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My husband and I are selling our house and we received a good recommendation for a listing agent. We are new sellers as this was our first house so we don't know if we did something wrong here.
The listing agent was initially introduced to us through a mutual friend who told her we needed a buyer's agent in a nearby city. This listing agent contacted me with a suggestion for a buyer's agent in that city, noting she receives a referral fee if we take up her recommendation. I didn't take up on her rec. Later, when looking for a seller agent, I asked this gal if she would be interested in being our listing agent. She agreed, came over and spent time with us discussing our home. She said given the modest sales price we'd get for our house, she will reduce her regular 7% commission rate to 6% but wanted us to use the buyer's agent she recommended for our new house. The referral fee, she said, would defray the cost of the lowered commission.
I didn't think too much about the referral because buyer's are not usually legally tied to one agent. I figured I could check the referral out, and decide on whether I want to use that referral or not. When the listing contract came, it stated that the 6% commission was contingent on us using her recommended agent to buy our house. In other words, we HAD to use the agent referred in order to get the 6% commission. We balked on that.
I told the agent that we don't like the required referral and the realtor became upset. I guess our stance that we wouldn't compromise on the referral was upsetting to her. Anyway, I contacted the current buyer's agent we are working with, asking about normal seller's commission in our area (as he worked here before). He said 6% is standard but could go even lower given the market. So our (now ex) listing agent's talk of 7% seems a bit high...
I wanted to know if it's normal for seller's agent to require clients take their referral in return for lowered commission, even if that commission is actually the norm in this area. Our ex-agent said her usual commission is 7% but that she was doing us a favor by taking a lowered fee, so we should return the favor by taking her referral.
I was really disappointed that the situation didn't work out. I thought she was pretty good and came highly recommended. Were we harsh on her? Is this type of required referral common?
Absolutely not common at all, and frankly, completely unethical, if not downright illegal. Where in the country are you that someone can claim a 7% commission?
"I told the agent that we don't like the required referral and the realtor became upset. I guess our stance that we wouldn't compromise on the referral was upsetting to her. Anyway, I contacted the current buyer's agent we are working with, asking about normal seller's commission in our area (as he worked here before). He said 6% is standard but could go even lower given the market."
Hmmm. Regarding:
Agent 1: "Upset" over commission discussion is a nice red flag for you.
Agent 2: Well. There is no "standard commission."
It seems like you are being gamed a bit by both agents, each in their own way.
"I told the agent that we don't like the required referral and the realtor became upset. I guess our stance that we wouldn't compromise on the referral was upsetting to her. Anyway, I contacted the current buyer's agent we are working with, asking about normal seller's commission in our area (as he worked here before). He said 6% is standard but could go even lower given the market."
Hmmm. Regarding:
Agent 1: "Upset" over commission discussion is a nice red flag for you.
Agent 2: Well. There is no "standard commission."
It seems like you are being gamed a bit by both agents, each in their own way.
You think the current buyer's agent is also manipulating me? I didn't tell him what was going on on this side, merely that I had a question about listing commission in our city. He said 6% was standard but that it could go lower these days. Do you think he stands to gain something from telling me this? It's so difficult to know who is being honest and who is not.
Absolutely not common at all, and frankly, completely unethical, if not downright illegal. Where in the country are you that someone can claim a 7% commission?
What's unethical or illegal about it? The consumer wanted to pay less than what the listing agent put forth as her rate. The listing agent showed the consumer a way to do that; use the buyer agent recommended by the listing agent, for which the listing agent will get a referral fee. All clearly disclosed and put up for discussion/negotiation before the signing of any contracts. Maybe not a business model everyone likes, but what's unethical or illegal about it?
And any licensed agent anywhere in the country can claim whatever commission they want, if a client is willing to pay them.
Last edited by Bill Keegan; 04-14-2014 at 06:42 AM..
Reason: Added last sentence.
You think the current buyer's agent is also manipulating me? I didn't tell him what was going on on this side, merely that I had a question about listing commission in our city. He said 6% was standard but that it could go lower these days. Do you think he stands to gain something from telling me this? It's so difficult to know who is being honest and who is not.
I don't really think he is terribly manipulative based on your post.
It is completely wrong to state that ANY commission level is "standard," but an error that many agents still make.
All commissions are negotiable, and that has been beat into our heads for years. Also beat into our heads is to never call any commission "standard." It is amazing that some folks don't get that message.
At least he is open about discussing the topic with you.
You think the current buyer's agent is also manipulating me? I didn't tell him what was going on on this side, merely that I had a question about listing commission in our city. He said 6% was standard but that it could go lower these days. Do you think he stands to gain something from telling me this? It's so difficult to know who is being honest and who is not.
The point is that there is no such thing as "standard". Every broker sets their own policy regarding commissions & fees, and there is no standard among brokerage companies. That's the law. A standard is not legal. So the guy who says the standard is X, is really giving you a bit of misinformation.
I'm not an agent but I also don't see anything illegal or unethical about it. A business deal was proposed which was advantageous to the agents involved. Everything was presented up front before any contract was signed. If the seller doesn't like it, then the seller and the agent negotiate something else. No harm was done to anyone.
If a meeting of the minds can't be reached, then the sellers can move on to another agent or agents until a listing agreement acceptable to all is reached. There are lots of agents out there. This is business- learn a little about the business before entering into negotiations.
OP- you'll be OK- if you're looking to pay a 5-6% commission, just keep looking. Since you're worried about this referral fee stuff, I would suggest you not even go that route. Just find another agent in your new area on your own.
The point is that there is no such thing as "standard". Every broker sets their own policy regarding commissions & fees, and there is no standard among brokerage companies. That's the law. A standard is not legal. So the guy who says the standard is X, is really giving you a bit of misinformation.
yes in a perfect sort of legal world this is all true...
however if you go to a particular area, there is a "standard" amount that full service brokers tend to charge, whether it be 4%, 5%, 6%, or 7%. in low cost areas its on the higher end, on high cost areas, it can be on the lower end.
its just like when contractors get outraged when there is talk about a "going rate" for something.... yeah there are exceptions, and complicated jobs, but the going rate for a change out of water heater is X, the going rate for a paver job is Y psft etc
interview 2-3 other real estate agents from major brokerages and you'll find out what the going rate is in the area and whether this guy is out of line at 7%.
What's wrong with 7%? SHe said her listing is a "modest" price point, which tells me it's below $100k. I've charged 8% for lower prices before. I've also charged flat fees like $4k to each side when the percentage was going to be too low.
Commissions are negotiable. There is no set amount. The agent is welcome to negotiate whatever she can get. I would do a 7% if it was a low price point also. Much of the marketing is the same price as the higher price points.
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