Adding Commission to Sales Price (agents, contract, Realtor, closing)
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I have just seen a deal which, to me, is very odd.
House formally appraises for $325. Listing goes up through a full service agent at $329 with a 6% commission arrangement.
Buyer comes along and agrees to the selling price of $329 whereupon the seller/listing agent ADD $21,000 to the listing price in order to cover a 6% commission. 6% of $350 is $21,000
Buyer, for reasons which i believe are personal (they REALLY wanted the property) agree to the higher price. There is no other buyer in the pipeline.
Is this ethical? Legal? Anyone ever hear of such a situation? Is it fraudulent? I am flummoxed having seen this unfold and not sure whether there is an issue, or "just what it took to put the deal together".
I can't speak for every market, but I think it is perfectly legal and customary. The buyer can counter-offer and that is not uncommon in any market. If they don't feel the home is worth the asking price, they don't have to accept it at the listing price. Commonly, the seller pays the commission, not the buyer unless agreed upon by BOTH parties prior to closing.
As a former realtor, every closing I have attended, the closing agent takes the commission from the seller's side and the buyer is responsible for the remaining pro-rated property taxes and/or HOA fees/assessments for the current fiscal year at closing.
I have just seen a deal which, to me, is very odd.
House formally appraises for $325. Listing goes up through a full service agent at $329 with a 6% commission arrangement.
Buyer comes along and agrees to the selling price of $329 whereupon the seller/listing agent ADD $21,000 to the listing price in order to cover a 6% commission. 6% of $350 is $21,000
Buyer, for reasons which i believe are personal (they REALLY wanted the property) agree to the higher price. There is no other buyer in the pipeline.
Is this ethical? Legal? Anyone ever hear of such a situation? Is it fraudulent? I am flummoxed having seen this unfold and not sure whether there is an issue, or "just what it took to put the deal together".
Thoughts? Experience? Opinions?
Line items are nuts.
Seller, and buyer, should just negotiate "what it takes to put the deal together" without wandering into the weeds.
Ethical? Sure. No one has to sell for list price. A listing is just a solicitation for offers.
Smart business? Maybe not.
I can't speak for every market, but I think it is perfectly legal and customary. The buyer can counter-offer and that is not uncommon in any market. If they don't feel the home is worth the asking price, they don't have to accept it at the listing price. Commonly, the seller pays the commission, not the buyer unless agreed upon by BOTH parties prior to closing.
As a former realtor, every closing I have attended, the closing agent takes the commission from the seller's side and the buyer is responsible for the remaining pro-rated property taxes and/or HOA fees/assessments for the current fiscal year at closing.
Ummm,
no, you can't accept an offer and then add on to it.
The selling price is understood to include the agent's commission.
If the seller wants it done differently, they need to specify this.
Frankly I think it's a cheap attempt at deception.
I don't think that I said anything different than what you just said. I didn't imply that the selling price didn't include the commission that is traditionally paid by the seller.
My reading of the OP was buyer agreed to $329, and then all of a sudden the agents said, Oh, we’re tacking on $21,000 for the commission, the real price is $350. I would expect the commission to be baked into the listing price.
I would think that if the seller accepted an offer at $329,000 the price is $329,000!
Now, what is missing from the OP is if the seller accepted a contact at $329,000 or if they countered with $350,000 to cover the 6% commission. I would think that until the seller accepted the offer, the price is negotiable up or down.
My reading of the OP was buyer agreed to $329, and then all of a sudden the agents said, Oh, we’re tacking on $21,000 for the commission, the real price is $350. I would expect the commission to be baked into the listing price.
The OP IS a bit unclear, yes.
Quote:
Originally Posted by Rabrrita
I would think that if the seller accepted an offer at $329,000 the price is $329,000!
Now, what is missing from the OP is if the seller accepted a contact at $329,000 or if they countered with $350,000 to cover the 6% commission. I would think that until the seller accepted the offer, the price is negotiable up or down.
"until the seller accepted the offer, the price is negotiable..."
I have just seen a deal which, to me, is very odd.
House formally appraises for $325. Listing goes up through a full service agent at $329 with a 6% commission arrangement.
Buyer comes along and agrees to the selling price of $329 whereupon the seller/listing agent ADD $21,000 to the listing price in order to cover a 6% commission. 6% of $350 is $21,000
Buyer, for reasons which i believe are personal (they REALLY wanted the property) agree to the higher price. There is no other buyer in the pipeline.
Is this ethical? Legal? Anyone ever hear of such a situation? Is it fraudulent? I am flummoxed having seen this unfold and not sure whether there is an issue, or "just what it took to put the deal together".
Thoughts? Experience? Opinions?
That is a common misconception. The Buyer didn't "agree" to a selling price because a listing price is not an offer to sell. It's a suggested price designed to solicit offers. By offering to pay the listing price, that is not an agreement. It's still just an offer which the Seller can choose to accept, reject or seek to negotiate. In this case, it's apparent that the Seller chose to try to negotiate a higher price, which they did. Had I been the Buyer, I highly doubt that I would have accepted the counter-offer, but the Buyers in this case apparently thought that it was worth it to them.
The only complication is that if they need to finance the purchase, the lender will require an appraisal. A lender will rarely, if ever, accept an appraisal done by the Seller (if that was the sequence). Even so, if a new appraisal pegs the value at $325K, the Buyer will need to cover any additional amount over the appraised value. Of course, if it's a cash sale, an appraisal is largely irrelevant as it's only an opinion of value which may or may not affect how a Buyer perceives the property.
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