Adding incentive to a realtor's commission (5%, negotiating, agent, sale)
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I'm going to be looking to purchase a small inexpensive house in the middle of America in a town where the average home sells for about $70,000 to $80,000 although there are also homes selling for over $200,000 there. I'm planning not to spend more than about $50,000 on a small older house which is very doable in this area.
I currently live half way across the country from this town so I need to rely on a very good realtor to represent me as a buyer as far as finding the house, looking at it first to see if it fits what I'm looking for, maybe taking additional pictures and so on. I realize that there isn't much commission on a house this inexpensive and most likely not much incentive to work very hard to help me as my purchasing agent. I'm assuming the standard commission they will receive would be half of the 6 percent of the listing.
Would it be silly, wrong or even unethical for me to find an agent to represent me and offer them a small bonus of maybe $2,000 - $3,000 to make it more profitable for them to work in my behalf and hopefully do a good job finding a house for me and assist me?
Of course I'll be going out to this town and looking at houses myself, but can't possibly travel there every time a possible house pops up for sale so I need to rely on my realtor to look at it first and then tell me honestly if it's something they think I would really like and fit the criteria I'm looking for. Does this make sense or am I over thinking this or being unrealistic?
I'm going to be looking to purchase a small inexpensive house in the middle of America in a town where the average home sells for about $70,000 to $80,000 although there are also homes selling for over $200,000 there. I'm planning not to spend more than about $50,000 on a small older house which is very doable in this area.
I currently live half way across the country from this town so I need to rely on a very good realtor to represent me as a buyer as far as finding the house, looking at it first to see if it fits what I'm looking for, maybe taking additional pictures and so on. I realize that there isn't much commission on a house this inexpensive and most likely not much incentive to work very hard to help me as my purchasing agent. I'm assuming the standard commission they will receive would be half of the 6 percent of the listing.
Would it be silly, wrong or even unethical for me to find an agent to represent me and offer them a small bonus of maybe $2,000 - $3,000 to make it more profitable for them to work in my behalf and hopefully do a good job finding a house for me and assist me?
Of course I'll be going out to this town and looking at houses myself, but can't possibly travel there every time a possible house pops up for sale so I need to rely on my realtor to look at it first and then tell me honestly if it's something they think I would really like and fit the criteria I'm looking for. Does this make sense or am I over thinking this or being unrealistic?
I am not a Realtor, but your post makes perfect sense to insure extra attention - I would likely do the same. Only agree to pay it for a home you ultimately approve and close on and pay the bonus at closing.
I'm not from the midwest, but in my area (east coast), it's not uncommon for buyer agents to have agreements with clients that call for a commission to be paid (usually represented as a percentage of the net or gross sale amount) that might be higher than what is offered to co-brokers through MLS, should the buyer agent be successful in finding the client a new home. So if the 'typical' co-broke commission in the area you are looking is 2%, maybe you could have an agreement that pays 4 or 5% to them in the event that they find the right house & close the deal.
So I don't think it's silly or wrong or unethical, but I would just make sure the contract was written to protect both sides and is clear on what is expected, which may not be as easy as it sounds.
Are there a lot of houses on the market, and will they be going out several times a week to see them? Do you want them to send you photos of each since sometimes MLS does not have sufficient photos? Do you want to know what kind of repairs will be necessary? How far will they need to drive to these houses? etc..... If you're paying more than what is expected, it may be easy for expectations to get out of hand unless you're both very reasonable people & willing to be flexible. Then the question is how to go about finding a person who will agree to it for the higher amount and actually do what you're asking and not just go through the motions.
So I think it could be done, but requires a clear set of expectations and the right people on both sides. As much as you would need to trust the person you engage with, they need to trust that you are not just sending them on a wild house chase and then go & find a house on your own and tell them that they didn't earn the higher percentage. Works both ways!
I'm not from the midwest, but in my area (east coast), it's not uncommon for buyer agents to have agreements with clients that call for a commission to be paid (usually represented as a percentage of the net or gross sale amount) that might be higher than what is offered to co-brokers through MLS, should the buyer agent be successful in finding the client a new home. So if the 'typical' co-broke commission in the area you are looking is 2%, maybe you could have an agreement that pays 4 or 5% to them in the event that they find the right house & close the deal.
So I don't think it's silly or wrong or unethical, but I would just make sure the contract was written to protect both sides and is clear on what is expected, which may not be as easy as it sounds.
Are there a lot of houses on the market, and will they be going out several times a week to see them? Do you want them to send you photos of each since sometimes MLS does not have sufficient photos? Do you want to know what kind of repairs will be necessary? How far will they need to drive to these houses? etc..... If you're paying more than what is expected, it may be easy for expectations to get out of hand unless you're both very reasonable people & willing to be flexible. Then the question is how to go about finding a person who will agree to it for the higher amount and actually do what you're asking and not just go through the motions.
So I think it could be done, but requires a clear set of expectations and the right people on both sides. As much as you would need to trust the person you engage with, they need to trust that you are not just sending them on a wild house chase and then go & find a house on your own and tell them that they didn't earn the higher percentage. Works both ways!
Good luck.
All good points. What I would expect from my end is the following.
- keep me informed of any new listings that they believe I would be interested in including repos and maybe even for sale by owner but I doubt that
- take a few pictures of the inside of the house and yard
- tell me something about the neighborhood and street the house is located in both positive and negative
- give me their honest opinion about the property and condition of the house as they see it. I realize they are not home inspectors but an overall opinion of condition like "almost ready to move into", "needs a lot of work", "plumbing in bathroom is all torn out", "the house has a shared driveway with neighbor", things like that.
- help me with closing when the right house is found
Many times homes in this town only have one or two photos available of the outside of the house. The town is small about 10,000 people and only about 7 square miles so there wouldn't be a lot of driving involved for them if they are local.
The reason I thought about a bonus rather than a higher commission is because I don't want the realtor to only steer me towards the more expensive homes. There might be a less expensive home that might be great for me and paying a bonus would give the realtor the same dollar amount even if the house was less expensive, therefore the incentive is the same for them regardless of price or negotiating to a lower price than original asking price.
I need to make it clear to them that they will be my eyes and ears and will rely on them so when I do go out there, there is a reasonable chance I will like or at least consider the homes they have steered me towards.
Being a relatively small town, there aren't a lot of houses that come up for sale. Maybe 2 a week at most that I see popping up within the price range I want.
Re: bonus vs increased commission - A swing of $20,000 on the price of a house is going to put an additional $300 -$600 in an agents pocket (1.5% - 3%). I doubt that's enough for them to mislead you.
I also suspect that some of the information you're asking for in their "opinion" may be problematic when you consider the limitations in what an agent can and cannot say.
You'll get better answers to your questions on the professional realtors forum. But I think that the way you are approaching this (extra income for extea work) is a great idea.
Thanks. One important thing I left out is that I want to be fair to the agent working for me. I don't expect them to work on my behalf for so little money as only a small commission since it's going to be an inexpensive house. I don't think I'm expecting a lot more than a good realtor would normally provide but I want to be fair.
Make it completely different than the commission. You are asking for hand holding and special services, above normal for a buyers agent. You are asking for special help, and advice.
Offer the agent through his broker, that you will pay the agent a $2,000 or whatever you agree on as a consulting fee separate from any and all commission if the agent gives you the extra service you are asking for. The agent would receive the normal commission for writing the contract and getting the sale closed. The other payment would be for his/her going out there and evaluating all the properties to find the one you then may want to purchase. For going far above what an agent would normally do, to find you a property. What you are asking is far above the normal actions of a Realtor. But if you do sign up a Realtor for such specialized work, pick one that is extra good and has been around the business for a few years, and really understands what they are looking for, and will truly recognize it when they find it. A newby would not have the background to evaluate the property to see if was the right property for you.
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