Maverick, Home Buyer in Los Angeles, CA

Doing my own search for a home in Los Angeles. I am using a Flat-Rate Broker, since California allows them

Asked by Maverick, Los Angeles, CA Thu Feb 14, 2008

to give a rebate back to the buyer. I have been advised by friends to also hire a Real-Estate Lawyer. Is this necessary?

Help the community by answering this question:


Irina Netchaev, Pasadena CA’s answer
It never hurts to hire a RE lawyer if you are concerned that you will not be represented professionally.

A full service broker whose services are usually paid for by the seller that is referred and experienced will be able to take much better care of you in the long run. A full service agent, in almost most instances, will know their local market and trends. He or she will not just sit at the computer sending you lists of homes. They will guide you in the process and will help you make the right decision on the offer price of the house. Ultimately, they will save you a lot more money by ensuring that you are paying the right price for the house and that you are making a decision that in the long run (most full time brokers will be looking ahead to the time you sell and will advise you accordingly) will be beneficial for you.

Just remember "you get what you paid for". Rebate brokers are usually rebating because they are not very strong.

Best of luck to you in finding your home, whichever broker you end up using!
4 votes Thank Flag Link Thu Feb 14, 2008
Hi Maverick,
I don't care if I seem biased because I am a full service real estate agent. I've worked with "flat rate" brokers in the past. They do very little work, basically sending their clients to open houses. Then it is up to the listing agent to do the work. Even this I can deal with as the listing agent... but is it a service to the buyer? No. Definately hire an attorney to look over paper work. There's too much at stake. Better yet, get a real agent.
3 votes Thank Flag Link Wed Feb 27, 2008
"You get what you pay for"

I am not a "flat rate" broker but also respect the consumers right to choose who they do business with. If a consumer is fully aware and educated of the buying process, choosing a "flat rate" broker may have some advantages. Using one without an understanding of the buying process can have dire consequences and lead to much frustration.

I don't get paid by a buyer. I don't charge buyers for information so, "you get what you pay for" would seem to make my services worthless. You don't pay me so you must get nothing in return. A "flat rate broker" appears to be paying you so.....Does it make them less than worthless since not only are you not paying them, they must pay you in order to gain business? Depends on your point of view.

When offering on a property with someone who is simply submitting an offer based on your direction, you could end up paying more for the property than necessary. If you are a very educated buyer, this may not end up being the case but, an overlooked part of the process is the negotiation between the "buyers agent" and the sellers agent. I know when an offer is being presented by a "flat rate broker", an uneducated agent, an uneducated buyer or....all three. It is my job to know. When representing a seller, it is my fiduciary responsibilities to know and, to get the highest and best price and terms for my client. When representing a buyer, my responsibility is to obtain the lowest price and best terms possible.

The buyers motivation, when representing a seller, is an important part of determining how the seller will....or will not, respond. Buyers that are using a "rebate" type program to make offers, in my opinion, will pay more. They pay more, in the majority of cases I have seen, because they seem to be more concerned with the rebate than the actual price. This is a very good thing for my seller so, when I am representing a seller, part of my marketing includes direct marketing specifically to "flat rate" and "rebate" brokers and agents. Since their buyers seem to pay more, in exchange for a very small percentage "rebate", my sellers can make more, I make more and everyone is happy. Well, everyone that I am concerned with anyway.

The negotiation process is so much more than submitting an offer. Many deals are made simply because of the agents reputation, the agents ability to negotiate and how they present an offer and, the timing of the offer. Aspects that could be missing when using a "flat rate" or "rebate"based brokerage.

Do I discourage use of "flat rate" or "rebate" brokerages? No. I respect your choice and understand that you have your reasons for doing so. To answer your question about hiring an attorney when using those services....YES. Consider this though: Doesn't increasing your costs by having to hire a competent real estate attorney outweigh any advantage you may perceive buy using a "rebate" agent? If you are also considering finding a "rebate" attorney, you may want to rethink the advantages.

Use your rebate agent of choice, hire a competent and experienced real estate attorney (They wont be cheap if they are good at what they do) and let us know how things turn out. Remember also that, most sellers, will view a transaction involving an attorney in a very different way. If one of my clients is considering a transaction involving an attorney, my first suggestion is that they also hire an attorney. This will increase their costs and will be reflected in our counter offer back to the buyer.
3 votes Thank Flag Link Thu Feb 14, 2008
I love dealing with flat rate brokers because for the most part, they just want to get the deal done quick so they can move on to their next transaction. Flat rate brokers survive based on volume, not quality of service or repeat business. Traditional brokers need referrals and repeat business and therefore have an incentive to make sure their clients are excessively happy. Flat rate brokers work under the belief that low prices is enough to buy loyalty - that's a pretty poor incentive for an agent, don't you think?
2 votes Thank Flag Link Tue Feb 26, 2008
Well, I am sorry if I have underestimated you. I am sure that you are probably outstanding at what ever it is you do professionally. Just as I am.

And Mike...of course it is hypothetical, but most of us know that a flat rate guy is not going to do "any negotiating" what so ever. That is part of the while it is hypothetical, it is not unreasonable. Furthermore, I didn't base the 25K reduction on the again...."if you even bought it after my ....." it was simply an illustration.

Also Mike, your point about Discount or flat rate brokers being absent from this forum is well taken. Here is my opinion, accept it as such, just an opinion… Those guys only show up in the 2003-05 types of markets. Then fold and go away again. Look around your town, there are not as many now as there were three years ago.

The point is that percentages are such a joke, yet that is what we use to base our value. It is a horrible system, but the best we have.

So Maverick, good luck and yes, you probably should hire an attorney, but you should also hire a real “Real Estate Agent” and not someone who is just a processor. Hopefully, someone like Mike, he seems to have his head on straight. I would bet that he is a damn good Broker.


Gary De Pury
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS
2 votes Thank Flag Link Mon Feb 18, 2008
Percentages are a funny thing indeed. They are quite possibly the greatest mathematical joke ever played on the masses.

For instance...If you get a speeding ticket for say...$285.00, you will gladly pay an Attorney $250.00 to make it go away. That is roughly 88%

If something has 30% less fat, then we buy it. Well it used to have 400 calories and now it "ONLY" has 280 calories. Still fattening as hell...but hey, 30% less...

So when a person is making one of the biggest decisions of their lives, they go with the guy who says 50% back....

Lets do the math...

400K house. Potential commission of 2.5% 10K minus the MLS fee and other broker costs that the "FLAT RATE GUY glossed over of 1.5K leaving 8.5K Your 50% is a whopping $4,250.00.

Of that, you pay an attorney to go over the docs and say...Yep, looks good to me....I gotta go take care of a speeding ticket so pay the lady by the door....

You now have 3,250.00 and feel pretty good because you somehow believe that you got 50% back....

Here is my scenario...

That 400K house would have been 375K, if you even bought it after my home inspector found multiple issues. I would have negotiated it down to a better deal and had everything repaired if it was broken. I also would have placed you with the best lender for the area and your credit further saving you money. Additionally, my title company doesn't have to help me make up part of the 50% by charging you an additional rate, so there is a savings there and if you do choose to use an attorney, I would ensure that you have the names of a true REAL ESTATE attorney who knows the contracts inside and out. Plus your bill would be less because they know that I know what they normally charge my clients. (think of it as contractor pricing)

Finally, when all was said and done, you would be mad at me, because I got you the house for 375K off of the 400K price, I added about 1K in services, (Attorney, inspector, etc..) bringing you to a total of 376K which is only a 6% savings which is a lot less than the 50% that the other guy saved you.

Gary De Pury
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS
2 votes Thank Flag Link Sat Feb 16, 2008
Here is to all of you Agents who are still trying to do "business as usual" . I did find my house, by myself. It is brand new and in a great neighborhood. The builder had just finished it and was planning a open-house that week-end. He lives down the street from my house. He was great and straight-forward to deal with. He immediately knocked off the "realtor's" commission on BOTH sides and we started the negotiaions from there. (It had already been listed on Redfin for a couple of days). I got the house at a great price and he got his money, I have been in the house for 3 months and it is amazing.

I do realize that I was lucky. I still do not believe in the "old" way of buying a house and paying all that money to TWO agents. Redfin is the way of the modern way to purchase a house. I predict in the future after all the walls have been knocked one will be buying thru the "traditional" method.

If the agents who are commenting every day on this site were so busy with business I do not think they would have time to be on here,
1 vote Thank Flag Link Fri Aug 1, 2008
Maverick, I'd pay the fee for a lawyer just to make sure that the rebate aspect goes smoothly, as well as having a legal set of eyes to review the paperwork.
Web Reference:
1 vote Thank Flag Link Fri Aug 1, 2008
Your post answers your question. If you had used a Full Service Broker, then you'd ask them the question, or not worry about it. Your problems are not primarily legal (this is not legal advice).

Your challenge is that you simply have not one with market expertise that can negotiate for you. And because you have a signed listing agreement, it is unethical for us to advise you.

You get what you pay for.
1 vote Thank Flag Link Thu Jul 31, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
What I have learned so far is that not all, but in general, most brokers,or agents under-estimate people.
1 vote Thank Flag Link Sat Feb 16, 2008
I don't think anyone here means to disrespect a flat rate broker. There are just a lot of agents who have personal horror stories or experiences when dealing with them.

It is my personal opinion that a buyer or seller is best represented by a full service brokerage that will be very involved in the transaction and offer the best advice available to the client. Many discount or flat rate services offer an ala carte menu and most of the time the client ends up paying as much or more to these brokerages as they would have had they chosen a full service brokerage to begin with.

A buyer or seller absolutely has the right to make the choice that is best for them - no question about it. A buyer or seller needs to educate themselves, however, before going with a discount service.
Web Reference:
1 vote Thank Flag Link Thu Feb 14, 2008
Does the quality of your broker suggest that you will need additional representation? If the answer is yes, then you may want to rethink the situation.

Another question: will the rebate be more valuable than: the additional cost of the attorney, any added complication due to having two cooks in the kitchen, missed opportunities in structuring the deal, resistance (or resentment) on the part of the seller because of the appearance of unprofessional representation and perhaps loss of peace of mind on your part? If so, by all means go for it.

Hiring a lawyer should be able to provide you another level of protecting your interest, although they aren't always great at getting the deal through (especially challenging if you have 2 agents (the broker and lawyer) speaking on your behalf.

I actually have no problem with the idea of a flat-rate fee, but a discount is the same in real estate as it is anywhere else. The fee should be commensurate with the quality of service. That's not to say that there are not exceptions to the rule, but it's a good rule of thumb.
1 vote Thank Flag Link Thu Feb 14, 2008
Read my blogs on Flat Rate brokers, YOu get what you pay for. The unfortunate thing is that if you don't know what you are missing than How do you know you are missing it? Just google maryinpalosverdes that will take you to my blog and hit the tag cloud for discount brokers.
You should always seek the advice of a real estate attorney when not being represented by a full service broker. We have errors and ommission insurance plus, most flat rate brokers if they carr y ins. may only have minimum due to costs.Hope this should help you make a good decision. I also have articles on the hazards of listing with a flat rate broker..GoodLuck!
1 vote Thank Flag Link Thu Feb 14, 2008
I totally agree with Irina and Mary. You get what you pay for and as a buyer you are not paying for the flat-rate broker. The homes are usually listed for the same price as a home listed by a full-service broker.

Many states use real estate attorneys for closing a transaction. In California you don't usually involve an attorney unless there is a problem. It is your decision whether or not you want to spend hundreds of dollars more in attorney fees for a real estate transaction.

I've only had to involve an attorney once during a transaction and it was for my own personal transaction where the seller was beginning to get flaky - we hired an attorney and all ended well.

I'm always amazed that someone would choose to "do it yourself" when it comes to real estate - agents study, take the required courses and then some and then take a course to learn how to take a very difficult State test to get a license. Buying real estate is one of the biggest things you will ever do in your life, why would you want to cheapen the process when you know you get what you pay for? This is a 30 year decision for your and your credit!

Let me know if I can help you in any way, Cynthia. All the best to you in your search for the right home.
Web Reference:
1 vote Thank Flag Link Thu Feb 14, 2008
Hi Maverick

Since this post is dated Feb 14, 2008, you may have already bought a home. So this response is just for the sake of answering a very good question which is you should use whatever method you are comfortable with and fits your needs.

Just keep in mind....
Flat-Rate Brokers are not going to show homes in person or preview homes before your showing appointments in order to be sure each home they show fits your list of wants and must-haves. I am also pretty sure Real Estate Lawyers will not provide those services either.

A rebate sounds good initially but what services are you giving up? I work with lenders that also provide rebates on loan costs and so far most of the sales I have closed included Seller credits toward the buyer's closing costs.

So, if you are serious about buying a home it's best to use a REALTOR or agent that will spend the time and make the effort not just to show you the homes in person, but be available to meet with you in person throughout the entire transaction.

Good Luck
Monica Hernandez
Bankers Realty Exclusive, Inc
DRE Lic #01239118
0 votes Thank Flag Link Wed Jul 25, 2012
Dear Mav,
For your own protection, It's worth the expense to hire an attorney.
0 votes Thank Flag Link Mon Sep 6, 2010
Dude, Maverick, umm I thought you were going to do this yourself?
0 votes Thank Flag Link Thu Jul 31, 2008

What is your ultimate goal here?? Is it to get some money back on the deal or have an agent who can negotiate on the best home at the best price for you? People get wrapped up into thinking they are getting money back and that is what the deal is about. A better option is to find a full service broker in which 99,9% of the time the "seller" pays the commision (no cost to you) and if you need money back have someone strong and creative who can negotiate for some money back for closing cost.
Really do the numbers, what kind of rebate are they giving back...a few thousand?? It may sem like allot but in the scope of 100,000s of thousands and all the liability possibilitys it's nothing! Remember, if an agent can not find their own worth and negotiate a commision for themselves how are they going to do going up to the negotiation table on your behalf?? A great agent doesnt have to "buy" business.
Again remember your goal is to have a home you love for the price you can afford not to make a few bucks and have the deal fall apart and break your heart when you are already emotionally attached!
Good luck!
0 votes Thank Flag Link Thu Jul 31, 2008
NO, I am not that guy.
0 votes Thank Flag Link Wed Feb 27, 2008
Forgive me for asking the obvious...but are you that guy?

"a very experienced, independent, knowledgeable, careful, buyer. Not all buyers would have time, nerves, & patience it takes to do 99% of the work it takes to buy a house"

Because if you are, then I don't understand your initial question...

"I have been advised by friends to also hire a Real-Estate Lawyer. Is this necessary?"

I am not trying to insult you, so please don't take it that way. I am just trying to understand your methodology.


Gary De Pury
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
0 votes Thank Flag Link Wed Feb 27, 2008
LA Condo Sto,
It is totally understood what motivates "the flat-rate broker". They should only be used by a very experienced, independent, knowledgeable, careful, buyer. Not all buyers would have time, nerves, & patience it takes to do 99% of the work it takes to buy a house.
0 votes Thank Flag Link Wed Feb 27, 2008
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