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Its just free money for your relative. If you like them, go for it. Its how the business works.
Basically you call relative, ask her to refer you to the realtor you want to use. The relative gets 1% of purchase price at closing. Real estate office you use gets 6% minus the 1% referral to your relative so 5%. These are just sample numbers.
Quote:
Originally Posted by Bill Keegan
What would you rather have; a referral fee paid out to your family member, or a reduction on the commission for the same amount, which puts money in YOUR pocket? In your negotiations with the listing agent, you can likely get one or the other, but it's tough to find an agent who will give you both.
This is the only pitfall. But you may or may not be able to negotiate a reduction in commission anyway. Depends on how bad the real estate market is around you.
Its just free money for your relative. If you like them, go for it. Its how the business works.
Basically you call relative, ask her to refer you to the realtor you want to use. The relative gets 1% of purchase price at closing. Real estate office you use gets 6% minus the 1% referral to your relative so 5%. These are just sample numbers.
Yeah, I love it when the guy sitting next to me does all the work and I get paid for doing nothing. Sounds like a rip off of 1% to the realtor and brokerage who did all the work AND paid all the expenses of marketing the property.
Sorry but I think your family member is just out of line on this one. I KNOW it's legal. I KNOW it's done all the time. That doesn't make it right.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Quote:
Originally Posted by suzsaz
We will be selling our house in about 1.5 years. Right now, we've got a For Sale By Owner in front....just in case. (house next door is on the market).
I am totally lost at what you're trying to achieve. In case of what?
With a FSBO sign out front, you're telling any agent who shows the house next door to come visit you and most who do will make a reasonable attempt to convince you to list with them. Given your preference for some agent at one of a couple of franchises, if nothing else, I'd go with whoever seemed to spend the most energy on your home now (or until the home next door sells) If someone came over and made you an offer today, would you be in a position to sell today?
I think you run the risk of having a stale listing when you get serious about selling later, even if you are a FSBO now. I remember back in the '80's when there was a FSBO for sale that we would use as a directional reference. "You know, it's a couple of blocks west of that house that's been a FSBO for so long".
Its just free money for your relative. If you like them, go for it. Its how the business works.
Basically you call relative, ask her to refer you to the realtor you want to use. The relative gets 1% of purchase price at closing. Real estate office you use gets 6% minus the 1% referral to your relative so 5%. These are just sample numbers.
This is the only pitfall. But you may or may not be able to negotiate a reduction in commission anyway. Depends on how bad the real estate market is around you.
Using your sample number of 6%. The listing agent would get 3% to split between themselves and their office (average of 50/50 split) and would pay 25% referral fee off their side to the family member before the split.
The other 3% would go to the agent who brings the buyer.
ToIf they just want some of the listing agents earnings because they have a real estate license, they'll be costing YOU money. What would you rather have; a referral fee paid out to your family member, or a reduction on the commission for the same amount, which puts money in YOUR pocket? In your negotiations with the listing agent, you can likely get one or the other, but it's tough to find an agent who will give you both.
Bill: Thanks for your response. I am stuck between a rock and a hard place. It is my sister. I feel weird because I've lived in my town for over 20 years and I know which two agents I am going to decide between to use (one is CB and the other is Weichert). Hopefully, I will sell my house on my own prior to that.
Anyway, can you please explain further the money thing? I'm not quite sure I understand your explaination.
Bill: Thanks for your response. I am stuck between a rock and a hard place. It is my sister. I feel weird because I've lived in my town for over 20 years and I know which two agents I am going to decide between to use (one is CB and the other is Weichert). Hopefully, I will sell my house on my own prior to that.
Anyway, can you please explain further the money thing? I'm not quite sure I understand your explaination.
Thanks.
No problem;
When a referral fee is paid out, the listing agent's pay is reduced by the amount of the referral fee. If the agent's fee is $100, and your sister gets a referral fee of $25, then the listing agent only gets to keep $75. You still pay the listing agent $100. You gain nothing, except that you feel good about having generated some income for your sister. The listing agent may be willing to pay it, seeing it as a cost of getting the business. If your sister does some work for you, (assists with the selection of the agent, offers her thoughts & insight as to the marketing plan, etc.) then perhaps it's money well spent, on your behalf. If she simply steps in between you & the listing agent for the purpose of collecting a referral fee......
Now, let's imagine you ask the listing agent to reduce her commission by $25. Listing agent gets paid the same $75. She may be willing to negotiate a lower commission, or she may not. If she does, you pay the reduced fee of $75, and keep the $25 in your pocket, instead of shuffling it to your sister. Have you lost anything? Only the good feeling of having generated some income for sis.
Third, let's consider trying to get both the reduced commission and the referral fee for your sister. You're now asking the listing agent to reduce her total fee to $75, so you can save the $25. Then, out of her $75, you ask her to pay a referral fee to sis. Probably not the same $25, but maybe $15-$20. It still comes out of the listing agent's income. Making her total paycheck maybe $60. It's possible a listing agent is willing to do that, but I wouldn't, and I son't know many who would.
In any case, you'll decide what's best for you. If it's important to you that you let sis participate in the income, then go ahead. Hope this helps you to make an informed decision.
One last question. I know you were just using simplistic money figures...but were they just that, simplistic or are you actually saying 25% as in if the agent's commission ended up being $20,000, you are talking $5000 to my sister?
One last question. I know you were just using simplistic money figures...but were they just that, simplistic or are you actually saying 25% as in if the agent's commission ended up being $20,000, you are talking $5000 to my sister?
If that was the listing agent's side of the commission (after splitting with the buyer agent), then yes, $5K to your sister's broker. Sister's cut will be less depending on split with her broker.
One last question. I know you were just using simplistic money figures...but were they just that, simplistic or are you actually saying 25% as in if the agent's commission ended up being $20,000, you are talking $5000 to my sister?
25% is a fairly common referral rate. Like everything in the real estate business, it is negotiable. That percentage is based on the listing side of the commission, which is usually about half of the total commission paid by the seller. So, if we use your number of $20,000 for the agent's commission (that would probably mean a $40k TOTAL commission, split with the buyers broker) your sister's brokerage would get 25% of $20k, or $5,000. You sister then gets paid based on her agreed upon "split" with her broker.
One last question. I know you were just using simplistic money figures...but were they just that, simplistic or are you actually saying 25% as in if the agent's commission ended up being $20,000, you are talking $5000 to my sister?
Let's say we use the standard 6% of purchase price as what you negotiated as pay for the sale of your house. The listing agent advertises 3% to agents who bring a buyer, making the listing agent's cut 3% as well.
For a $400,000 house, each agent would receive $12,000 in commission. The listing agent would then have to pay 25% of his commission as a referral fee to your sister, or about $3,000. So it breaks down like this:
Only you can know what you think is right to do in the situation. I might let my sister refer me to one of my chosen agents if I thought my sister was having a hard time with money or something major was going on in her life (having a baby, going through a divorce or whatnot). If my sister was a "user" type person I would probably say no. I don't really feel it's fair to the listing agent for her to get a cut of the commission if she didn't do any work at all.
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