IF Both parties are comfortable. Some states utilze Title companies for the paperwork.

Bottom line:
Getting a buyers agent creates extra paperwork, but done by the agent. The buyers have an advantage. You have a ready buyer. Be careful how you handle it. I'm sure the agent will try to disway them from buying your house if you don't pay them the commission. Those are the facts. You decide.

"Getting a buyers agent creates extra paperwork,"

What paperwork would that be in your state?

Below are mandatory forms for RE agents to be used here, FSBO sellers and attorneys are strongly advised to use the same.
Obviously, mandatory federal disclosure requirements for lead based paint depend on the age of the property. (the only extra form shown below, would the "Brokerage Disclosure to FSBO")

Purchase Contract
http://www.dora.state.co.us/Real-Estate/contracts/2008Contracts/CBS1_Contract_110408.pdf

Water Source Addendum
http://www.dora.state.co.us/Real-Estate/contracts/2007Contracts/SWA35_8_07_Source_Water_Add.pdf

Brokerage Disclosure to Seller (FSBO)
http://www.dora.state.co.us/Real-Estate/contracts/2008Contracts/SD16_BD_Discl_Seller_92108.pdf

Closing Instructions to Title Company
http://www.dora.state.co.us/Real-Estate/contracts/2008Contracts/CL8_Closing_Instr_91708.pdf

Sellers Property Disclosure
http://www.dora.state.co.us/Real-Estate/contracts/2008Contracts/SPD29_SPD_Resid_91908_RE_9.pdf

Square Footage Disclosure
http://www.dora.state.co.us/Real-Estate/contracts/2005Contracts/SF94-05-04.pdf

Thanks again to everyone who responded to my question - I do appreciate your thoughts and feel better prepared to deal with the situation.

Sooo... what 'ya gonna do?

"The buyer pays for their own attorney, but the seller would be paying for the agent"

The buyer's offer typically includes their agent's fee.

The buyer's offer typically includes their agent's fee.

... which is a percentage that is then subtracted from the total amount that ultimately gets paid to the seller, so really, isn't it the seller that is paying the buyer's agent fee?

In reality, who pays the commission?

IMO,It depends.
If the house is priced at about the market value, or a little higher...

If the house sells for close to the asking price, the buyer is paying the commission. If the house is negotiated way down, the seller pays the commission. Usually the seller lists with a realtor, building in the commission.

Getting close to asking price= buyer pays
Accepting a much lower offer= seller pays

the price determines who's actually paying for what?

huh?

The seller is "paying" concessions from the money the buyer is paying-

It makes no difference to the seller whether the buyer pays, say, $100,000 for the house & asks the seller to pay $10,000 for whatever (buyer closing, commission, repairs, etc), or whether the buyer pays $90,000 & pays all those things in cash.

Either way, the buyer is paying for the "concessions"
(if there's a mortgage, the buyer is actually amortizing the costs of the concessions over the term of the loan).

If the bottom line isn't acceptable to the seller, then the seller can counter the buyer's offer.

The seller needs to remember, though, that the buyer has structured the contract according to his/her needs, & that countering by striking out concessions such as seller-paid closing & commission amounts may not work.