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Hello! I am new to this forum. I sure hope all of you experts can answer my question.
My question is on real estate agent's commission.
Let me present an example. Say you custom built a house with a
custom home builder for a contract for $50,000. Now lets say that
the builder gives $5,000 allowance (out of the $50,000) towards your kitchen.
And then lets say that you spend another $2,000 more
(i.e. over the allowance) for the kitchen.
Now I know that the real estate agent gets the commission on the
$50,000 contract for the house. BUT, does the agent get commission
on the $2,000 you spend extra on the kitchen???
My agent says yes because it is still part of the total cost of the house.
My husband disagrees.
I am hoping any expert out there can answer this question. Its bugging
the heck out of me.
Let me say that we have known our agent for 4 years and he is very nice,
knowledgeable, and helpful in every way. We have already paid him in cash the commission on the overages
(meaning all the money we spend over the allowance on kitchen,
lighting, plumbing, tiles, carpet, appliances, etc. etc.).
But like I said, it is bugging me and I just want to know if our agent is indeed
entitled to commission on the overages or not???
Thank you! And I apologize if this topic/question has already been
discussed.
Commissions are negotiable. You should agree with your Realtor on the commission before going into the contract on the house. If the contract states that the commission will be based on the sales price, and the $2,000 upgrade is included as part of the sales price than you may be out of luck.
I would discuss it a little more with your Realtor and ask him to explain why commission is paid on the upgrade, and is it in writing anywhere?
I have done it both ways but it is always agreed up front.
And how did you pay him commission in cash? All commissions are supposed to go through the broker and then paid to the agent. Unless he is the broker, he's not supposed to take payment from a client directly.
I ran into this recently with a client that is building a custom home. My client was obviously the purchaser so I am reprensenting them as a buyer's agent. The builder notated on all documents that they would charge a 6% commission on each change order for upgrades/changes. This was due to the builders listing agreement that was currently in place with their agent. I told my client that I would credit them back the difference on my end which in this case is 3% of those upgrades. All of this will be documented on the HUD-1 closing statement.
Not everyone can do this or will, due to choice or their firms guidelines.
I ran into this recently with a client that is building a custom home. My client was obviously the purchaser so I am reprensenting them as a buyer's agent. The builder notated on all documents that they would charge a 6% commission on each change order for upgrades/changes. This was due to the builders listing agreement that was currently in place with their agent. I told my client that I would credit them back the difference on my end which in this case is 3% of those upgrades. All of this will be documented on the HUD-1 closing statement.
Not everyone can do this or will, due to choice or their firms guidelines.
Bravo!! This is where it counts the most.....full disclosure
Hello! I am new to this forum. I sure hope all of you experts can answer my question.
My question is on real estate agent's commission.
Let me present an example. Say you custom built a house with a
custom home builder for a contract for $50,000. Now lets say that
the builder gives $5,000 allowance (out of the $50,000) towards your kitchen.
And then lets say that you spend another $2,000 more
(i.e. over the allowance) for the kitchen.
Now I know that the real estate agent gets the commission on the
$50,000 contract for the house. BUT, does the agent get commission
on the $2,000 you spend extra on the kitchen???
My agent says yes because it is still part of the total cost of the house.
My husband disagrees.
I am hoping any expert out there can answer this question. Its bugging
the heck out of me.
Let me say that we have known our agent for 4 years and he is very nice,
knowledgeable, and helpful in every way. We have already paid him in cash the commission on the overages
(meaning all the money we spend over the allowance on kitchen,
lighting, plumbing, tiles, carpet, appliances, etc. etc.).
But like I said, it is bugging me and I just want to know if our agent is indeed
entitled to commission on the overages or not???
Thank you! And I apologize if this topic/question has already been
discussed.
Maybe, maybe not. It depends on the contract and how it is spelled out. Some builders here don't pay commission on upgrades or closing costs but it's written on the contract.
Lots of good advice here. Commissions are negotiable. Sometimes sellers and banks do not pay commission on any concessions, upgrades or closing costs. It is however all in writing. It is usually such a small amount that it never holds up any transaction. I think you should speak to your agent and review your buyer's agency agreement if you have one, if you don't, then you pay him what you think is fair.
Since he accepted cash payments, you can pretty much dictate whatever future terms you want...he's already done enough to lose his license. Does he really even have a license?
That you're actually in a dispute over his commission on $2000...what are we talking about? $60? $120?
That said, it should have been in the contract but, since it was not, I would lean slightly in favor of paying the agent based on the amount you pay, including upgrades. My basis is that the original intention was to pay a fixed percentage of the total purchase price...which you have renegotiated with the result being that the purchase price has gone up to $52,000.
To not pay a commission on the new purchase price would normally have required an affirmative statement added to the commission agreement at the time of execution. Such an affirmative statement was not added, therefore you should pay the $60 or $120.
$60. Cash payments. I can smell the stink from here. Sorry if that sounds harsh, but I wouldn't let my mother give me a cash payment - it's as serious a legal and ethical violation as there can be.
Hello! Lots of good advice here. So, thank you very much for that.
No, I have not read the buyer's contract and I wouldn't know
how to read one even if my life depended on it!
However, I will have my husband (he understands all the legal lingo)
check the contract .
But, I am guessing that our contract did not
say anything about commission on upgrades one way or the other.
Second, to answer Eric Young's question, we paid him cash because he
asked for it. That is obviously stinky because his manager does not know about this.
The total amount is a little less than $3000!
And yes, he has a license and has been a real estate agent for over 20 years!
(Eric, the numbers I gave in my example were fictional to
help make my question easier to understand; i.e. our house cost a whole lot more.)
So, to summarize from what you all are saying is that yes, he is entitled to
the commission on the upgrades but he should NOT have requested cash
and his manager should know about it.
Well, I guess what's done is done. I do not want to cause any trouble
for him. Like I said, with exception of this commission business,
he has been very good and helpful. So for that, I am very thankful
to him.
(Eric, the numbers I gave in my example were fictional to
help make my question easier to understand; i.e. our house cost a whole lot more.)
I am sooo glad to hear at least that, T&J!!
I really had to bite my tongue (bite my typing finger?) to keep from questioning the precise section of Appalachia in which you were constructing your $50,000 custom home.
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