[London Girl]

Hi everyone!

I would be very interested to hear from anybody who has purchased real estate without using a buyer's agent.

If anyone has experience of this could you let me know how you negotiated on the sale price to take account of the fact that the seller would potentially not need to pay a buyers agent commission.

Alternatively, has anybody used a discount broker like Redfin or Buyside? I can't seem to find a similar company that operates in MI

Finally, what steps did you follow to complete the process, from offer to closure - ie: at what stage did you put funds in escrow, consult title company etc?

Any advice would be much appreciated!!!

Thank you

[Dr.Jim]

Out of curiousity why would you not want a buyers agent? It doesnt cost you anything.

Otherwise, sorry,....never bought without a buyers agent. Too much risk regarding things, processes...etc...for me to forego that.

[London Girl]

Hi Dr Jim

As a UK citizen I'm unfamiliar with the concept of a "buyer's agent".

In the UK only the seller appoints an agent who usually receives between 1-2% of the sale proceeds as his/her fee, effectively for marketing and showing the property, and, as they are paid by percentage, negotiating a good sale price.

As a buyer you would browse the websites/advertisements of several agents and arrange viewings directly with each agency.

I understand that in the US the seller pays up to 6 or 7% in agent fees of which maybe 3% is allocated to potentially pay the buyer's agent.

I'm just wondering why it would not be possible to cut out the buyer's agent and effectively save that 3% - ultimately the buying agent is being paid by the buyer (by a higher sale price that the seller has to adhere to to cover the buyer's agent fees) for services that I would happily do myself. Or, in the absence of a buyer's agent, the selling agent effectively "double dips" to get 6-7% which seems an extremely high percentage to me!!! Indirectly that sale price has to include the "buyers agent" fee for "services" that I would happily bypass.

I can't seem to find any discount brokerages agencies like Redfin or Buyside that operate in MI - they work on the basis that they rebate 75% of the buyer's agent commission that they receive to the buyer. If anyone knows of a similar company in MI I would be keen to hear from them.

In the UK the buyer and seller each appoint a solicitor (attorney) who draw up the contract and perform the land searches etc. The buyer appoints a surveyor to inspect the house for any structural problems prior to the contract (which confirms closing date etc) being signed.

I understand that the escrow company and title company perform a similar function here - personally I would be happy to deal direct with both.

[TaxBait]

Originally Posted by London Girl

...I'm just wondering why it would not be possible to cut out the buyer's agent and effectively save that 3% - ultimately the buying agent is being paid by the buyer (by a higher sale price that the seller has to adhere to to cover the buyer's agent fees) for services that I would happily do myself. Or, in the absence of a buyer's agent, the selling agent effectively "double dips" to get 6-7% which seems an extremely high percentage to me!!! Indirectly that sale price has to include the "buyers agent" fee for "services" that I would happily bypass. ...

You are certainly free to negotiate directly with a listing agent. I have done that in the past since I'm experienced in housing and don't really value the input of a buyers agent. Listings are all online these days and I found my my last property browsing MLS listings. In this market, most listing agents should be so hungry for a sale they would accomodate. However, they might be so starved you may have to fight off their attempts to get you to sign up with them as a buyer agent to "help" you look.

However, one problem you might find in negoatiating is that the commision might actually be split 4 ways. Each individual salesperson/realtor may work for a broker and the brokers usually get 1/2 also. You would need to find a selling agent willing to negotiate the sales and brokerage part. In the end it might be easier to negotiate with an agent/broker that can speak for the entire buyer's side of the transaction. Then you would avoid negotiating with each individual listing agent. I can't imagine a buyers agent who would turn down any reasonable offer from a buyer willing to do all the leg work. But then, I can't see why anyone would pay 3% to a selling agent either. The last house I sold I negotiated at 1% on the listing side with the understanding I wasn't expecting any open houses or advertising (both wastes of money in my opinion). Unfortunately, seller's are stuck offering the buyers agent a hefty commision since most buyers still sign up with an agent.

Quite frankly, I'd like to see the whole thing done away with and replaced with ala carte services based on hourly rates or fixed fee per item. Then those who need to spend 200 hours of an agents time to help them look would pay accordingly and those who just want a public listing of properties for sale could pay much less. Because you're absolutely right - in the end the buyer pays for all of it.

[Dr.Jim]

You can look at it like this,...this is a practical example:
Sellers agents charge the seller a fixes % for marketing and selling their home.
Lets use 6% for this example.

This 6% may or may NOT be part of the home sale price. The price of the home is dictated by the comparables in the market. So for example if their house is worth 200K. And they try to add the 6% on top of that and then ask for 212K, they will be overpricing their home. Not saying people don't try,.....but it will be obvious if you are looking at alot of homes.

Now, back to example. So the couple is asking 200K and they have to pay 6% (12K).
They are going to pay that 6% whether there is a buyers agent or not!
If you have a buyers agent representing you (finding homes for you to see, arranging things, handling things...etc..etc at closing..etc) then they will receive half of that 6%.

If you do NOT have a buyers agent, and you go directly to the sellers agent, then the sellers agent will receive ALL of that 6%.

So in effect, the sellers will not be saving any money whether you have a buyers agent or not.
The sellers agent may want you to sign with them as a buyers agent so that they can then show you other houses and such if this property does not work out....this is then going to give them more business......but their motivation to do so is not based off the property they represent for the seller, either way they are getting money.

Follow?

btw - Splits with brokers and such all come out of the agents shares, and are already in the %. So dont confuse yourself with that.

[London Girl]

Thank you for your reply Taxbait!

I am glad you agree that the buyer effectively pays for their agent because almost everyone I speak to says "Oh but the buyer doesn't pay the agent" - of COURSE the buyer is ultimately paying the fee. It's just sneakily rolled into the overall cost of the property. The seller has to give up some of his proceeds and I have to provide that money in the first place!!!!!! I suppose that, being used to the UK property market I'm used to accepting paying seller's agent commission but when I look at the whole buyer's agent issue it gives me a sense of "Oh, who's THIS guy who's suddenly appeared to skim some money off too?". In the UK the buyer does their own negotiating and I am confident with that process having bought and sold several properties myself.

You are right about the listing agents trying to get me to use them to "represent" me - they are all over me like a cheap suit! To date I have kept them at arm's length and have always arranged viewing solely through the listing agent or visited open houses, despite the constant refrain when I get there of "I can show you ALL the houses you might be interested in" - yeah right, I can do that myself thank you very much without paying you 3% for the privilege.

I have no issue with a sellers agent receiving commission because I accept that they have to invest time and money in marketing and showing the property and also working towards getting a decent price for the seller which benefits both agent AND seller.

However I'm highly resistant to me, the buyer, who as you pointed out DOES ultimately pay all the costs (indirectly) being charged a whopping additional 3% that has to be incorporated into the sale price to effectively view something that I will be paying for.

Nobody is charged to view a car for sale so why am I being charged to view a house?

I accept that I will need to pay for and deal with title company, escrow, contract etc but cannot for one moment believe that (based on me paying, for example, $250,000 for a property) these costs would total $7,500 (which I would effectively be having to pay as the seller has to roll this into his cost, working on the assumption that any buyer will be using a buyer's agent).

Anyway, grumble over - I am aware that there are such things as discount brokerages such as Redfin where they act as agent BUT refund 75% of the commission - if I were able to pay just 25% of the commission due ($1,875) then I would be happy to do so if they are then dealing with the legwork and still refunding me $5,625 rather than me just forking out $7,500 to someone who's filled a few standard forms out and unlocked some front doors.

I agree with Taxbait that 6% is extortionate for selling a property - and I think that there will soon come a point when realtors are forced to reduce their fees to an acceptable level with more and more people viewing online and more For Sale By Owner properties coming to the market. I agree that selling agents should be remunerated but not to the tune of up to 6%!!!!!!!! The comparison with travel agencies is a good one.

[SteveVolkers]

These are great questions. Here is my thoughts as an agent.

1. Seller has agree up front to pay the commission what ever that might be. If I as an agent bring a buyer to the transaction and they are not represent by another agent at time I might have an agreement with the seller to take a reduced commission. But it is rare to cut the commission in half because as the selling agent I end up doing just as much work if not more if you came with an agent.

2. I worked with buyers in the past that wanted to represent them selves to save some of the commission. But they might have been able to get a better deal on the home if they had worked with a buyers agents.

You might save some on the commission by doing the work yourself but you might have gained more by having the back ground of the neighborhood price with your buyer agent.

I could go on but it seems you are not really interested in a Realtor opinion. If you are your welcome to give a call. 575-1153

[SteveVolkers]

I just had another thought on this. If you pick out a home and you know what your are willing to buy the home for what does it matter how much the agent get paid for it?

[magellan]

Originally Posted by London Girl

Thank you for your reply Taxbait!

I am glad you agree that the buyer effectively pays for their agent because almost everyone I speak to says "Oh but the buyer doesn't pay the agent" - of COURSE the buyer is ultimately paying the fee. It's just sneakily rolled into the overall cost of the property. The seller has to give up some of his proceeds and I have to provide that money in the first place!!!!!! I suppose that, being used to the UK property market I'm used to accepting paying seller's agent commission but when I look at the whole buyer's agent issue it gives me a sense of "Oh, who's THIS guy who's suddenly appeared to skim some money off too?". In the UK the buyer does their own negotiating and I am confident with that process having bought and sold several properties myself.

You are right about the listing agents trying to get me to use them to "represent" me - they are all over me like a cheap suit! To date I have kept them at arm's length and have always arranged viewing solely through the listing agent or visited open houses, despite the constant refrain when I get there of "I can show you ALL the houses you might be interested in" - yeah right, I can do that myself thank you very much without paying you 3% for the privilege.

I have no issue with a sellers agent receiving commission because I accept that they have to invest time and money in marketing and showing the property and also working towards getting a decent price for the seller which benefits both agent AND seller.

However I'm highly resistant to me, the buyer, who as you pointed out DOES ultimately pay all the costs (indirectly) being charged a whopping additional 3% that has to be incorporated into the sale price to effectively view something that I will be paying for.

Nobody is charged to view a car for sale so why am I being charged to view a house?

I accept that I will need to pay for and deal with title company, escrow, contract etc but cannot for one moment believe that (based on me paying, for example, $250,000 for a property) these costs would total $7,500 (which I would effectively be having to pay as the seller has to roll this into his cost, working on the assumption that any buyer will be using a buyer's agent).

Anyway, grumble over - I am aware that there are such things as discount brokerages such as Redfin where they act as agent BUT refund 75% of the commission - if I were able to pay just 25% of the commission due ($1,875) then I would be happy to do so if they are then dealing with the legwork and still refunding me $5,625 rather than me just forking out $7,500 to someone who's filled a few standard forms out and unlocked some front doors.

I agree with Taxbait that 6% is extortionate for selling a property - and I think that there will soon come a point when realtors are forced to reduce their fees to an acceptable level with more and more people viewing online and more For Sale By Owner properties coming to the market. I agree that selling agents should be remunerated but not to the tune of up to 6%!!!!!!!! The comparison with travel agencies is a good one.

The comparison to travel agents is not apples to apples. Travel agents get paid a commission from the airline, not the client. Although airlines have been greatly reducing commissions to travel agencies, thereby forcing agents to add on service charges. But either way, you can buy an airline ticket directly through the airline, through an online service, or from a travel agent. If a home is listed with an agent, you cannot buy that home other than through the agent.

There is a quick and easy way to buy a home and not pay a realtor commission, if you are against it: buy a home that is not listed with an agency. Easy as that. There are millions of them. If you don't like Wal-Mart, shop somewhere else. If you feel a home has had the realtor's commission "baked in" to the price, then make an offer based on other comparable home sales in the area. Just remember that it is up to the seller as to what the outcome will be, and he or she has professional representation, not you.

BTW: I think a buyer's agency for car purchases is actually a good idea.

[London Girl]

Hi Magellan - thanks for your input!

If there were "millions" of homes for sale by owner in the small town that I am going to be living in then believe me I would be looking at them before any listed with a realtor!!!! Unfortunately there are not "millions" on the market here.

I think the buyer's agent commission structure is so entrenched in the minds of so many people (even though everyone I've spoken to grumbles about paying them) that it will be difficult to negotiate around it. I have found some discount brokerages who operate in MI who will refund 1.5% of the buyer's agent commission (rebate must appear in the closing statement) so at least I'll recoup around $3,750 which is better than nothing!

The concept of discount brokerages seems less familiar here than those states where it is already well established (like CA) but I'm sure it will soon start to catch on.

Thanks for all the comments!