States may vary, but in Texas if an agent is representing a buyer and they approach a FSBO, even if the FSBO agrees to compensate the buyer’s agent, the agent is still representing the buyer. when i worked with buyers i always required a buyer’s rep agreement, or we didn’t do business, in my agreement the buyer agreed to 3%, some or all of which could be paid by the seller but was due from the buyer.
Excellent point!
Infowell,
I am verklempt…
wendy
It is entirely too easy to get into the real estate agent profession. Lets look at the ‘barriers to entry’ — no college or professional degree required, no start up capital required, can work from home or small office so little in the way of equipment / space needed. The only thing that is required (at least here in Texas) is to take and pass an exam (there is a class that accompanies the exam). Any time it’s that easy to get into an industry, it makes for more people in the industry than if it were more difficult.
I know that many people in the general public don’t know how to negotiate, I deal with it every time I offer a house FSBO and I have to discuss the contract with them. Most of the time they offer, I counter then they don’t counter the counter. It’s just basic knowledge of how to negotiate ANYTHING in life.
That being said, you often talk about the benefits and expertise a real estate agent provides. Given that an investor should have knowledge of the what the comps are in the area BEFORE THEY BUY AN INVESTMENT PROPERTY, what benefit would a real estate agent provide. I want you to sell me on the idea on using one.
DFW-
I doubt I’ll be able to “sell you on anything.” You’ve stated in the past “you have no respect for me.” But, for the benefit of readers…
Getting a Real Estate license is not as easy as you make it out to be.
First you’ve got to save the money for, and take the required clock hours (not an easy thing when so many are living paycheck to paycheck, and working so many hours they’ve barely enough time to get a good nights sleep).
The you’ve got to pass the exam (which requires studying…it’s not a ‘no brainer’…many fail).
Then you’ve got to attend two weeks of more classes to teach you even more.
Then there’s the Continuing Education requirements every two years (I hold two licenses…I’m constantly taking CE courses).
“…no start up capital required,…”
YOU CAN’T BE SERIOUS!
This statement just goes to show just how little you understand about the real estate business. Fledgling Agents can expect to go MONTHS without a single sale. Once they get a sale…they have to wait to get paid out of escrow.
It typically takes 2-3 years to build a real estate business & one better have plenty of CAPITAL set aside going in or you’re not going to make it. I know one couple that burned through $30,000 in a matter of months…they’re back working their day jobs.
“…what benefit would a real estate agent provide. I want you to sell me on the idea on using one.”
EXPERIENCE! What you do on occasion (FSBO) we do for a living. Every job is different & you learn something new with regularity. In an overly litigious business…the benefit of experience is invaluable, and cannot be discounted.
TRAINING & KNOWLEDGE! The forms & the business is constantly changing. We attend meetings weekly & are given classes to keep abreast of industry changes. We have attorney’s on retainer who meet with us & educate us about the pitfalls of the industry (did you know that a large percentage of FSBO’s fall apart in escrow because of lack of knowledge on how to fill out the forms properly).
PROFESSIONALISM! We’ve proven adverstising techniques, and tools available to us that are not afforded to the general public. FSBO’s are not always available to show their home…we are.
I’ve a long list of everything we offer that I include in our CMA’s. I don’t have the time this morning to copy & past it for you, but I will say this;
I know some people prefer to go it alone when selling (maybe even buying a home). Yet others have no respect for real estate Agents (I run across them occasionally…they think we’re nothing more than glorified taxi drivers).
It’s these people (the one’s that think they know) that I tend to watch closely. Unfortunately, they tend to overprice their properties more often than not (wishful thinking) and their homes tend to linger on the market (the majority of which eventually sell w/the services of a real estate agent). But, occasionally you run across a gem.
-Info
So to clarify, you’ve said that it takes a 2 week class and passing an exam to get a license?
As for start up capital, you’ve said they had to pay for the class / exam and then they had to buy what? I’m not referring to the money or lack of money they will generate in order to make a living. I am referring to the amount of capital it takes to get into the business.
They don’t require a professional degree or even a college degree. They don’t require a large outlay of cash for retail space, office equipement, staff, etc.
It costs less than $1000 to get into the business of being a Real Estate agent. That’s a very low barrier to entry. That’s why so many people get into that business. Conversely, what is the start up cost of a restuarant, dry cleaner, or other business? It’s much higher, that means it’s more difficult to even go into that business in the first place.
Of the business options available to someone, being a real estate agent is one of the EASIEST to go into.
As for the ‘services’ you mentioned, you didn’t mention a single one that is tangible. Everything you just said is intangible. That’s why I laugh when you make statement like ‘overly litigious’. That, in my opinion, is classic ‘scare tactics’ type marketing.
In the past I’ve said I have no respect for you, this is not based on your profession, this is based on your internet persona.
I have little respect for anyone that begins statements with vague comments, that cannot defend their position with facts other than those that cannot be validated (such as, ‘the people I speak with’ or something similar), those that will not seek to understand an argument in it’s entirety but rather concentrate on semantics instead, and those to make braggart statemets in an effort to impress instead of presenting data to support their positions.
I’m curious…what was I wrong about in the housing market last fall? Did I say housing prices would continue to rise? Did I say that interest rates would fall? Please point me to the part where I said anything that HASN’T happened would happen.
If you recall we were arguing the same point, that the housing market would cool. The part we disagreed on was WHY. I do not think there is a ‘bubble’ nor have I ever. I do not think there is actual depreciation of home prices, I do think there is a lack of appreciation (quite different).
Please tell me what lititgation a real estate agent prevents or what protection having a real estate agent helps? Or for that matter, what litigation are you referring to about when stating that, other than the medical profession, this is the most litigious industry.
As for what experience being an underwriter requires as a barrier to entry. VA requires that to be LAPP certified you need 3+ years experience with VA loans. That’s one barrier to entry. In fact, I’ll post the description from Salary.com since you won’t believe anything I type myself.
"Mortgage Loan Underwriter
Underwrites mortgage loan applications and evaluates loans in order to maximize organizational profit and minimize risk or loss. Monitors property appraisal process. May require a bachelor’s degree in area of specialty and 2-5 years of experience in the field or in a related area. Familiar with standard concepts, practices, and procedures within a particular field. Relies on limited experience and judgment to plan and accomplish goals. Performs a variety of tasks. Works under general supervision. A certain degree of creativity and latitude is required. Typically reports to a supervisor or manager. "
Based on this I’d say that the minimum would be 2+ years experience in the industry. Of course, most have bachelor’s degrees, but that’s not an absolute requirement.
A real estate agent requires 0 starting experience except the afore mentioned 2 week training class and passing of the exam afterwards.
That is a very low barrier to entry.
As for Loan Officers and Processors, they have different requirements but that’s on the origination side, not on the side I’m on. Loan officers are often in experienced and new to the industry. Of course they are on the sales side and commissioned based. Notice a trend?
Please tell me what cash outlay a real estate agent is required to have. Do they need retail space? Do they need ‘brick and mortar’ of any kind? Are not many agents part-time agents that work out of their homes? So, it’s 100% service, you can work out of your home, it requires no previous experience in the industry, you do not store inventory, you do not store raw materials, you have no shipping costs, and you can get your license after 2 weeks of a class. This is a difficult industry to get into? I’d love to see your thoughts on what difficult industry is to get into then.
Yeah Keith but that is just because they feel sorry for the buyer that got hosed on the inflated price of the house to cover the Realtors costs… 8)
So if they make it look like the seller paid for it the buyer feels better about taking it in the aaaaaaaaaanyway Got Kool-aid?
I don’t know everything but I do know this. If I’m selling a house for 100k by FSBO and an agent comes up to me and tells me that they have a buyer for my house, guess what??? The price just went up to 106k, I’m not gonna pay the commission, they can. So if the buyer agreed to the 106k price who just paid the commission.
John,
You always have that perogative. You have not chosen to be represented and therefore have no contractual obligation to pay an agent anything. If however you are in area where homes are not selling quickly, and your home is about par or less than comps in the area; whether or not you will pay the buyer’s agent, if they have one may become a negotiation point. When I represented a buyer in a FSBO, if they seller agreed to compensate me the amount I had agreed on with the buyer, it was only that amount (usually 3%), if they did not agree, my buyers would typically move on to another property.
wasj,
When I do use a realtor I still adjust the price to allow for the commission. I have nothing against any realtors they work hard and deserve their commissions. In my opinion the buyer still pays for the commission, at least with me anyway’s.
How do you adjust the price to allow for the commissions? Are you talking about when you buy or sell a home?
Infowell,
Can you honestly say that in your area you have never seen anyone that has said the price is 100k with out a Realtor or 106k with a Realtor. Let me ask you this if you wanted a quick sale on your own home and someone came to you and said I have no Realtor involved would you discount that house. I will take into account that you said in a previous post you only work in upcoming markets so maybe you have not seen that. I see it everyday…
Your Buddy,
Robb
First: I’ve never said I “only work in upcoming markets,” that’s ridiculous!
What I said was, “I prefer to invest in emerging markets…in front of short term future growth.” Ride the equity elevator if you will.
Check my previous posts under “is anyone a millionaire investing in real estate.” In the past 5 years I’ve been all over the West Coast, Hawaii, Mexico, & Canada looking for opportunity.
Secondly: YES! I’ve never seen “anyone that has said the price is 100k with out a Realtor or 106k with a Realtor.”
I’m sorry…that’s just NOT THE WAY IT WORKS.
FSBO’s don’t discount their asking prices the amount of an Agents commission. Again that’s just ridiculous!
Nobody walks away from $6,000 just because, they’re not using the services of an Agent. Discount the asking price slightly?..perhaps. But most FSBO’s want fair market value, and fair market value includes commissions.
As a footnote I’d add: Most FSBO’s are overpriced and poorly marketed. That explains why the overwhelming majority eventually sell with the assistance of an Agent, and why Agents consider FSBO’s a niche’ market.
Of the FSBO’s that do sell without the assistance of an Agent…an extremely high number fall apart in escrow due to contractural errors.
-Info
Infowell,
“Nobody walks away from $6,000 just because, they’re not using the services of an Agent. Discount the asking price slightly?..perhaps. But most FSBO’s want fair market value, and fair market value includes commissions.”
I personally know of over 500+ properties that I purchased where the first thing to come off the sellers perceived value of what they thought their house was worth was the 6% commission. Now if I add in thousands of more deals that my students have done using my methods, we always like it when the seller agrees with us as to why the 6% deduction and that is just the beginning of how we handle perceived value from FSBO’s.
It is the difference between thinking the seller pays the commission and the truth that the buyer really does.
John $Cash$ Locke
If you would take the time and read the whole THREAD you would see that I was talking about if I was the seller. So the BUYER paid the commission or should I say pays the commission.
I agree with $Cash$, when I’m buying I always negotiate the 6% off, that’s the first deduction that comes off the price, and then I start with the repairs, etc. etc.
JOhn
To this I’ll add that in every deal that I do (I do not list with an agent) I will use the 3% commission the buyer’s agent wants as a negotiating tool to ‘sweeten-the-pot’. By this I mean, I am selling a house, buyer approaches without an agent, I say ‘since you’re not using an agent, the bottom line stays the same for me if at this price I throw in 3% closing costs’. This immediately sweetens the deal for the borrower because I wouldn’t come off the bottom line like that if they had an agent.
I also negotiated a builder’s contract for my own home where I had them come off the agreed price an additional 3% based on it not affecting their bottom line since I didn’t have a realtor.
In both of these instances the buyer’s sales price came down by the cost of the commission. I always consider the commissions I’m paying and my bottom line when negotiating any concessions, sales price changes, or allowances. I think any educated seller does that.
So to me, if the buyer’s cost is reduced by not having a realtor, then by having one it is not. That means that the realtor is costing the buyer that 3% which means the buyer is paying it.
Now, to Infowell and other realtors out there the argument can be made that the realtor’s fees are offset by the savings they could provide by negotiating a better deal than the buyer themselves. That may be true.
In fact, that was the original post that I wrote. That if you’re comfortable performing the duties that a realtor would perform for you (negotiating, marketing, contracts, etc) then you may see this as an opportunity to save money by not using a realtor. The discussion about whether non-realtors perform those tasks as well as realtors is a whole different discussion.
Your post is hard to follow John.
You’d have to explain better for me to understand it. You’ve wrapped it in inuendo & only hint at what you consider “perceived value.” Sixteen years appraising…never heard of “perceived value.” I’ve heard of “needed value,” “pretty please value,” & “fair market value,” but never “perceived value.”
John_NM: “If you would take the time and read the whole THREAD you would see that I was talking about if I was the seller.”
Touchy…touchy. I have read the whole thread John & your post I quoted was unclear & didn’t seem a continuation of your previous post. However, to quote your earlier post…
“I don’t know everything but I do know this. If I’m selling a house for 100k by FSBO and an agent comes up to me and tells me that they have a buyer for my house, guess what??? The price just went up to 106k, I’m not gonna pay the commission, they can. So if the buyer agreed to the 106k price who just paid the commission.”
Well guess what John_NM…you may not have an Agent assisted sale.
The Agent assisted buyer may agree to $106,000, however, the home must be worth $106,000 for two reasons; first it must appraise if the buyer requires financing & secondly the buyer must feel you’ve underpriced your home @ $100,000 & is, therefore, willing to pay the Agent’s commission (which by the way…would be $3,000 since we don’t have a listing agent). So the price would be $103,000.
DFW: [i][b]Now, to Infowell and other realtors out there the argument can be made that the realtor’s fees are offset by the savings they could provide by negotiating a better deal than the buyer themselves. That may be true.
In fact, that was the original post that I wrote. That if you’re comfortable performing the duties that a realtor would perform for you (negotiating, marketing, contracts, etc) then you may see this as an opportunity to save money by not using a realtor. The discussion about whether non-realtors perform those tasks as well as realtors is a whole different discussion.[/b][/i]
Agreed! The only way to save on Agent’s commissions (insofar as I’m aware) is to do ALL the work of the Agent yourself;
Best of luck in that regard as the overwhelming (majority) of FSBO’s eventually sell with the assistance of an Agent. Morover, of the FSBO’s that do sell without the aid of an Agent…a large percentage fall apart in escrow (it’s what some aren’t telling novices that could cost them dearly).
Footnote: I like watching novices buy & sell on their own…therein lies a goldmine of opportunity.
-Infowell
Well guess what Infowell I don’t need an “assisted sale”, I do quite well on my own. I make my own money and I don’t need someone elses home to sell like you do to make a living.
As you know and I know an appraisal can go either way 5%. So if I was to raise the price 6% to cover the “assisted sale” I would be ok. I’m not here to argue with you and I don’t have a problem with agents, the discussion is who pays the commission. I can say first hand that in MY deals I don’t or won’t, the buyer does. Sounds like you’re starting to take this personal, don’t take it personal just accept the fact the buyer pays the commission.
John_NM: Well guess what Infowell I don’t need an “assisted sale”, I do quite well on my own. I make my own money and I don’t need someone elses home to sell like you do to make a living.
As you know and I know an appraisal can go either way 5%. So if I was to raise the price 6% to cover the “assisted sale” I would be ok. I’m not here to argue with you and I don’t have a problem with agents, the discussion is who pays the commission. I can say first hand that in MY deals I don’t or won’t, the buyer does. Sounds like you’re starting to take this personal, don’t take it personal just accept the fact the buyer pays the commission.
Well John…I would accept the fact, but for one major problem; it’s not fact…it’s fiction. I’ve already challenged reader’s to investigate this issue for themselves. Don’t take the word of personalities on the internet…do the research, ask your accountant, an escrow agent, the IRS, a lawyer friend, etc. After readers have done that to their own satisfaction they should then ask themselves…what else is it they (buyer’s pay agents commissions advocates) don’t know, or aren’t telling them?
“As you know and I know an appraisal can go either way 5%. So if I was to raise the price 6% to cover the “assisted sale” I would be ok. I’m not here to argue with you…”
You may not be “here to argue with me,” but if you write something it should be open to civil debate (which is what I’m doing). For instance your assertion that an appraisal "can go either way 5%…so raising your price 6% to cover the assisted sale you’d “be OK.” A couple observations;
First…I think you’re having a hard time understanding commissions. You keep stating 6%, but you’re not grasping the fact that there’s one agent involved (cause you’re selling FSBO)…so it’d be only 3%.
Moreover, if you’re asking price of $100,000 is competitive, and you’ve marketed your property at that price…you may have a couple other problems with your scenario:
First: There may be no higher selling comps
Secondly: The appraiser gets the unenviable tasks of explaining why their opinion of value exceeds asking price. This is made all the more difficult the longer the property’s been listed for sale at that lower price. Appraisers can be reviewed, and that fact is always in back of their mind.
We shouldn’t assume that an appraisal can go either way 5% anymore than we should assume tax assessments are within a given range of fair market value. Whether an appraisal can go either way 5% is dependent upon market data, and the appraisers competency at analyzing that data.
And for Pete’s sakes…don’t fall into that trap that others have that you know anything about me or anyone else you’ve never met on the Internet because, “they live in a 1,600 sf house” (as one antagonist put it): “I do quite well on my own. I make my own money and I don’t need someone elses home to sell like you do to make a living.”
For your information…I’ve never written a Purchase & Sale Agreement. I’ve seen, held & read thousands of them over my career, but I’ve NEVER once written a Purchase & Sale Agreement.
So how do I make a living? Another fact is…you’ve no idea.
-Infowell