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It happens every day. Walmart does more business at lower wages than most other companies. Consumers prefer low wage companies, and they persuade with their pocketbooks.
And yet other companies that pay more and charge more thrive as well. Different customers have different priorities.
That's why the buyer, if they wish a discount agent, should negotiate with their agent to receive a lower commission. Or, if their agent won't (and many won't because they do actually have business expenses to pay and eating would be nice once in a while), find one who will. There's plenty of options out there for both buyer and seller.
All of the buyer rep agreements that I've seen that specify what the buyer guarantees to pay their agent state that if the coop offered doesn't match that, at that point the buyer, not the seller, not the seller's agent, will pay the difference. At that point, if the agent goes after the difference (I never have, as good will in future is more important to me than an extra pittance now), the buyer is who they should be going after, and at that point the buyer is paying that portion of their agent's fee, with the seller's agent paying the rest out of their proceeds (which the seller pays to them out of his or her proceeds).
Hi. I went to see an open house several months ago never figuring the house would still be on the market when I was ready to buy. I have also spoken to the listing agent over the past few months asking about the status of the house.
I am going to see it again with the agent that listed it because I felt awkward bringing my own realtor with me since I had already dealt with her and it was through her open house I first saw the house.
Now since selling I see the importance of having my own representation but I think in this case I will be representing myself-if this doesnt come to anything I will definetly be taking my own realtor with me when I go looking.
The same style house sold recently-a few weeks ago-that had another bedroom, bathroom, finished basement and more updated for the asking price of the house we are interested in. I feel it is overpriced and has been on the market for 5 months already.
My husband and I will probably make an offer this weekend. Any advice in negotiating with the listing agent-I know she is legally bound to the best interest of the seller. Thanks
I don't know about where YOU live. But in Missouri you don't negotiate with the agent. The agent's responsibility in this is to present offers to the seller. You just have them write up an offer for what you want to buy it for and present it to the seller. The realtor shouldn't have anything to say about it. But if they DO, simply tell them to present the offer to the seller. If they fail to do so then they are in violation of the law and can be sued. If they give you a hard time, tell them you will contact their broker about having your offer presented.
Real estate agents are simply that....AGENTS of the seller. They have nothing to say about terms, conditions, negotiations, etc. That is between you and the seller. Realtors are just messengers.
Realtors are more than messengers - there's a difference between a messenger and an agent. That being said, to a certain extent you're right - the agent presents the offer, breaks it down into what's being paid for and, critically, what the estimated bottom line to the seller will be, provides any and all information they can get that is pertinent to the offer (whether from the MLS or from things dropped by the buyer's agent in conversation while the offer is being given to the seller's agent) and appropriate ways to counter to their client, and advises them on possible ways to counter, keeping emotion out of the mix. Then, the fully informed seller makes their decision on how to proceed and instructions the agent.
So, yes, you're not negotiating with the agent, you're negotiating with the seller. However, you're not negotiating with either of them regarding changing terms of the contract that is between the seller and their agent, because you're not a party to that contract. Yes, the listing agreement is just as much a contract as the sales contract is - how about your potential new neighbor stepping in and trying to change the terms of the contract that you have with the seller to one that he likes better and that will be to his benefit? Same thing.
Something I didn't mention before. You shouldn't assume a seller bringing a check is underwater. It could just mean they made less than the amount of the commission. I could sell my house for 5% more than I owe on it and still have to bring a check to cover off on a 6% commission.
You are missing the point here.........no buyer = no sales = no commission.
The seller does not get to bring a check (for the commissions) if there is no buyer period. I know it is difficult to understand it being a Friday and all......and no we have not made any progress looks like....
You are missing the point here.........no buyer = no sales = no commission.
The seller does not get to bring a check (for the commissions) if there is no buyer period. I know it is difficult to understand it being a Friday and all......and no we have not made any progress looks like....
Tigerclaws is right about this. The buyer is the party that is bringing all the money to the table.
Now, if the seller is deeply in debt on the house, the seller may have to show up with some money (over and above the amount that the buyer pays) to pay off the bank, but that is just to satisfy the seller's independent obligation to the bank (or, as tigerclaws put it, "that's not the buyer's problem"--it has absolutely nothing to do with the buyer). The seller's loan with the bank is a completely different transaction than the sale of the house. You might say the real estate agent's commission is a completely different transaction as well, but it's not--it is contingent on the sale of the house. The seller's duty to pay back the bank is a duty that the seller undertook years ago (probably) and is not contingent on the sale of the house.
Don't get confused and think that just because the bank is getting paid back at the closing, the seller's obligation to the bank has anything to do with the sale. The seller is obligated to pay the bank back whether there is a sale or not. The seller has to pay the bank at closing because the seller is transferring the collateral to the buyer, but just as the price the seller paid for the home has no bearing on its current market value, so also the seller's pre-existing obligation to the bank cannot be considered the seller bringing money to the transaction between the seller and buyer.
As between the seller and the buyer, the buyer shows up with the money, some percentage of which will go to the real estate agent(s), and the rest of which will go to the seller (who may then have to use it to pay back the bank, etc.). The seller ultimately is concerned with that bottom line (after subtracting the commission from the purchase price). The seller should be negotiating based on that net figure the whole time. It is only the buyer who is really negotiating based on the total purchase price.
Again, this is different than the analogies to other situations where an end-consumer may or may not be able to dictate upstream labor prices, etc. In the Wal-Mart example, the consumer buys the goods, and Wal-Mart sets wages. Consumer demand may put downward pressure on Wal-Mart wages, but the consumer transaction and the employer-employee transaction are completely separate transactions. In the real estate agent context, it is a contingent fee--in other words, they are not completely independent transactions.
In the end, though, it doesn't really matter who we say "pays." What matters is that the buyer pays $100k, the seller gets $94k, and the agents get $3k apiece. In a similar transaction where the buyer is unrepresented, the buyer could pay $99k, the seller could get $95k, and the agent could get $4k. Everybody wins. That's the simple economics of the deal (assuming all else is equal, of course--which it never is, but we also never have perfect information so this entire discussion is all equally theoretical and abstract).
Last edited by southernsmoke; 03-26-2012 at 07:16 AM..
As a former legal assistant, no, they are entirely separate contracts, with different parties to the contracts. The amount of the listing agent's commission may be dependent on the sale of the house, but the percentage is a part of one contract that the buyer is no party to.
And the analogy is accurate. The seller is selling a product, the house, and is hiring someone to assist him in marketing that product. Just as Walmart, or anyone, hires employees, or companies, to do marketing for them. If the seller hires someone to paint the house in preparation for putting it on the market, should the buyer get to retroactively dictate the amount the seller agreed to pay the painting contractor? Same thing, really - the price of the painting, any flooring, any pre-market repairs, etc., all is rolled into the price of the product, just as it is with any product, whether it be Walmart or Neiman Marcus.
Real estate is the only area I can think of where buyers seem to think that they should have any say in a contract to which they are not a party. That's usually called contract interference.
Bottom line: whatever you purchase, you're paying a multitude of people that you didn't hire. Unless you think you should be able to dictate the terms under which they all are hired, and how much they were paid, it makes no sense for you to think that just because you're purchasing a house instead of a vacuum cleaner (Walmart) or a camel (Neiman's), you should get to retroactively dictate how much someone is paid.
As a former legal assistant, no, they are entirely separate contracts, with different parties to the contracts. The amount of the listing agent's commission may be dependent on the sale of the house, but the percentage is a part of one contract that the buyer is no party to.
It is true that they are separate documents and that the buyer is not a party to an agreement between a seller and listing agent, but the contractual obligations are related because one is contingent on the other. The seller doesn't pay the agent unless it is with the buyer's money.
Quote:
Originally Posted by TexasHorseLady
And the analogy is accurate. The seller is selling a product, the house, and is hiring someone to assist him in marketing that product. Just as Walmart, or anyone, hires employees, or companies, to do marketing for them. If the seller hires someone to paint the house in preparation for putting it on the market, should the buyer get to retroactively dictate the amount the seller agreed to pay the painting contractor? Same thing, really - the price of the painting, any flooring, any pre-market repairs, etc., all is rolled into the price of the product, just as it is with any product, whether it be Walmart or Neiman Marcus.
The analogy is not logically sound. The listing agreement is more like a fee-sharing arrangement than an employment agreement at Wal-Mart or Neiman Marcus. Again, Wal-Mart is selling goods, and a Wal-Mart employee is paid hourly (or monthly, if on salary), regardless of what goes on between Wal-Mart and its customers. A real estate agent is a service provider and (generally) is not paid any set amount of money by the seller. The seller and the agent agree how they will split up the money that the buyer pays. A complex and (relatively) heavily negotiated several hundred thousand dollar transaction is nothing like the thousands of small transactions that Wal-Mart conducts every day in the ordinary course of business. And the relationship of an employee to those small transactions is nothing like the relationship of a real estate agent to the property sale.
Quote:
Originally Posted by TexasHorseLady
Real estate is the only area I can think of where buyers seem to think that they should have any say in a contract to which they are not a party. That's usually called contract interference.
Bottom line: whatever you purchase, you're paying a multitude of people that you didn't hire. Unless you think you should be able to dictate the terms under which they all are hired, and how much they were paid, it makes no sense for you to think that just because you're purchasing a house instead of a vacuum cleaner (Walmart) or a camel (Neiman's), you should get to retroactively dictate how much someone is paid.
First of all, this is not what we were talking about.
Second, the buyer is not tortiously interfering with a contract just by encouraging the parties to renegotiate it in light of the buyer's offer. There is nothing wrong with that. If the seller and listing agent have an agreement, neither one of them is obligated to give up whatever rights they have under that agreement. However, it may well be in their best interests to do so. It's not tortious interference for the buyer to come along and make an offer that is conditioned on the seller and listing agent renegotiating their contract. It would only be tortious interference if the buyer came along and somehow persuaded the buyer to just drop the purchase price and refuse to pay the listing agent or something.
Also, see the above part about how a large, heavily negotiated real estate transaction is not at all the same as a small, ordinary retail transaction. (Although you can definitely still go to Wal-Mart and say you will pay $100 for the vacuum cleaner, but only if Susie at the cash register agrees to take minimum wage for the day. You won't be successful, but there is no reason why you couldn't say that... This example should illustrate the obvious--that the buyer shouldn't care how much Susie gets paid, as long as he gets his vacuum cleaner for $100. This is why I personally, as a buyer, would not try to dictate how much the listing agent gets paid. I would just go in unrepresented and make a (low) offer that I was happy with and trust the agent's self interest to help me out. From the agent's perspective, obviously 6% of 100k would be optimal, but it's better to renegotiate the listing agreement and settle for 4% of $98k from an unrepresented buyer than lose the sale altogether, and its also better to renegotiate than to be stubborn and end up taking 3% of $100k from another (represented) buyer.)
Last edited by southernsmoke; 03-26-2012 at 08:41 AM..
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