realtor commission

General Real Estate Investing
1

I have a realtor I use when I need one. He has done well for me and I will continue to use him loyally on my investment properties. I am about to buy a new personal residence out of state, and I do not need the help of a realtor to do so. My preference would be to do the work myself and have 3% of the purchase price flexible to deal with. I realize when a seller’s realtor sees someone looking at a property w/ no realtor, their eyes light up seeing a 6% commission. I am not willing to let a seller’s realtor collect 15-18,000 out of my pocket for doing the same work they would be doing if I were using a realtor. Does anyone w/ experience in this know how to go about negotiating this commission. If I state this too early in the process, the realtor and seller may not deal with me honestly and negate the purpose I am trying to accomplish (to lower the selling price). If the realtor will not deal with me, I will still cut their commission by bringing in my normal out of state realtor and give him the 3% as a gift - which is not as good for me, but better than it going to an uncooperative seller’s realtor. One way or another, the commission works out the same for the listing realtor. How can I use this to save myself 7500-9000 (3% of 250 - 300K)?

Thanks for any advice.

2

Simple.

Type up a short form that basically says that you are acting as your on buyer’s agent (in essense, representing yourself), that you do not want, nor expect their help as your representative. You understand that by not being a licensed agent that you cannot receive a commission, but that you expect the listing/selling agent to REDUCE their commission by the amount that would be given to the buyers agent, normally 1/2 of the total commission. It needs a place for the listing agent to sign and date.

Once you have this, I would request for the seller to be present when you present your offer because you can structure your offer(s) with the commission reduction in mind (in other words, make sure that the seller knows about the commission reduction).

I’ve used this for years, and I’ve only had one agent flat out refuse to sign it, which cost him the listing when the seller found out about it.

Raj

3

Thanks a lot, that’s exactly what I needed.

4

As an agent…when we purchase a home for ourselves…

…we figure the 3% commission, and state in the purchase & sale agreement; “seller to pay no sales office commission.”

We just purchased a home listed for $179,950. We offered $174,600 ($180,000 less 3% + $50). We also waived the Home Inspection. The market here is overheated & waiving the Home Inspection is the only reason they accepted our offer (I’m also a former Home Inspector & former Commercial Pest Control Consultant…so we felt comfortable waiving the inspection…after I’d conducted a quick inspection initially–hope I’m not being confusing).

Couple things to keep in mind here;

  • Seller typically pays real estate commissions…buyer typically pays no real estate commissions. So it matters not whether you’re “…not willing to let a seller’s Realtor collect 15-18,000 out of your pocket for doing the same work they would be doing if you were using a Realtor.” No disrespect, but the commission’s not coming from your “pocket,” rather the seller’s paying the agent’s commission, therefore, the matter’s entirely upto the seller.

  • If you ever want to use an out-of-state agent…make sure they’re legally permitted to sell real estate in another state via either reciprocity, or they’re operating legally under “out of state agent” rules.

  • Furthermore, you could always sweeten a deal by offering an amount slightly over a 3% commission, (especially if you’re in a competitive market). In so doing…the seller will most likely be more attracted to your offer (as it cost them less in commission), and the sellers agent would probably be more than happy to point that fact out to the seller.

“I’ve used this for years, and I’ve only had one agent flat out refuse to sign it, which cost him the listing when the seller found out about it.”

I’m confused about this statement–as it’s the seller that “signs” an offer…not the agent. Moreover, agents are required to submit ALL OFFERS to the seller in a timely fashion.

Good luck in your endeavor!

5

Infowell,

Thank you for a typical RE agent reply. You say that since the seller “pays” the agent’s fee, the money is NOT coming out of the buyers pocket. Well, let me ask you, if the seller doesn’t have a buyer, then when does the agent get paid? In case this is confusing, let me answer; they don’t. The agent doesn’t get paid until there is a buyer with $$$. So please tell me again who REALLY pays the agent?

Let me simplify. Two offers come in straight to the listing agent (one agent involved). One is for $100K with a standard 6% commission. Other other is for $97K, with a stipulation that the agent only receive the normal split of commission between buyer and seller agent (which I outlined above), which is usually 1/2, or in this case, 3%. Which is the better offer for the seller? The second, because doing the math, it is for $90.00 MORE. Also, which is cheaper for the buyer? Again, the second, because it’s $3K cheaper than the first. So again, who pays the agent’s fee?

"I've used this for years, and I've only had one agent flat out refuse to sign it, which cost him the listing when the seller found out about it."

I’m confused about this statement–as it’s the seller that “signs” an offer…not the agent. Moreover, agents are required to submit ALL OFFERS to the seller in a timely fashion.

I’m not sure what is confusing about the statement but I’ll try to clarify. IF you’re reread my post above, it says to have the AGENT sign a form stating they THE AGENT agrees to reduce their commission by the amount normally split with a buyer’s agent. That is what the agent would be signing.

As far as required to submit ALL OFFERS goes; yep, you’re correct. In a perfect world ALL offers would be submitted promptly and correctly. Unfortunately, we don’t live in a perfect world, and greed rules many. The agent in question thought that it was better (for him) to collect a full 6% than to sell the customer’s property. Since he refused to sign the commission reduction, there was no formal offer made. I did, however, call the customer to let him know that what I had offered, which the agent refused. Once the seller found out that this agent refused to reduce his commission to sell the property, the seller cancelled the contract for this agent.

Does that clear things up?

Hope it helps,

Raj

6

Thank you for a typical RE agent reply.

You’re welcome–but I’m not a typical Real Estate Agent.

“So please tell me again who REALLY pays the agent?”

There are various forms of agency, however, as it’s been discussed here…the seller pays the agent. Seller’s money–seller pays–your debate is semantic.

Does that clear things up?

Nope!

Seller’s signed a listing contract with the Agent’s Broker. All the Broker has to do is refuse to lower the commission as agreed to in the Listing Agreement.

I’d recommend using honey in this situation rather than vinegar. Demand still far exceeds supply in most areas of the country.

7

Infowell,

Thanks for your reply. I appreciate your information, as it was presented noncombatitavely from a RE agents point of view. I do disagree, however, that the commission doesn’t come out of the buyers pocket. If a seller needs to walk away with 300K, they can not sell for 300K due to RE commission. They must sell for 318K to end with 300K, which means the buyer has 18K more out of pocket than the seller actually needs.

I understand I can not deal with the selling realtor’s 3%, b/c that was agreed to by the seller, but at least I can save 3% by not using a buyers agent.

I have nothing against RE agents. Mine has been very helpful to me and I understand agents earn their money when buyers/sellers don’t know enough to take care of the transaction themselves, which I am borderline on. But, if I can afford 9K more worth of house instead of paying that 9K to a realtor for a few afternoons worth of work, I’ll take the house upgrade.

8

On the issue of who really pays the agents’ commissions…

I believe it is the seller but for different reasons than those already presented. The seller is supplying the property. The commission and other closing costs are coming out of the seller’s sale proceeds. The source of money is actually the seller’s equity in the property – the difference between the current sale price and the price the seller originally paid less the amount of mortgages or other liens that the seller has against the property.

As for the main issue…
I would not give the listing agent something to sign. I would put right in the purchase contract something to the effect that the buyer is representing him/her self, is not RE licensed and therefore does not expect to be paid a commission. I would NOT put in the contract that I expected the total commission to be cut in half. Why alienate the listing agent where it’s not necessary to do that to achieve your objective? Then I would play out the negotiation. You can bet that the seller will do the math and agree to a price reduced by the commission that won’t have to be paid to a buyer’s agent.

Nancy

9

I understand I can not deal with the selling realtor’s 3%, b/c that was agreed to by the seller, but at least I can save 3% by not using a buyers agent.

TRUE…TRUE!

Nancy gives great advice.

I’ve seen literally thousands of P&S Agreements come across my desk over the years. I personally have never seen a form (therefore my confusion). Nancy’s advice to write into the P&S Agreement what you intend is the best tact in my opinion.

I’m new here, and hope I didn’t offend Raj, or anyone else. I’m only here to share & learn.