An earnest question on the commission thing w/buyer's agent.. (square footage, contract)

[fierce_flawless]

I have a buyer's agent and I am very happy with her.. and I understand that she gets a percentage (half, normally) of the commission when I buy a home.

My question though, is not meant to offend, but I wonder how a buyer's agent will truly work to get the buyer the best price, since it directly affects the amount of a commission they will receive?

For example, if a home is listed at $100,000 and a buyer's agent knows, due to comps and the neighborhood and days on the market, etc., that the house could be had for $89,000, but they also know that their buyer is willing to spend up to $100,000, then why would they suggest the buyer offer $89,000 if they knew the buyer would "go for" a suggested offer amount of $97,000?

Another question, kinda related: do agents dislike being asked to "lowball"? I'm interested in a property that seems to be over priced by at least $7000 to 10,000 (if not more) and my agent agrees it's overpriced but she's only suggested that I offer $5000 below asking.
This is what got me thinking about the commission thing. She knows I was willing to spend X dollars on 2 previous homes I saw, and even though this one is worth less than X (IMO) she's still suggesting X as an amount to offer.

I know I can tell her I want to offer something different, I am just relating what she's said to me and wondering about it.

I kind of feel sorry for her, she is stuck with picky me and I'm shopping in a lower end of the price range so it's no huge sale for her (and I get the feeling she normally sells higher end homes)... but I still don't want to overpay just because.

Thanks for any input.

[OvertaxedOnLI]

Originally Posted by fierce_flawless

... I wonder how a buyer's agent will truly work to get the buyer the best price, since it directly affects the amount of a commission they will receive?

For example, if a home is listed at $100,000 and a buyer's agent knows, due to comps and the neighborhood and days on the market, etc., that the house could be had for $89,000, but they also know that their buyer is willing to spend up to $100,000, then why would they suggest the buyer offer $89,000 if they knew the buyer would "go for" a suggested offer amount of $97,000?

You know, that is a VERY GOOD question!!

In this area where seller subagency has been the norm and buyer agency rare until literally this year, what you describe has never been a factor because usually all the agents involved were representing the seller. However, that is changing.

The only answer I can envision to the question of why a buyer agent would negotiate a lower selling price (and thus receive a smaller commission), comes down to ethics. The agent owes a legal (fiduciary) obligation to the buyer, with whom he/she has a written contract to do exactly that: Work solely for the BUYER'S interest which means obtaining the home at the best price for the buyer. Since the "best price for the buyer" is normally a lower one, it's also the "worse price for the buyer's agent" because it results in a smaller commission. But from a legal/ethical standpoint, that doesn't matter. An ethical realtor will do what he/she is legally obligated to do, which is get the lowest price possible regardless of the impact on their commission.

The buyer agent is also working on his client's behalf "against" other buyers and their buyer agents who may also be negotiating for the same house. In that case, a lower commission is definitely far better than none at all!

But I think the answer to your question all comes down to the integrity and ethics of the individual buyer agent, because it would be difficult to prove intentional negligence of fiduciary duty without a lot of detailed backup which most buyers wouldn't think to do... it'd come down to a "he said/she said" situation.

[businessperson]

As a Buyer's Agent I approach all sales as if I were buying myself. Why would an agent push you to pay $20,000 more for a house when her bottom line commission on that $20,000 is only $300? Most agents are more concerned about their reputation and the possibility of repeat business and referrals than making $300. Another thing...if the house is overpriced and you make a full price offer, it won't appraise. So, then the deal falls through. The agent makes zero if there's no sale.

As for low ball offers, they are a waste of your time as well as your agent's. In most cases all it does is insult the seller.

[sunsprit]

businessperson ... why are "low ball" offers a "waste of your time as well as your agent's"?

It may indicate a real interest on my part as a buyer, but it's a signal to the seller that the price is an issue.

In my experience, I've looked at properties that were way overpriced ... perhaps by an overzealous listing realtor who "bought" a listing by misleading a seller into thinking they could get even more than "top dollar" for a property.
Until my offer came in, the seller had absolutely no action on the property and it was a "stale" listing of many months ... few showings, no offers.

Ultimately, I have purcased several properties for a realistic amount at a "low ball" figure ... due to the price being right on in the market, or other seller circumstances (property defects, timely sale completion, close to foreclosure/default, etc) making my "low ball" offer acceptable to them.

Just whose time did I waste then?

[WendyK]

Low ball offers on a property that obviously needs work or updating are expected. My pet peeve is when a buyer wants to low-ball an offer on a house that is in pristine condition and hasn't been on the market very long. Those kind of offers are a waste of time and do insult the seller.
Regarding the buyers agent commission - the commission difference on the amount a buyer wants to offer vs. asking price is usually minimal. Buyers agents really do want to represent their clients and negotiating the best terms of an offer comes first. A client's interests should ALWAYS come before any commission consideration. I have made that my mantra and business commitment to the point where on some deals I've had to actually forego getting paid on a transaction (long story) in order to help my buyers get the property. Our reputation is more important than a few hundred dollars extra on a sale. This is what leads to good referrals and future business leads.

[2bindenver]

Sometimes a "lowball" offer is FMV, and other times it's ridiculously below FMV.

A lowball offer significantly below FMV is a waste of time, 99% of the time.

If it is your priority to purchase a house significantly below FMV, the you should tell your agent upfront, so the s/he understands your goals, and agrees to be a willing participant.

Last year I had a lovely house listed, and because it was unique, I paid $300 for an appraisal, and then the seller listed it for $5,000 more than appraised value.

We received an offer for 40% less than it appraised for. What a shock! I asked the buyers agent if they have made other offers, and how long have they been looking, etc. I was amazed when she said they have made more than a dozen offers in 8 months, not one was accepted. Geez, take a clue.

We countered at $10,000 over list. That was last June. As of January, they are still looking and have made more than 30 offers.

[sunsprit]

There's a big difference between an overpriced property (maybe with defects, maybe not) and a professionally represented and marketed property. Absent a distress situation, an offer at 40% less than a realistic FMV price with a well presented property is obviously not a serious offer.

IMO, any agent running around with a client for a year making such absurd "low ball" offers without merit is either ignorant or just has a lot of time to throw away. The client obviously isn't serious or realistic, either. Maybe they deserve each other ....

[mainebrokerman]

wendy is correct,

selling a house is an often stressful time for a seller, as with a buyer,
most homes are the sellers largest asset and if a family grew up in the house
it does get emotional, ive seen many a seller cry, leaving a home
thinking of fond memories. so, when an offer comes in thats very very low, they take it personally,(insulted) and ive seen 4 times, when the seller wouldnt budge on price, and the buyer did come up to within 5k of asking price, and the seller wouldnt sell it to that individual. yes there were other offers and the sellers were fond of the buyers.

ive worked with many buyers that really like a house, would pay close to asking price, but because of their first low ball offer, they were rejected immediately ,(this isnt the best strategy if the buyer really wants the house, because of competing offers... and another offer was accepted.
we've had other brokers in the area do this....with a low ball buyer
they would tell the buyer to go personally to the seller, talk about the house, and start throwing figures out, see what the sellers tolerance is.(the seller should have immediately told him to call his broker, this is a good point for the fsbo's ..listing a house often eliminates the tire-kickers'

the late night infomercials have generated many real estate experts and genius's

[rubytue]

Originally Posted by WendyK

My pet peeve is when a buyer wants to low-ball an offer on a house that is in pristine condition and hasn't been on the market very long.

The first offer on my townhome was 10 days after listing and came in 20% under list. List was set in the middle of comps (and with a townhome, comps are easy as everyone has the same square footage and lot size). We had just finished a kitchen remodel (transfered 2 months after *sob*), and had updated everything in the house. We were nothing but insulted. We kept it on the market for another 4 weeks and got another offer at almost full price. It closed yesterday

But where do you draw the line at a lowball vs FMV? If a seller insists on a certain list price that is 30% above FMV, you are insulting to offer 35% less. But yet you are close to FMV.

There is one place we love, we looked at it back in December, but our agent advised it was overpriced, and we later decided that our personal top price is lower than the bank approved. Its still on the market, they are dropping the price. Our agent's estimate of FMV is about halfway between our personal limit and its current price (we are only talking 5% total difference).

[cindyj]

Buyer's agent response - If your agent is a member of the Realtor's association, then they are required to abide by a code of ethics and secondly - I approach it with the idea that if I get you the best price possible, then you will spread my name to your friends, family, neighbors, etc. Being a good buyer's agent will provide positive results in the end. Not to mention, when you decide to sell your home a few years down the road, I want you to remember that I did a good job for you and you will hopefully use me again.
Low ball - Your agent should be able to complete a market analysis on any property you are considering a purchase on to provide you with the proper information and tools to made an educated offer, even if it is a low ball offer. The market analysis will prove whether or not the property is really overpriced.