Buyer's agent commission - a conflict of interest? (Austin, Point: appointed, sale)

[kingugly]

Isn't basing the buyer's agent's commission off of the final sale price a conflict of interest? Why would the buyer's agent angle for the best possible deal when the worst possible deal (for the buyer) would give them a greater financial reward?

Shouldn't the buyer's agent be paid more based on a reduction in price, and not the reverse? I bet that would get those low ball offers moving!

Maybe the buyer should pay their own commission to their agent? You get me a better deal, I pay you more money.

Set me straight here. Any agents on this board?

[And this is purely a financial discussion. Please don't sell me on the other "advantages" a buyer's agent brings to the table.]

[AustinAaron]

Well, time is money. And "low ball offers" are a waste of time. Think you can figure out the rest.

There's a difference between "low ball" and calculated negotiations. I had a client tell me, "If the Seller isn't taking a bath, then I didn't get a good deal." I was dumbfounded. Should have been my first indication to walk. Ignorantly stuck around, though, and finally left pleased to have rid myself of said client. Offers coming in 35%+ under Asking. I wouldn't make his ridiculous offer (waste of my time), so fortunately he chose another agent. My not making his offer was my invitation to leave.

Point being, if the "low ball" offer is called for, then let's do it! But when the comps show me homes selling 3-5% SP/AP, then I've got no time for 35%+ discounted offers. I've made some ridiculous offers for clients. Money is money. Regardless of the amount, it's more than I had before. If it's feasible, then let's do it. But clients just out to rob people get no love from me.

Let's say you're a teacher, though. "Teach my kid more, and I'll pay you more. But if he doesn't learn as much as I think he should, then you don't get paid as much." My kid's learning ability has little to do with your teaching methods. Maybe my kid is challenged. Same with the Seller's market. Some variables can not be controlled in your favor. I can not control what the comps tell me. If they tell me 3-5%, then 25%+ does not cut it.

Had lots of clients tell me that I was saving pride when not willing to submit their low ball offer. Pride? There's no pride when trying to feed my family. We can't eat pride. I'm willing to WORK for my money. I am NOT willing to waste my time when I could be WORKING.

In addition, reevaluate your question. Everyone knows the % of commission a TX agent gets paid based on price. Let's say that house is $100k. We get $X,XXX for that sale. Say the agent gets you $10k off Asking Price. Difference in commission is only several hundred dollars. When we're already making $X,XXX, what's a $300 difference? Not much. In other words, I don't think I would EVER consider NOT negotiating in my client's favor only so I could take home an extra few hundred dollars. Just doesn't make sense. Even if the home is $1mil+. You got to look at what you ARE taking home. Not what you COULD be taking home. The "could be" is irrelevant if you don't make the sell due to high sale's price. Sure you've worked on a commission basis before. Many people have. The "could be" will ********* every time. And the difference is a happy client that is most likely now a friend. A friend is the best form of advertisement one can get . . . referrals!

[austin-steve]

Isn't basing the buyer's agent's commission off of the final sale price a conflict of interest? Why would the buyer's agent angle for the best possible deal when the worst possible deal (for the buyer) would give them a greater financial reward?

Darn, you caught on to our #1 wealth building secret. Yeah, I always try to get buyers to offer an extra $1,000 because I really need that extra $30 in commission.

Seriously, your premise is way off base.

A buyer agent's job is to help the buyer offer the right amount, whatever it might be. Our commission isn't even part of the thought process, at least not for me. I've recommended offering over list price and I've recommended offering rock bottom. I've recommended not making any offer at all, because the house was all wrong. Every deal is different and every buyer's motivation level is different.

One example real quick:

One of my buyers looked at a house a couple of months ago and knew it was the right one for them. They had seen tons of houses over the past several months. This was it, no question. It was the first day on the market, staged beautifully, showed great. It was perfect. I ran a market analysis and the price was right, even a bit lower than I would have listed it for.

How much should they offer?

The question I asked was of the buyer was "how disappointed will you be if we end up going against multiple offers and you lose the house?" The answer: "We want this house - tell us what we need to do". I suggested offering full list price, right now, tonight. We did that and got it accepted and signed off the next morning.

Fast forward a month after closing.
The seller drops by the house to give my buyer some stuff he found, that should have stayed with the house (touchup paint, something for the fireplace). He mentioned to my buyers that they had received a second offer on day 2 for $10K over the list price but that they had already signed off on the first contract. They also had other agents wanting to bring more offers. But they liked out offer, it was clean, needed no changes, and they were really happy to have a full price offer so fast.

Under your scheme, did I do a good job or a crappy job? Under your scenario, I a greedy agent motivated by higher commission might have encouraged a lower offer, but that would not have been the best offer in that situation.

Also, what would you use as the basis point for establishing a "good deal"? Since most properties are over-priced, it wouldn't be proper to use the list price as the starting number. One buyer might buy for 10% below list, but be paying full market value. Another might pay full list price or more, but be getting a great deal. So the list price is irrelevant.

The system works well the way it is, provided buyers pick good agents and not their cousin or part time friend from work.

steve

[Trainwreck20]

This is a topic for the real estate forum, not an Austin topic.