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For Buyers and Sellers Only. Here is your chance to discuss among each other some issues regarding commissions. Please begin the discussion by answering the questions below.
Background:
Buyers on the forum have said that they pay the real estate commission
Sellers on the forum have said that they pay the real estate commission.
Question for buyers:
Who do you think pays the commission? Explain your reason.
Question for sellers:
Who do you think pays the commission? Explain your reason.
For another question, here is a hypothetical situation.
Seller lists a home for $250,000 with a realtor at 6% commission. 3% for listing agent; 3% for buyers agent. No other commission information is available for this example.
An unrepresented buyer comes and wants to buy the house.
Questions:
You are the seller. Who should get the $7,500 buyers agent commission? Why?
You are the buyer. Who should get the $7,500 buyers agent commission. Why?
For the seller; in this case, who should help the unrepresented seller with their paperwork if they need help? Why?
For the buyer; if you need help with the paperwork, who would you expect to help you? Why?
Location: Halfway between Number 4 Privet Drive and Forks, WA
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Okay, Bill, I'll play...
First, as a seller, I think the seller AND the buyer pay the real estate commission. Here's why: The seller has the commission built into the sales price of the home, however, the buyer makes the purchase, therefore he is forking over the money that covers the commission. With no buyer, you have no commission, even though it comes off the sellers net.
If an unrepresented buyer comes into purchase a house, I would like the BUYER to receive that discount off the purchase price of the house for a couple of reasons, the most important being, a.) the buyer would be less likely to chew down the price of the house, and b.) if they did the work in finding the home, why should the listing agent be entitled to full commission?
If the unrepresented buyer needs help, they should have hired an agent or a lawyer to assist them, HOWEVER, buying a house is not rocket science (like alot of agents make it out to be).
If I was an unrepresented buyer, I am confident I can handle my own paperwork. Those who can't I wonder if they're fully knowledgable to purchase a house at all...
For Buyers and Sellers Only. Here is your chance to discuss among each other some issues regarding commissions. Please begin the discussion by answering the questions below.
Background:
Buyers on the forum have said that they pay the real estate commission
Sellers on the forum have said that they pay the real estate commission.
Question for buyers:
Who do you think pays the commission? Explain your reason.
Question for sellers:
Who do you think pays the commission? Explain your reason.
For another question, here is a hypothetical situation.
Seller lists a home for $250,000 with a realtor at 6% commission. 3% for listing agent; 3% for buyers agent. No other commission information is available for this example.
An unrepresented buyer comes and wants to buy the house.
Questions:
You are the seller. Who should get the $7,500 buyers agent commission? Why?
You are the buyer. Who should get the $7,500 buyers agent commission. Why?
For the seller; in this case, who should help the unrepresented seller with their paperwork if they need help? Why?
For the buyer; if you need help with the paperwork, who would you expect to help you? Why?
First, are we speaking legally, or in reality land? Legally, the seller pays the commissions, they have the agreement to pay the commissions. They pay these fees from the equity that they have built into their home.
In reality land, an argument could be made for either side.
Obviously the buyer is the individual with cash in hand, without the cash, there is nothing to pay the realtor (evidence by the fact that if the property does not sell, the realtor does not get paid), so an argument is obviously made that the buyer pays for the realtor. But, we all know, that these funds get transferred to the seller on paper, so that the seller can pay for the fees.
For me, when I'm buying properties and using a realtor, I usually have my agent get the commission, + they get a bonus for helping to close the deal. That being said, I put a lot of exta stress on the buyers agents I deal with and they know this ahead of time to get the deals done in a favorable term for me over the next guy.
example, I'm in a bidding war for a property with an asking price of $149K.. My price is $140K, while 3 others are $149K, the asking price. My agent is arguing that I can close within 48 hours, well the others will have delayed closings, and possibly hangups like home inspections etc and because of this, they should take my offer.
Since the only part I can write off on my taxes is the "extra".. the standard commissions are paid by the seller.
Here in Mass. the seller usually pays the commission to his/her listing agent at closing, who then pays the split to other realtors down the line. It's customary.
I haven't seen it otherwise but I'm not a realtor. I suppose people can negotiate whatever they want. The skankier the demands for out of the ordinary circumstances, the less likely I will take a buyer or seller seriously.
Once, I bought a house from a seller who would not hire a lawyer. My attorney did all the work for the unrepresented seller and I basically had to pay extra for it. Sleazy! If I declined to be represented also, we never would have gotten to a closing. We hire professionals for good reason.
I'm about to be a seller again. If any buyer or realtor brings me a deal with oddball demands or terms, I'll pass. I don't need the aggravation and I see it as making getting to a closing unlikely.
One time, a few years ago, a local big shot investor made an offer on a house I was selling. He tried to offer a "promissory note" instead of a cash deposit. He was so persistent, I gave him a 6 month right of first refusal, took a substantial cash deposit from him, held by my attorney, with no interest. I took my time for six months, looked around slowly for what I wanted to buy. When the six months expired I told him and my realtor both to get lost and sold my house to a family - for more money. My realtor and he were buddies and both ethically challenged. I used his skanky offer to find time to make a better deal for me.
Here in Mass. the seller usually pays the commission to his/her listing agent at closing, who then pays the split to other realtors down the line. It's customary.
I haven't seen it otherwise but I'm not a realtor. I suppose people can negotiate whatever they want. The skankier the demands for out of the ordinary circumstances, the less likely I will take a buyer or seller seriously.
Once, I bought a house from a seller who would not hire a lawyer. My attorney did all the work for the unrepresented seller and I basically had to pay extra for it. Sleazy! If I declined to be represented also, we never would have gotten to a closing. We hire professionals for good reason.
I'm about to be a seller again. If any buyer or realtor brings me a deal with oddball demands or terms, I'll pass. I don't need the aggravation and I see it as making getting to a closing unlikely.
One time, a few years ago, a local big shot investor made an offer on a house I was selling. He tried to offer a "promissory note" instead of a cash deposit. He was so persistent, I gave him a 6 month right of first refusal, took a substantial cash deposit from him, held by my attorney, with no interest. I took my time for six months, looked around slowly for what I wanted to buy. When the six months expired I told him and my realtor both to get lost and sold my house to a family - for more money. My realtor and he were buddies and both ethically challenged. I used his skanky offer to find time to make a better deal for me.
Thats odd because here in PA, lawyers are rarely needed. The agents and closing companies get all of the paperwork together. I usually only bring lawyers in after a sale to redo the paperwork to meet my needs, not wanting to disclose my intent prior to the purchase to individuals.
example one time I bought a property to subdivide it, to let part of it go to tax sale, to lower the tax liability on the land, so I could resell the valuable part for a profit.
Another time I bought an apartment building, turned it over as a "hotel", then continued to rent it out to tenants on a month to month basis, meaning that I no longer needed to take them to the magistrate to throw them out if they did not pay rent. I could just change locks, call the police, and haul them away.
Your example reminds me of a time I bought a property for $12K, that was appraised for $65K, and the deal almost fell through because the sellers debated about a $10 fee and their realtors stuck to the gun that his client should pay for it, even though I was obviously more then willing to whip $10 from my pocket to get the deal done.
Dont think I ever needed a lawyer to get a property deal done.
I had a house in Philly, on Germantown Ave. in the Penn-Knox area and didn't use a lawyer. The realtors did all the paperwork. But here in Mass. houses begin at 5 times what I paid in the median range in Philly. We feel it's better to have representation.
Leavingbyron has it right, in my opinion.
I also think if the buyer has done the work his agent would have done, he should get the commission/price write off.
Leavingbyron has it right, in my opinion.
I also think if the buyer has done the work his agent would have done, he should get the commission/price write off.
Usually by time I get around to calling an agent, I've already done my preliminary work and ready to make an offer. I'd get my license to get my % back, but that would mean the other 90% of the deals I do, outside of the realtors, I would have to disclose that I"m a realtor, something I dont care to do.
Your right though, if all I'm expecting my realtor to do is write up an offer, why am I paying them full commission? Thats probably where the biggest complaint about realtors come in at. I could ask a realtor to show me 100 homes, buy 1, or show me 1, and buy 1, and they get paid the same.
All the internet has done is cut down on the amount of showings to people who would not be interested in the home they planned to view because I'm able to narrow my search down and tell the agent what one I want to see, rather then the agent coming to me. It also has cut down on the cost of advertising homes, as everything pulls from the MLS, and there is little need to buy extra local newspaper advertising. They now work from home, meaning smaller, less over head. Has the cost of commissions gone down to reflect lower costs? not a chance.
I am responding to give my perspective as a buyer, as I have never been a seller. Please excuse my essay, but I appreciate a good realtor so I try to give feedback whenever possible.
Question for buyers:
I am in complete agreement with LeavingByron that the commission is built into the sales price, so both parties end up paying.
As far as the hypothetical, I think the buyer and seller/seller's agent would need to agree in advance on what the commission would be. Obviously if the seller's agent refused to help the buyer, they would lose the sale. I'm sure buyers would love to use this as leverage.
My own opinion:
I used to think an unrepresented buyer should get the 3 percent commission off the price (in addition to other negotiations). However, I do not believe that anymore. We seriously considered purchasing a few years ago but weren't happy with what we could afford in the market. During this time however, we gained some invaluable (to us anyway) insight into the buying process.
However, as newbies we made the mistake of contacting the seller's agent thinking we could automatically knock 3 percent or so off the price. Not so much, as it turned out However, this seems to be a very common misconception. Some realtors were willing to negotiate, but not down to 3 percent for doing all the work. And we quickly realized this. My husband and I don't work for free, so why expect someone else to work for free.
Here's an example of my logic. I am a CPA and work part time. Say it's filing season and I have two different clients come in to have their tax returns prepared. Client A has organized all of the necessary information and Client B simply has a box of receipts through which I have to sort. I am not going to prepare Client A's tax return for free just because they did the prelimary work!
So, why should I expect a realtor to do all the work for half of the pay?
During our neverending house hunt in the market we couldn't afford, we also realized FSBO and listings with discount brokers (say $2k for everything) listed that way because they wanted to save on commission and put the extra money in their pockets. They didn't care about saving the buyers money! This may have changed somewhat given the current market, but overall, people trying to save money aren't going to be eager to give it away during negotations.
In addition, finding a house is the easy part, as nearly everyone searches online. It's like people expect a cookie, a pat on the back and 3 percent back, all for being intelligent enough to use realtor.com to find a house they like. A good realtor will prove their worth when it comes to making an offer/contract negotiation/closing.
If you find a good realtor (and we did when we finally purchased) they will protect your interests (and only your interests). Since we relocated to another area of the country, we did use our credit union's real estate referral program and ended up getting a partial refund of the buyer's commission. The funny thing is, we were planning to use the agent anyway, and when we discovered she was part of the program we were elated.
I am a firm believer if you can't afford the house you shouldn't buy it. If you are worried it's overpriced, show the seller comps to explain why you are offering a certain price and why it's reasonable. Live within your means. If you absolutely have to pocket that commission to make the deal happen, maybe it's time to reevaluate the purchase.
I understand some people feel like they always have to get the deal, and they won't be content without feeling like they shafted someone, which is pretty sad.
In this market, there probably are realtors willing to forgo or split commission. Just remember, you usually get what you pay for!
Sorry, Bill
I know you requested no Realtors. However, the fact that some of these arguments are based on such misinformation, I felt compelled to respond.
"First, as a seller, I think the seller AND the buyer pay the real estate commission."
The semantics of this can be argued indefinitely. However:
1. The commission agreement is strictly between the seller and the broker. The buyer is in no manner a party to that agreement (more on this in a moment.
2. Since the ultimate purchase price of a home is fully negotiable, it is whatever a buyer and seller can agree upon. While the commission is one of the considerations of the seller, it is not automatically "built in". You, as a buyer can determine your valuation, regardless of any of the seller's expenses.
"If an unrepresented buyer comes into purchase a house, I would like the BUYER to receive that discount off the purchase price of the house for a couple of reasons, the most important being, a.) the buyer would be less likely to chew down the price of the house, and b.) if they did the work in finding the home, why should the listing agent be entitled to full commission?"
1. Re: a.) Maybe. Maybe not. It's all negotiable. And price is not the only thing being negotiated.
2. Re: b.) Here's the major misconception about the commission. First of all, as stated above, this is strictly an agreement between seller and broker. Secondly, it is ONE commission the seller agrees to pay the broker to sell the house. As part of his marketing, the broker offers a certain portion (usually around 50%) to potential Buyer's Brokers, if they provide the eventual purchaser. It is strictly the listing broker's money to spend - nobody else's (although he should consult the seller and inform him/her what that will be, along with any other marketing).
If someone purchases the house, the listing broker is entitled to the full commission, as previously agreed. If the purchaser is unrepresented, there is no buyer agent to pay. Just because a customer (Buyer) does his own homework and found the house on his own (most likely through the listing broker's marketing, which includes the MLS and "For Sale" signs), he is not entitled to any of the commission since, again, the commission is a contracted agreement to sell the house, no matter where the buyer came from. Therefore, the listing agent did his/her job. No part of the commission is for buyer assistance. Therefore, the lack thereof entitles the buyer to nothing.
However, in a practical sense, an agent may agree to cut his commission to make a deal work. S/he may have already done that in the original listing agreement, which you may not be aware on a given property. There could already be an agreement that the commission will be lower on a non-cobrokered sale.
"HOWEVER, buying a house is not rocket science (like alot of agents make it out to be)"
1. Rocket science, or not, you're not entitled to a portion of someone else's legally earned income (especially on an agreement of which you are not a party), just because you judge the profession, or an individual and his work, less than you and yours.
2. Aren't you the seller who hasn't had an offer for over nine months because YOU overpriced your property by at least $30,000? I know you blame your Realtor, but the decision was 100% yours and you should have known the approximate value of your own house. Afterall, most buyers and sellers are not naive and it's not rocket science.
"If I was an unrepresented buyer, I am confident I can handle my own paperwork."
I'm sure you can, as can most anyone. Just make sure the information on there starts with a price based on well-researched market valuation data. Bad (or a lack of good) info can cost a buyer as badly as I've seen it hurt sellers.
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However, this seems to be a very common misconception. Some realtors were willing to negotiate, but not down to 3 percent for doing all the work. And we quickly realized this. My husband and I don't work for free, so why expect someone else to work for free.
