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If I'm in the market to buy a house, and I use the services of a real estate agent to help me find one, I find it unsettling that the more I pay for the house, the more money they get. It doesn't seem like our interests are aligned. Is there ever a case where an agreement is made where the buying agent's commission would be inversely proportionate to what I pay as a buyer? Wouldn't that provide the best scenario?
You can talk with a flat fee service company or an employee model company, but other than that, we're all independent contractors working on commission, and our best results is when our clients are happy so they refer more friends and family our way. We do not work one transaction to the next to see how much we can get one buyer to spend. Even a $10k price different between properties is a mere $300 that has to be split with brokers and other fees, so it's not worth the pennies to make our buyers unhappy and magically get them to spend more on a house than they want to.
- the SELLER has already agreed to pay a commission based on sales price. If your agent finds you a house he gets to share the already-agreed commission.
- suppose you are the salesman. You get $100 if you sell a basic refrigerator to a customer, $110 if you sell an upgraded model, and $0 if you sell nothing. What's your strategy?
- suppose you are the salesman. You get $100 if you sell a basic refrigerator to a customer, $110 if you sell an upgraded model, and $0 if you sell nothing. What's your strategy?
Not sure if this question is for me or not, but obviously I would sell the upgraded model were I the salesman.
Not sure if this question is for me or not, but obviously I would sell the upgraded model were I the salesman.
Hence my question.
You would try to sell the upgraded version for a mere $10 when you had a sure sale with the regular model? Sorry, but most of us don't work for $10 here and there. We see the bigger picture in making sure our clients are happy so we don't push into more expensive houses. If you, as the buyer, choose to go into a more expensive house, why shouldn't the agent get paid for your decision?
- the SELLER has already agreed to pay a commission based on sales price. If your agent finds you a house he gets to share the already-agreed commission.
- suppose you are the salesman. You get $100 if you sell a basic refrigerator to a customer, $110 if you sell an upgraded model, and $0 if you sell nothing. What's your strategy?
The actual scenario should be "You get $100 if you sell a basic refrigerator to a customer, $110 if you sell an the same model for more, and $0 if you sell nothing. What's your strategy?"
Do you want to attempt to get $10 more and risk pissing the customer and him not buying anything or try and see if you can sell it for less, make $90 and have him refer 5 friends to buy a refrigerator from you where you make $90 from each of the 5 friends?
The buyer has nothing to do with the commission. The commission is determined by what the listing agent and the seller agree upon. The listing agent then offers usually half of that out to the buyers agent. You are trying to get in the middle of a contract between the agents and the seller.
Not sure if this question is for me or not, but obviously I would sell the upgraded model were I the salesman.
Hence my question.
But if you, the consumer chooses the more expensive home? It is your decision, not ours.
But if you, the consumer cannot afford or qualify for the more expensive home, how will you pay for it?
I give the same level of service to someone that is purchasing a home for $100K or $1M. It takes me the same amount of time and energy. You could spend $100K and then come back to me and want to but a $1M a few years later. If I have provided you good service, hopefully you would return to me as a repeat client.
My point is this. Most people buying a house know how much they can afford or are willing to pay. They are not going to pay more because an agent pushes them to do so. They MAY pay more because they come to realize they want to. The agent has very little impact on this (apart from showing them upscale homes).
Not all customers will actually buy, even if they can. They might decide they are happy enough in a present house, they decide to wait, or get rejected for a mortgage.
So if an agent gets a customer to buy something, he will make most of the possible commission he can get out of that customer. The customer usually can't choose to double the amount he pays; at best he might push 10-20%. On the other hand he could choose to walk if he feels pressured by the agent.
So I feel agents are motivated to find most customers what they want and can afford. Because pushing a customer too hard means getting nothing. Contrary to the OP, I DON'T think being paid a percentage significantly distorts the agent's motivation. He has much to gain by making a sale, any sale, and no commission and time lost if he sells nothing.
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