Under 50K realtor fee for being buyer's agent (California: sale, real estate)

[Benicat]

A realtor suggested that as a buyer I pay a fee of $2,000 for his assistance in helping me to purchase a home. Is this customary or reasonable?

Thanks for your thoughts

[Sarge621]

Run!!!!

[PAhippo]

I've never heard of it.

I'd go with Sarge621: run

[bubbleboy]

Originally Posted by Benicat

A realtor suggested that as a buyer I pay a fee of $2,000 for his assistance in helping me to purchase a home. Is this customary or reasonable?

Thanks for your thoughts

Hi Beni

Good point.
First thing you have to know is that you can negotiate the fee down but 2K sounds about right.

A good agent should pay himself, right in front of you, so if the agent gets you the home for 5K less, you make 3K. Since the agent is not emotionally involved in the buy, he can probably negotiate better than you, not because there is anything wrong with you, but because you are representing yourself. Like with lawyers, you don't want to be your own advocate.

If the property you are interested comes with a 2% listing incentive from the seller to the buyer's agent via the seller's agent, make sure that your written contract with your agent states that you are responsible for the 2 K commission and that your agent is responsible for crediting, and the escrow company for paying you any money above the 2K you owe the agent.
For how that works, just look at a California buyer broker agency agreement and copy the clause that explains how it works, although I am sure your state has the same forms.

If you are not set on buying a particular property and want the agent to find you one, you can write in the property description part of the buyer broker agreement, the part where you describe the type of property your agent will be finding for you, that you want a property that is listed on the MLS and that such property is to come with a 2% or 3% MLS incentive (agents call it the commission to the buyer's agent but that is not quite accurate). If your agent gets you a MLS listing like that, you will have money to pay the agent and have either a nice chunk of change at closing (3% minus 2K) or you can leave the money on escrow and pay escrow fees with that.
It is all in the Buyer Representation Agreement and you just follow the instructions.

Your agent is not talking about getting the MLS incentive and additionally getting paid 2K by you.
There is no contract that can do that lawfully. If your agent receives the MLS incentive, he is not your agent, he is a sub agent of the listing agent, and if he is not your agent, he can't lawfully receive the MLS incentive, since he is not the buyer's broker.
The MLS incentive and the buyer's broker agreement work together and you can have a buyer broker agreement with out a MLS incentive but not the other way around.

I have a thread on this very subject.

BB

[PeanutKrys]

As a buyer!? I find it crazy and I have dealt with many realtors in PA ... I just bought a home .

[ksobilo]

I think its pretty rare for a buyer's agent in this area to request this. Are you asking for the agent to help you buy a property not listed through a real estate company such as a FSBO (Forsale By Owner) or are you asking them to help you research properties you want to bid on at tax sale or sheriff's sale or something else out of the ordinary???

In most cases buyer's agents get paid strictly from a portion of the commission paid by the seller.

[bubbleboy]

Originally Posted by ksobilo

I think its pretty rare for a buyer's agent in this area to request this. Are you asking for the agent to help you buy a property not listed through a real estate company such as a FSBO (Forsale By Owner) or are you asking them to help you research properties you want to bid on at tax sale or sheriff's sale or something else out of the ordinary???
In most cases buyer's agents get paid strictly from a portion of the commission paid by the seller.

In an ideal world, the buyer would not request this. The agent would have to give you the option, because as your agent, he has to put your intereset first, but that is another story and has to do with how the forms and the law of agency work together. When the buyer request the services of an agent, the agent has a narrow path that needs to be followed, to avoid the agent dealing himself a better hand at the expense of the principal.

Am I asking an agent to help me buy a property not listed?
The buyer is asking the agent to find him a property to buy, regardless of how ordinary it is.
The many multiple listing services available are a private way for agents to offer properties to members of such services. It is a fast and easy way to find a place to live. No doubt. The idea is to copy how stocks and commodities are traded on the floor of the exchange, only because real estate does not move, it does not work the same way and it would need some tweeking.

What if the property you want is sold directly by the owner, and you would like to buy that house?
Real Estate agents ought to be able to help you in all cases. They have the forms for that, but hardly ever are they discussed with the buyer. As a Real Estate agent, is easy to write an offer to an owner where he instructs escrow to give money to the buyers agent. The law allows for that, but nobody is interested in changing.

Do you think that Real Estate agency law is written in a way that agents for buyers can only be paid by other agents? The answer is no.
Real Estate was bought and sold long before listing services were put to work, (by real estate agents) and the rules are pretty old. How do you think it was done then?

The same way, the forms used by agents are also written for buyers to pay their agents fee, using the money the seller, seller's agent or anybody offers to make the transaction go smooth.

Does not matter who's money is used to pay the agent, as long as the buyer controls the fee and when the agent gets it. That way, if the agents does not perform, the client can stop payment. Pretty simple stuff.

Today, agents control how the fee is disbursed, and therefore, control the fee.

This has to do, at least in California, with how the Title and Escrow Company work together with agents to capture clients. Escrow companies make it easy on agents and agents bring their escrows to the friendly Escrow Company. There are 3 title companies always competing for business, so it pays to cooperate.
It is all in black and white, but the escrow companies and the agents are the only ones that handle the documents.
If you are going to read the documentation, read the Real Estate law, the forms, the MLS rules, the Agents rules, and the escrow rules. No one that buys a home once every decade is going to do that.

Buyers are told they don't pay anything by someone the buyer belives to be his personal, private, do as I tell you, put my interests ahead of yours agent. But, really, the buyer does not have an agent.

That does not seem to bother buyers, so the practice prevails, but with restrictions. One of them is that buyers can only use agents to buy homes listed by other agents. That is just one of the disatvantages.

Now, payment of a fee determines the agency. The agent represents the person that pays the fee, and to establish a real estate agency, the agreement needs to be in writing. Something to do with the Statute of Frauds, and in California, it is the California Civil Code, paragraph 1624. If you don't pay, the person helping you is either a friend or an agent working for whom ever is paying the fee.

Think about this...

What if you want to choose a the home you buy among a list of homes listed by different listing agents?
When you hire your agent at the beginning, who is your agent really working for?
Actually nobody until you choose the property.
Once you choose the property, only then, the agents begins working for the seller's agent, not you.
That is why, if you begin working with an agent and stop, the agents do not complain.

In the case of listings, and you mentioned FSBO listing service, the agent with the listing pays your agent, to try to sell you the property. and again, you don't have your agent. In those cases, the agents do not sell homes, they sell listings, meaning homes on the list.
If you ever want to have your own agent, make sure you get their story straight. Most of the people reading this post do not need an agent to represent them. If you are one of those folks, keep doing what you are doing.

Think of it like a brokerage house. Lehman Brothers sell you their product, not all of the investments available, only their paper.
To buy the best investment available, you would have to go to the NYSE yourself, buy a seat and bid.
What is wrong would be for Lehman Brothers to tell you that they sell you all of the investments available. They don't do that and sorry I used LB as an example. Is the first name that came to mind from watching the news.

Real Estate Agents that do not charge fees to buyers do not work for buyers. They are subagents for the seller. Talk it over with your attorney friend.

But as long as your wife gets the house near the school your children will be attending, who cares who your agent owes loyalty too. Besides, you are using the banks money anyway.

Get the house and move on. KISS right?

I want to thank those who read my entries with enthusiasm and curiosity.

BB