Buyer's broker wants to charge 1/2% to buyer. (Phoenix: rental homes, house)

[Smitty550]

A broker with whom I have done business before in the Phoenix area informed me of a house that "just came on the market." I have purchased a few rental homes in the past with this broker, but have never paid any fees to him for acting as my buyer's broker.

I want to purchase the house with cash. My broker just informed me that he wants to charge me 1/2% interest (about $800) on the full value of the house because the listing agent is offering only 2.5% commission split to my broker. I was just informed of this by email, shortly before my broker emailed my wife and me an electronic offer form to sign and send to the seller's agent.

Since it is a hot market, I would assume that our broker is busy and/or may have other clients who might make an offer on the same property. I might also assume that the seller's broker can get away with splitting the customary 6% fee 3.5%/2.5%, with the 2.5% going to our broker, with my wife and I making up the difference of 1/2% going to our broker.

The bottom line here is that the entire commission ends up being 6 1/2%: 3.5% to seller's broker and 3% to our (buyer's) broker.

I know that everything is negotiable, but has the above scenario become "customary," at least in the Phoenix area, purely due to the "hot" market, or has it become the norm, regardless of market activity in the Phoenix area? I would like to know because we plan to purchase another house or two and don't want to give our broker the idea that we can be manipulated into paying him a 1/2% fee for future purchases. If such is the case, we will look for another buyer's broker......provided that they are not all asking at this time that their buyers to take up the slack when the seller's brokers try to low-ball the buyer's broker.

I haven't talked to our broker yet because I don't have enough ammunition/knowledge about the state of the current customary fee charges are in the Phoenix area.

Any information/ideas would be much appreciated.

[Zippyman]

There is no "customary" split in Phoenix, and the mls listing you see as a client doesnt show the split or the comission rate. So it's entirely possible the listing agent signed a 5% contract & is splitting it 50/50. In any case, your broker is free to charge you whatever you will pay. As for what is "common", brokers arent allowed to discuss what is "common" or "customary" amongst themselves, as it stinks of price-fixing & anti trust.

In any case, a busy broker isn't really going to care about 1/2% here or there, if they do a good job, they get all your future business..

If 1/2% makes a difference to you, you might consider getting your own license & cutting out a layer of middlemen. There are a number of brokerages in town that will let you hang your own license for $25/mo +$250 per transaction, and you can keep the rest of the buy side comission for yourself. Its also quite handy to have your own license when you're renting out those properties - you can control the rental listing & minimize the cost of property management.

[S. Chris Webb]

There is no customary compensation in Arizona, as "customary" suggests collusion between Brokers and goes against Sherman Antitrust laws. What is currently being offered on the MLS is all over the place. Compensation is normally negotiated with the clients - for the Listing agent, that would be the Seller, and for the Buyer's agent, that would be the Buyer. Both the Listing Agent and the Buyer's agent have minimums for which they will work. Just because the MLS says 2.5%, that doesn't necessarily mean the Listing agent is working for a 6% (or more) commission from the seller and keeping the extra for himself. The seller may have been unable or unwilling to pay a more competitive compensation, and that gets passed down the line. This has become more and more common for sellers to pay listing agents less, especially with the banks dictating what gets paid to whom. Therefore, it has become common for Buyer's Agents to protect themselves by saying to their clients up front what they are willing to work for (and if it means collecting shortfalls from the Buyer, so be it), and this is usually done via a "Buyer-Broker Agreement", a contract between the Agent and their client. 1/2 a percent might seem like a small amount to bicker about on a high number transaction, but to a busy broker rounding up $50K deals, it might not be worth it to them to work for the 2.5% (or less) deals unless their buyer throws something in the pot. Hope that makes sense.

But yes, in short, asking the buyer to contribute has become quite common in the Phoenix area.