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If I have a buyer looking for a house there will be listings offering from 2% on up. If they find a house that suits their needs and the price is in line with what other similar houses are going for then what I make is what the seller is offering. Be it 2%, 3%, 4% or 12%.
We have a subdivision here that the developer is offering 12% to the buyers agent and resales are offering 3% from the owner. Which one should I sell?
Mike, do you have an agreement upfront with your buyer client about what your compensation will be? If you do, then what I am asking is what justification/rationale do you have for accepting more than you originally agreed to? If you don't have that agreement that may be a different story. However, I'm surprised that a buyer would engage the services of a buyer agent without knowing what that buyer agent's fee is(especially, as it is in Tennessee, the buyer would be responsible for any portion of the fee that the seller didn't cover).
In answer to your question "Which one should I sell?", I believe you should sell the one that the buyer wants. After all, that is what is in the best interest of the buyer.
And that is the right answer but here comes the kicker. The developer is selling the same home as the private owner for $50,000 less. There are some that will say I am only pushing it because of the 12% but in reality the buyer gets a the same home for $250,000 instead of $300,000.
What was your upfront agreement(if there was one) with your buyer client as to what your fee is for providing the full range of buyer agent services? Here's the real kicker. If it was three percent and you accepted what you agreed on then the buyer could get the home for $227,500(9% off of the 250k price). What additional services are you providing that would justify anything above your getting three percent?
OK, personally, I don't get it. First, perception can become a reality so I think you are on point with regard to your client's (the buyer) perception. While there might not be any "steering" whatsoever, it's about what the buyer things, feels, etc. I am not an agent so I can't speak from actual, practical, everyday experience -- however, I am a deal-maker and I do work in many settings on a commission, and I live every single day by being up front with the client, complete and full disclosure and always doing what's right by the client -- first, last and only. Period.
Second, are you playing the role of a "buyer's agent" here? I am not sure how it works in TN, but my experience in working with agents everyday is that they don't know what they are making until they find a house that I like, want to make an offer on, etc. I ask before I make an offer, what the % is, and the split, but I am not sure how that plays out before the fact.
Regardless, I expect and demand people to be up front with me as that is the way I am with them. I like the mindset you have here.
EANJ, the role I'm describing here is the Buyer agent representing the buyer client. In Tennessee, we are required to inform the buyer client what our fee is in writing and upfront. Typically, the fee is indicated as a percent of the sales price, and more often than not in Tennessee, this fee is about three percent of the sales price. This fee is for the agent providing the full range of buyer agent services.
Mike, do you have an agreement upfront with your buyer client about what your compensation will be? If you do, then what I am asking is what justification/rationale do you have for accepting more than you originally agreed to? If you don't have that agreement that may be a different story. However, I'm surprised that a buyer would engage the services of a buyer agent without knowing what that buyer agent's fee is(especially, as it is in Tennessee, the buyer would be responsible for any portion of the fee that the seller didn't cover).
In answer to your question "Which one should I sell?", I believe you should sell the one that the buyer wants. After all, that is what is in the best interest of the buyer.
No, I don't use an agreement upfront with my buyers. Is your agreement purely a compensation agreement or is the buyer required to use your services for a certain amount of time?
The buyer is never responsible for paying anything to me and they are also able to walk away and use another agent at any time if they feel I am not doing my job.
What was your upfront agreement(if there was one) with your buyer client as to what your fee is for providing the full range of buyer agent services? Here's the real kicker. If it was three percent and you accepted what you agreed on then the buyer could get the home for $227,500(9% off of the 250k price). What additional services are you providing that would justify anything above your getting three percent?
Or if the buyer had a buyer agency agreement the agent would make more by selling the overpriced house.
You are not going to make the additional money on the 12% listing so what does it matter to you.
No, I don't use an agreement upfront with my buyers. Is your agreement purely a compensation agreement or is the buyer required to use your services for a certain amount of time?
The buyer is never responsible for paying anything to me and they are also able to walk away and use another agent at any time if they feel I am not doing my job.
The state of Tennessee requires the Buyers Rep Agreement. It specifies compensation, responsibilities of each party, and a beginning and ending date.
Or if the buyer had a buyer agency agreement the agent would make more by selling the overpriced house.
You are not going to make the additional money on the 12% listing so what does it matter to you.
Obviously states that don't require a Buyer's Rep Agreement, or that agent fees be disclosed upfront, operate differently than those that do. I'm assuming many states don't require these based on comments in many of the threads in this forum that Buyer's Agents accept buyer agent incentives from the seller. At the same time, I know that some agents in states that do require an Agreement and that fees be disclosed upfront, also accept a buyer agent incentive bonus above and beyond what they agreed to. These are the people that my questions are primarily being posed to.
As far as the agent making more by selling the overpriced house, if the buyer was financially qualified to buy the house, and chose that house in spite of the agent telling them it was overpriced, then yes, the agent would make more based on the agreed to percent of the sales price. If this scenario occurred, I would have documentation and comps on file showing that I advised my buyer clients of the price issues.
The reason this issue matters to me is based on transactions in Tennessee that I am aware of where a buyer agent pockets a buyer agent incentive from the seller that is above and beyond what fee the buyer agent agreed to upfront. I would imagine Tennessee is not the only state that requires a Buyers Rep Agreement and also requires that the Buyer Agent disclose their fee for services upfront. In your scenario of a 12% commission going to the buyers agent, it would matter to me because the buyer(if in Tennessee) would actually benefit from this by getting a significant reduction in their price(assuming an agreed to 3% commission to the buyer agent).
As I am sure you are aware, the reputation of realtors in general is not very good in this country(somewhere just above used car salesmen). This is born out by some of the comments by non realtors in this forum. I'm aware of to many transactions where the best interests of the client(both buyer and seller) are not taken into consideration. A few examples of this would be buying a listing and accepting compensation above and beyond what was originally agreed to. I am aware that every industry has its 'bad apples'. I think there is much that the 'good apples' could and should be doing to minimize the 'bad apples'.
The state of Tennessee requires the Buyers Rep Agreement. It specifies compensation, responsibilities of each party, and a beginning and ending date.
I don't understand. If it's a state requirement that you need to use this form then what is the rationale for the seller to offer the bonus to the agent to begin with? Something isn't making any sense. If you have a prestated amount you are allowed to 'charge' be it 3%, 2%, whatever, why would anyone in the state be offering a 'bonus' to the agent and not the buyer or just lowering the price of the home? If there is a 'tip' then I'm sure you are able to accept it if all parties are informed, no?
Here, the commission is paid by the seller generally. I can't get paid by more than one party to the transaction unless everyone is informed.
So they are locked into an agent for a specified amount of time, even if the agent is not doing their job.
No, if the agent is not doing their job as outlined in the agreement then the Agreement can be voided.
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