First home purchase - cash deal

I just wrote a long post and deleted because I think I finally uinderstood what you are saying after reading ur post 10 times…I think some of your wording is the confusing part. You need to distinguish your wording between seller and seller’s AGENT better maybe?

You are assuming that the sellers AGENT might recommend to accept an offer from a person who is not represented by an agent, even if it is under valued or there is even higher offers because they could potentially walk into double commision?

I was thinking he was referring to that as well…however the point remains it doesn’t cost the buyer anything to hire said buyers agent.

@nsu1997… This is baffling. You acknowledge that a seller’s agent has more incentive to recommend to seller to take a lower offer if the buyer has no agent, but then you say it costs the buyer nothing to have an agent. That is self-contradictory! When you acknowledge a benefit of doing X, you are simultaneously acknowledging a cost of NOT doing X. It costs the buyer a stronger negotiating position that results in a higher price.

I don’t know how else I can explain it.

@PFunk, point well taken. I re-read some of my posts and you are exactly right. I omitted the word “agent” in at least one case, and obviously you guys aren’t mind readers. I apologize for any confusion there.

As an example regarding mwarden’s economic point: Although I generally deal directly with owners, in those instances where I find a listed property that I want to make an offer on, I try finding the listing agent for the property to make the offer with. This ensures the agent and agency gets double the commission if my offer is accepted, and although agents may argue otherwise, I believe they will work harder to get my offer accepted. At some point point during negotiations I generally talk with the owner directly and point out that if the agency cuts the commission, we can both win.

jmd_forest

Laws are different in each state but when a deal like this happens Dual agency gets assigned and I believe there is only one state (california) where the agent can both represent the buyer and the seller and recieve double commision, however…often another agent from the same brokerage might get assigned/recommended to represent the buyer so the BROKERAGE firm receives double commision, not the sellers agent.

Any agent worth his weight and who is ethical will recommend to the buyer to go find their own agent to represent them in the deal…going into dual agency on a deal does absolutely no good for anybody except the real estate agent and brokerage firm and a educated seller should be able to stipulate in their contract to be able to avoid such a situation.

P.

but that simply doesn’t happen. in theory it could but it just doesnt. if you show up to make an offer on a listed property with no buyers agent, the listing agent simply keeps the entire commission agreed upon with the seller. as a buyer you are not going to dictate what the listing agent makes in commission, whether you have representation or not.

tell you what. Demand a listing agent cut his commission in half and pass the savings on to you. let us know how that works out for you…LOL

that’s about the only way you’ll see a listing agent cut their commission when you don’t have a buyers agent. however in my opinion this strategy strikes me as a kinda underhanded way to extort (for lack of a better word) money from the realtor’s pocket. the way I see it they did their job and earned whatever commission they have coming to them. I mean do you really wants to put the seller in that type of predicament just so you can save a few bucks on the purchase price? and even then why would the listing agent agree to pass those savings on to you?

nsu1997:

Sorry, I just don’t see it the same way. The agency and agent double their money for ??? if there is no buyer’s agent. No predicament here, the buyer is always free to reject my offer.

Why would the listing agent/agency agree to pass the savings in the form of a lower commission that enables the seller to accept a lower price? Some real money today is much better than the possibility of more imaginary money in the future. Then of course the listing could run out and the seller list with another agency.

PFunk: New Jersey allows dual agency. It is not unusual for an agent to provide a form for you to sign that discloses the type of agency they are expecting to have. Dual agency in NJ is legal and considered “ethical”…and the agents are still surprised when they are held in such low esteem by the general public.

jmd_forest

JMD - I believe you are going to run into “Dual Agency” in ANY state…perhaps with a few different rules across the board, but I thought California had a unique law on commision vs. any other state, but I might be mis-informed.

This begs the question: why, as an investor, would you NOT have a real estate license??

If you could get an average of 2% return on every deal you potentially do, why not…I realize most investors work outside of an agent/listing network though, but still…for the occasions you otherwise might.

I am in Texas which actually takes a bit of education in terms of hours needed before taking a common sense multiple choice question and paying a small fee, but in most other states it seems like you can get them over the weekend at a simple class no problem.

What do you mean by “double their money?” They signed off on that commission percentage (say 6%) when they got the listing. It was locked in before they met you, I, or any other seller. That’s their agreed-upon renumeration for listing the property. Now they’ll protect another broker by splitting it in the even that you or I are represented by a buyer agent; otherwise they’ll keep the agreed-upon commission that was signed off on between them and the seller. The listing agreement actually has nothing to do with the buyer because it is customarily paid out of the seller’s proceeds, as myself and others have mentioned on this thread.

A listing agent won’t cut their commission just so you can make more money on your deal. They’ll cut it if there’s some other process demands it, such as some kind of financing restriction or perhaps if the seller would otherwise have to come out of pocket to get it sold or whatever, but they won’t cut their income just so an investor can steal a house even cheaper than we already are. We’re already making more money than them as it is. Again, it COULD happen, but you could also get struck by an asteroid when walking down the street.

Either the price makes sense to you or it doesn’t. Honestly if your profit margin on a deal comes down to cutting an agent’s commission in half, then you have to question whether it’s even a good deal. What are we talking about here, a few thousand bucks commission…you should be making much more than the listing agent even if you’re just wholesaling the house.

Because we’re not in this business to make that measly amount of money…an investor shouldn’t be willing to work that cheap. :biggrin

If I deal on a listed property I could care less what the agent makes. If they get their full commission, the way I see it they earned that money and God bless 'em.

Yea I guess if you have a good agent to work with who is helping you find deals, negotiate and work contracts, and potentially helping to sell, lease and market your properties your time is much more valuable then taking on everything yourself for the amount of commision you could recieve here and there facilitating deals on your own.

Just like a real estate agent should have a good network of contacts and people which includes many investors, an investor should have a good network of contacts and people which include real estate agents.

nsu1977:

$250000 property, property listed for 6% commission, listing runs out in 1 week, buyer and seller are $5000 apart and simply won’t budge, no buyer’s agent, seller mentions taking property off the market since it isn’t selling after sitting for 6 months. You are the agent/agency…what would you do? Evidently you are not particularly familiar with what goes on in a real estate agency. I know several agents and have had numerous discussions over numerous beers. Stuff like this happens all the time.

jmd_forest

As I said earlier, an agent will cut his commission if need be to save a deal for any number of particular reasons. I was a loan officer for 5 years and I’ve cut my broker fee more times than I can count to save a deal. I don’t know of any who have done so just so the investor buyer can make more money than he already is.

I guess if you pinned the poor guy to the wall and twisted his arm he’d do it under your given circumstances but he sure wouldn’t like it and in my opinion it ain’t worth it. I just don’t see the need to do that under any circumstances just to get the deal a couple grand cheaper. Either I can get it at my price or I can’t.

If the Realtor’s commission is the dealbreaker then it probably wasn’t a truly wholesale priced deal to begin with. I’m just not in the business of squeezing Realtors for their piddly commissions. We already make much more than they do per deal anyway…I just don’t see the need to even go down that road. What’s the chances that Realtor would potentially send you deals in the future? What kind of way is that to operate a business? Whatever works for you I guess.

You still aren’t understanding the first thing I’m saying. I give up.

I just re-read your last sentence and I now see what you’re saying…isn’t a realtor obligated to do what’s in the best interest of the seller, which would mean to pursue the highest and best offer?

Yes, that’s the creed. But people behave based on their incentives, not their creeds. Actually Freakonomics devoted a whole chapter to this topic with real estate agents, and it is a pretty accessible book.