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It doesn't really matter who pays the commission, or even who bears the cost of the commission. The point is that when only 4% of the deal price is being extracted for real estate commissions instead of 6%, there are thousands of dollars available for the buyer and/or seller to come out ahead. The parties will never have perfect information about whether the other party would have been willing to give more ground in negotiations or not, but the buyer might know that he is only willing to pay $250k, and he has a better chance of making that happen if only 4% of the purchase price is going to end up in the pocket of a real estate agent.
Of course. You are referring to "Overhead."
Overhead introduced into any type of transaction has to be absorbed by someone. Without exception.
The point of interest as to who bears the cost or who pays hinges on the fact that both parties often try to claim rewards from reduced overhead.
Buyer wants a reward in reduced price or closing costs concession.
Seller wants to be rewarded with higher net proceeds.
If they can amicably split the difference in some manner, then both parties may be happy. But, if both Buyer and Seller are adamant that they must see a 2% benefit from the reduced overhead in your example, negotiations may get a little more difficult.
...Boy did we get shafted. As our supposed buyer's agent (it was not his listing), he lied and told us that all purchase offers in FL were using "As is" contracts now. Then he only gave us a 5 day inspection period, and said we should put down $5,000 earnest money ($1,500 is more like it for this price, I found out)....
Not sure if you already answered this in one of your other related posts, but was this home a bank owned or short sale? "As-is" contracts are normal for these types of sales, which may be the dominate sales in FL now. Some banks will also shorten the inspection period from what is normal and require more earnest money. In any case this agent should have given you a better explanation of why he wanted these terms.
Of course. You are referring to "Overhead."
Overhead introduced into any type of transaction has to be absorbed by someone. Without exception.
The point of interest as to who bears the cost or who pays hinges on the fact that both parties often try to claim rewards from reduced overhead.
Buyer wants a reward in reduced price or closing costs concession.
Seller wants to be rewarded with higher net proceeds.
If they can amicably split the difference in some manner, then both parties may be happy. But, if both Buyer and Seller are adamant that they must see a 2% benefit from the reduced overhead in your example, negotiations may get a little more difficult.
I don't disagree with what you said. That being said, I still think it is somewhat meaningless (i.e., it's just semantics) to talk about who got how much of the benefit. Again, neither party ever really knows who got the benefit--all we know is that at least one (and likely both) of them did. It just provides a larger range of acceptable outcomes for both parties and thus a higher likelihood that the parties can arrive at a deal that is agreeable to both of them.
Having said that, however, I think it should be a bargaining chip in favor of the buyer if the buyer does not bring an agent into the transaction. In such a case, the buyer is indeed the party that effectively created the additional value in the transaction (or didn't reduce the value of the transaction--however you look at it), and the buyer is justified in asking/expecting to reap most of the benefit of the added value.
In sum, the buyer should expect to benefit if he adds value to the transaction. But like I said above, without perfect information (like when ESPN shows us the all of the poker players' hands) it is impossible to really know or even quantify which party in fact made off with most of the benefit.
Not sure if you already answered this in one of your other related posts, but was this home a bank owned or short sale? "As-is" contracts are normal for these types of sales, which may be the dominate sales in FL now. Some banks will also shorten the inspection period from what is normal and require more earnest money. In any case this agent should have given you a better explanation of why he wanted these terms.
No, this was a regular sale.
We were also "guided" to put $5,000 down and to only get a 5 day inspection window (and we lived an hour away!)
As for negotiations, it was like this:
Me: What do you think we should offer?
Agent: Whatever you think.
and so on.
I'm trying to track him down now to file a complaint. I know he is no longer with the firm that he was under at that time (last year) and neither is the listing agent.
The facts lead me to belive that maybe they were in on a fraud here: the very short (absurdly so) inspection window + the very high ($5k) earnest money on a modestly priced home + the "As Is" purchase offer.
Yeah, that raises a big red flag when you consider the fact that the entire septic drainfield went bad as soon as we moved in ($3,200)
Just my personal opinion... but in my view... If I buy the house directly from the seller, I can save money over buying it through a realtor... I am in a situation right now where I know what the seller is willing to take for the house, but must have the extra money to pay the realtor commission, so in my situation I could pay 6 percent less if there were no realtor involved... He wants a set amount for the home, (the amount he has in it because he built it) but the realtor wants a commission of a certain dollar amount, so even though the money is paid by the seller, it IS the buyer who is paying the realtors commission.
We were also "guided" to put $5,000 down and to only get a 5 day inspection window (and we lived an hour away!)
If you make a low offer, higher earnest money/short inspection windows can me the offer look a little stronger. I don't know if that was the case, just pointing that out.
Quote:
Originally Posted by MovedfromFL
As for negotiations, it was like this:
Me: What do you think we should offer?
Agent: Whatever you think.
Nothing wrong with that. It isn't the agents job to tell a buyer what to offer any more than it is to tell a seller what to accept. The agents role is to advise and educate so the clients can make their own informed decision.
Quote:
Originally Posted by MovedfromFL
The facts lead me to belive that maybe they were in on a fraud here: the very short (absurdly so) inspection window + the very high ($5k) earnest money on a modestly priced home + the "As Is" purchase offer.
Yeah, that raises a big red flag when you consider the fact that the entire septic drainfield went bad as soon as we moved in ($3,200)
Sometimes things just break and it's bad timing. I don't see what the buyer agent has to gain by hiding this from you.
Just my personal opinion... but in my view...
If I buy the house directly from the seller, I can save money over buying it through a realtor...
Maybe; maybe not. But probably not.
Probably not... because so few actual sale situations are this simplistic a scenario.
I am in a situation right now where I know what the seller is willing to take for the house,
but must have the extra money to pay the realtor commission,
so in my situation I could pay 6 percent less if there were no realtor involved...
Anecdotes such as this permeate...
Few, when the details are ferreted out, are found to be accurate.
(see above)
He wants an set amount for the home, (the amount he has in it because he built it)
but the realtor wants a commission of a certain dollar amount,
so even though the money is paid by the seller, it IS the buyer who is paying the realtors commission.
And? Setting aside the circular logic of who pays what and how...
The seller/builder engaged the RE agent.
Presumably, at some point at least, he thought their % would be worth it.
That "some point" (probably "some time" after you found the listing) may have changed. Too bad.
RE agents have to pay their mortgages and feed their families too.
Originally Posted by angie2613
Just my personal opinion... but in my view...
If I buy the house directly from the seller, I can save money over buying it through a realtor...
Maybe; maybe not. But probably not.
Probably not... because so few actual sale situations are this simplistic a scenario.
That makes no sense. It is indisputable that at least one party to the transaction will make out better in a transaction if there is only one real estate agent involved instead of two--and even more so if there is no agent involved at all.
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