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This is very common, actually. If a buyer's agent has a written employment contract with their buyer for them to be paid 3% (negotiable), but the listing agent is only offering 2% per the MLS, (as the MLS is a contract between agents) then the buyer gets to bring cash to closing for the difference.
If your price is $400k, then the buyer gets to pay $4000 in addition to their closing costs. How likely is it that the buyer would cross this house off their list because they don't want to pay an additional $4k on top of the price they're paying? Very likely.
But most of all, what kind of taste does the buyer have in his house for a seller who isn't willing to pay their buyer's agent the "going rate" for the area? It's an immediate thought of how negotiations are going to spiral downwards and repairs will probably be cringed at... and then the buyer talks themselves out of viewing it because of their perception of how the seller might be... goes full circle...
I don't think this happens.
If I ran into problems like this as a buyer, I'd have looked for a different realtor.
I certainly wouldn't cross a house off the list because of a concern about a 1% difference in price. I'd figure out what the house was worth to me and I'd offer that, accounting for any additional costs that I might need to pay. However I certainly wouldn't be talked out of an ideal area on the basis that the structure I used to pay for the house involved a 1% discount to cover a fee I was paying. That would be absurdly stupid. If buyers are that dumb, they are too ignorant to be signing a mortgage.
If the OP area is so hot try it FSBO for a couple of weeks.
I'm tempted to try FSBO, but I really don't know what I'm doing, how to price the house and need help dealing with multiple offers.
I'm not saying realtors don't add value. I think they do. I just think in my particular case, the going rate is too high.
I'm not really swayed by the argument that the easy houses pay for the hard ones. I think more work should= more commission.
I'm going to interview a few listing agents and ask what's the lowest they will go. It may be that they all will stick to their guns and keep it at 6%. In that case I will try FSBO.
If I ran into problems like this as a buyer, I'd have looked for a different realtor.
I certainly wouldn't cross a house off the list because of a concern about a 1% difference in price. I'd figure out what the house was worth to me and I'd offer that, accounting for any additional costs that I might need to pay. However I certainly wouldn't be talked out of an ideal area on the basis that the structure I used to pay for the house involved a 1% discount to cover a fee I was paying. That would be absurdly stupid. If buyers are that dumb, they are too ignorant to be signing a mortgage.
I think for the majority of buyers out there they'll have a different view of it. If they had to come up with an additional $4000 or $5000 out of pocket, in addition to all the regular closing costs, they'd probably have a much different view of whether the house is worth it or not. More likely than not, that would push them to considering other homes.
And as for making an offer taking that difference in fees into account, that's all well and good, but if it's in as hot a neighborhood as the OP seems to be in, prepare to have it rejected or strongly countered. The seller is not going to care about what your fee agreement is and how much cash out of hand you need to put up, and they certainly aren't going to take a hit on their price just to accommodate that difference for you.
I'm tempted to try FSBO, but I really don't know what I'm doing, how to price the house and need help dealing with multiple offers.
I'm not saying realtors don't add value. I think they do. I just think in my particular case, the going rate is too high.
I'm not really swayed by the argument that the easy houses pay for the hard ones. I think more work should= more commission.
I'm going to interview a few listing agents and ask what's the lowest they will go. It may be that they all will stick to their guns and keep it at 6%. In that case I will try FSBO.
I think the issue you're having is that you're anticipating exactly how much work you feel will be needed, and that's a very hard thing to gauge. Your deal could end up being unnecessarily complicated during inspection or the financing phase; would you then compensate your agent for the extra work that entails?
If your neighborhood is really that desirable, you shouldn't have much of an issue getting agents to compete for your listing. Something that might be fair to all parties is to have a sliding scale, where the agent gets paid the highest amount if you're in escrow within 30 days, then it starts dropping considerably the longer the house is on the market. If your house won't require that much work, as you say, then most competent agents should be fair with that model of compensation, and you're getting your reduced fee.
If you run the numbers on how much it costs to pay two mortgages (or otherwise maintain two houses plus lost earnings on the other investments you could have made), I think you'd maybe consider quicker sale should equal more commission. It's like a going to the dentist. Would you pay more for the one who drilled for two hours than the one who drilled for 5 minutes if they both solved your problem equally well?
I agree with you that six percent is too much. I think rates will eventually come down. But I'd be much happier to pay a commission for a quick sale than a slow one. If you aren't at all concerned about how long it takes to sell, FSBO sounds like a very good idea.
Our first house we sold the agent did a rising scale for commission. The quicker the house sold, the lower her commission was.
Do people not see the fallacy in this? An unethical agent could list it for well above market value just to have it sit longer so they could make more in the end.
Meanwhile, an agent who did a great job in listing the home, advertising it and advertising an open house could very well deserve 6% commission even if it only sold in a few days.
Yes, the house needs to sell itself, but it can never do that if people don't walk into the house.
I'm tempted to try FSBO, but I really don't know what I'm doing, how to price the house and need help dealing with multiple offers.
I'm not saying realtors don't add value. I think they do. I just think in my particular case, the going rate is too high.
I'm not really swayed by the argument that the easy houses pay for the hard ones. I think more work should= more commission.
I'm going to interview a few listing agents and ask what's the lowest they will go. It may be that they all will stick to their guns and keep it at 6%. In that case I will try FSBO.
Hire an attorney to hold your hand. With a 25,000 fee due a realtor. 25,000 v. 300/hour, I take 300/hour all day long. The attorney can take the offers.
I have worked quite a few deals where my agent took 1% comission. As it has been mentioned the rate is negotiable. if thearea you are talking about is truly "hot" the amount of work the realtor has to do will be minimal. I am talking about areas that are so hot the home may not even have a sign placed in front of it. The local realtors will already know of people wanting homes in these areas and contact them immediately after speaking to you.
The potential byers will buy the home sometimes sight unseen based on price per square foot, lot size etc... If the home is priced above market it will sell anyway. If the buyer needs to bring more cash to the table they do so. There are several areas in Houstn where these things happen on a daily basis.
So if your house and neighborhood are that hot you can pretty much forget about what most of these people are saying. I would expect most agents to take a quick and easy commision over worrying about the 6% or 3%. Just my 2 cents. Been buying\flipping investing about 20 years on the side, but still worked many deals.
Do people not see the fallacy in this? An unethical agent could list it for well above market value just to have it sit longer so they could make more in the end.
Meanwhile, an agent who did a great job in listing the home, advertising it and advertising an open house could very well deserve 6% commission even if it only sold in a few days.
Yes, the house needs to sell itself, but it can never do that if people don't walk into the house.
I think veuvegirl's comment was probably backwards, but maybe she'll respond and clear it up. My husband and I were thinking we might offer this scenario to a RE agent- if you bring us full asking price offer within 30 days, we'll pay 6%. The commission goes down from there if we have to reduce our price or sit on the market all summer. We have had some crazy sales in our neighborhood lately so I have no doubt it will appraise/get comps. Our biggest challenge in our price range is lack of a pool, and our back porch isn't huge (big enough for a 4 chair table, 2 big flower pots, and a grill though).
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I have a feeling this is backwards
