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There are many who are unelightened as myself because as presented on the seller's statement, commissions are a debit from the purchase price and it's natural to feel the purchase price are proceeds that a seller would receive.
No insult intended. It is a fact that basic personal economics are puzzling to most Americans. It is one reason some schools are under pressure to offer better personal econ education to kids.
The closing disclosure does not do much to clarify expenses accurately. But it may mislead sellers into thinking they had an expense which actually had to be covered by the buyer.
Do you "pay" a listing agent commission and/or a buyer's agent commission when the deal doesn't close? Most people do not. It requires buyer funds to pay commissions.
Commission expenses have always been a buyer burden. The accounting game in the closing statements doesn't change that fact.
Sellers price up to cover commissions to arrive at their targeted net proceeds. Without a commission they can net as much or more with a lower price than appraisal values based on comparable sales with commissions baked into the contract price.
Buyers funds are passed to the closing agent, either attorney or title company, and then an agreed amount is head-faked to the seller, and then passed back to the buyers agent to satisfy lenders. It is all nonsense.
Either way, the expenses ALWAYS fall to the buyer who is bringing the funds to the table.
Hmmmm.... Perhaps lenders should refuse to consider any brokerage commissions for either listing or selling broker as allowable closing costs. Relabel them as "Outside Closing."
Deduct them from the LTV applied for by the buyer.
Because too many buyers agents are openly saying they will not show the house.
And, listing agents will not take the listing and invest in photos, marketing, and time for a seller offering a $1.00 cobroke.
But, that may be where we are headed, if buyers can be convinced they will pay a buyers agent out of pocket. I am skeptical that that will happen.
I will say for many years, the buyers agent has allowed the listing agent to negotiate their pay. That may change now. If listing agents stop offering co-broke commisions or they drop below acceptable amounts, buyers agents will have to discuss commission and negotiate with the buyer prior to engaging them as a client. They'll have to sign an agency agreement to protect both parties. I'd love to see a buyers agent have to actually demonstrate value beyond unlocking a door and filling in the blanks on a contract. Sellers are typically a little more selective about the agent they hire when compared to buyers, but maybe now buyers will actually place value in making sure they hire a competent agent. That is a change I'd welcome with open arms. Either way, as a good and busy agent I believe this could benefit me quite a bit. I'd love to see some of the incompetent agents out of the industry.
Last edited by Brandon Hoffman; 11-01-2023 at 03:58 PM..
Do you realize that is the exception and not the norm in most real estate transactions ?? As a former realtor I found that on average, I spent much more time merely showing homes than actually closing on them. If it does happen to close quickly, does that mean that my time was worth less $ somehow? In that case, do I owe you a pound of flesh as well? It seems as if some folks think that is how it should work.
Do you feel if it goes under contract in 2 days, the agent should get more since they so quickly met the sellers goals and avoided a prolonged process and many, many weeks and weekends of showings? Just wondering, because if so it seems like sound logic.
My opinion, fwiw, is that it's not relevant. The seller decides how quickly the home sells based on their pricing. I do roughly the same amount of work whether it's 1 day or 100 days before it goes under contract as a listing agent.
The buyers agent side isn't relevant in the scenario because the DOM for the seller doesn't impact the buyer or buyers agent.
The inability or unwillingness of the writer to qualify statements with modifiers such as "some," "most," "many," "a few," while only dealing in absolutes makes this article nearly impossible to respect.
I will say for many years, the buyers agent has allowed the listing agent to negotiate their pay. That may change now. If listing agents stop offering co-broke commisions or they drop below acceptable amounts, buyers agents will have to discuss commission and negotiate with the buyer prior to engaging them as a client. They'll have to sign an agency agreement to protect both parties. I'd love to see a buyers agent have to actually demonstrate value beyond unlocking a door and filling in the blanks on a contract. Sellers are typically a little more selective about the agent they hire when compared to buyers, but maybe now buyers will actually place value in making sure they hire a competent agent. That is a change I'd welcome with open arms. Either way, as a good and busy agent I believe this could benefit me quite a bit. I'd love to see some of the incompetent agents out of the industry.
Consumers who have never worked with a good agent often cannot describe good service well.
Add in the common inability to understand self-employment and the attendant costs and confusion runs even higher.
I had no issue telling potential buyers that I would work for the offered co-broke but would have to revisit compensation if the fee was too low.
It is only common sense. Spend 100 hours with a buyer who purchases a $500,000 house and collect 1% or less, $5,000, or less? Not a good business plan.
We had the Brash $1.00 Co-Broke Hot Shot about 17 years ago. He didn't last long. Yes, some agents steered clients away from his listings, which is just wrong.
But most buyers wanted nothing to do with paying a buyers agent out of pocket on top of a price that was comped against properties that included both commissions in the contract price and closing.
If I agree to work with a buyer on their purchase at 2%, and they buy a $500,000 house that is comped and appraised against properties with 5% in included commissions so have to come up with another $10,000 above appraisal value to pay me?
That just won't work for a lot of people.
NC requires a buyers agency agreement. If this ruling stands, consumers will do well to read it closely.
Of course, for years, I have highly recommended not signing the agreement without the unilateral right to terminate it at any time prior to going under contract on a property.
Additionally, why would an agent keep their co-broke secret? I always sent or handed full MLS listing reports to buyers and the BA Co-Broke was clearly entered.
The basis of the suit is the requirement by MLSs, with NAR and member brokerages on board, that requiring MLS sellers to "pay" and to make payment through their listing agent to a successful buyer's agent is anti-competitive, that sellers should not have to "pay" the buyers agents' fees.
For decades, NAR ceaselessly identified those fees as seller costs and "free" to buyers, helping to make sellers feel like they were absorbing buyer costs.
Idiotic of NAR, but it is what it is.
I look forward to seeing appeals resolved in another 3-7 years.....
Thanks.
So, what would change here? When there are two agents, one working for the seller, and the other for the buyer, the buyer now pays half of that 5% the commission?
So, what would change here? When there are two agents, one working for the seller, and the other for the buyer, the buyer now pays half of that 5% the commission?
Don't assume any commission or split.
Brandon made a great point...
Sellers and listing agents have negotiated buyer's agent compensation for decades.
One major point of the suit is that buyers and buyers agents should be negotiating with each other to establish buyer's agent's compensation.
So, when the agent spends 100 hours with a buyer, showing multiple houses, writing multiple offers (including the attendant research), jumping when callled at mealtimes, and on evenings and weekends, and giving good guidance, how much should the agent gross and net?
No different than any other salesperson or business owner spending hours, perhaps months, working on proposals for clients only to not get the bid.
No different than any other salesperson or business owner spending hours, perhaps months, working on proposals for clients only to not get the bid.
So, how much is 100 hours of service worth at closing?
Choosing not to pay your bills is not a valid response.
However, you make a good point. The paying client MUST cover the expenses of failed transactions and interactions, for ANY business. If the failures are not covered, the business fails and disappears.
True in any endeavor.
"Free Estimates?" "Free Roof Inspections?" Someone is paying for time and vehicles, and training. Expenses are paid from revenue. That's how it works.
Last edited by MikeJaquish; 11-02-2023 at 01:24 PM..
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