Too bad I don't have my PA license. :(
Contrary to the opinion of the Department of Justice, real estate brokerage is actually a highly competitive field. How many cell-phone service providers are there? Four? Gasoline companies? We have four companies - one chain and three indies - within three blocks of my office.
But I have another resentment toward the limited-service companies, and it's not that they undercut full-service agents, because I believe we compete well on service. It's that they, in my opinion, put their clients at a disadvantage because they encourage (deceive would be too strong a word) novices to bypass expertise for the sole purpose of obtaining their business.
To my mind, this is like the "supplements" industry - they claim that their products are not to be used to treat ailments of any kind, but that they "support" good health. Uh huh. Why go to an expensive doctor with all those expensive tests when you can eat a "superfood" or take a "supplement."
So at least one well-known rebate brokerage provides a forum where people, often posting anonymously, can reinforce the firm's viewpoint that whatever services they don't provide aren't worth paying for.
Anyway. FB is sure that they don't need a full-service agent, and didn't ask for opinions, but the conversation went on around FB. Apparently, people responded and Trulia provided a service for FB, and all is well.
But to those of us who remain in the discussion, I think it's important that we realize, as individual practitioners, how it is that we provide value to our clients that is worth our fee. Whatever we charge.
However. I do want to remind myself and my colleagues that we do not charge a "service fee," we charge a "brokerage fee." Ultimately, we get paid for brokering real estate, and if that means opening a few doors and writing up the paperwork, then I think we have earned the entire commission.
This is from Depart of justice: http://www.justice.gov/atr/public/real_estate/faqs.html
May a real estate agent rebate a portion of the agent's commission to the borrower? If so, how should the rebate be listed on the HUD-1?
According to HUD, yes, real estate agents may rebate a portion of the agent's commission to the borrower in a real estate transaction. The rebate must be listed as a credit on page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business.
Though few have responded in this site, I got a bunch of responses to my email agreeing to my proposal.
I personally know few realtors who are really good and let me say there is no disrespect toward the profession. I am sure there are buyers out there who need all the services of a good realtor, I am not one of those. I can (at least I think) do my own research and my own bargaining. If I am losing out something in the process I outlined, so be it - it is my loss.
People should stop saying 'It doesn't cost you anything, Seller pays for it". There is only one person that is bringing the money to the table in a real estate transaction and that is the buyer. Seller will price a home considering the 6% commission that s/he has to pay.
I think it is just a matter of time before companies like Redfin come to the area. Everyhome and ZipRealty already give rebate to buyers. We all need to adapt to the changes happening in the industry.
Thanks for all the folks who contributed to the discussion.
I think that there will be more and more innovative ways to define the relationship between buyers and their real estate practitioners. After all, the commissions real estate brokerages charge are not fixed and there just may be someone out there who is willing to work with this buyer for the terms he presented. Perhaps his terms are also negotiable.
I had an interesting conversation with a colleague last week and he brought up the point that the reason real estate commissions are what they are is because the commission paid to the broker also has to compensate for all of the failed and unsettled transactions as well as the successful ones. In most cases, the consumer of real estate services does not share in the risk that the transaction may fail and the real estate practitioner may not receive any compensation at all. Perhaps if real estate practitioners were paid for the work they do rather than the result of a successful transaction, we could still earn a profit for our efforts and offer the services at lower prices. Of course, the consumer is asked to "put skin in the game" by paying their real estate agents based on services rendered regardless of the outcome.
Of course, there is still the issue of the legalities of offering buyers and sellers rebates of co-op commissions particularly with mortgage lender issues.
Furthermore, why would an agent agree to these terms if their profit potential is better by dealing with the co-op directly. How does the buyer provide the incentive to the real estate practitioner to accept this offer. Perhaps the buyer would be willing to pay the $4000 non-refundable in advance. #justsayin
Keller Williams Real Estate
Exton, PA 19341
Office: (610) 363-4300
Mobile: (484) 948-0936
I want a toasted ham and egg sandwich with bacon, but hold the ham, bacon and egg and substitute english muffin and I only want one side of the muffin, so charge me 65% less since I dropped the meat and only want one slice of muffin.
There's another thread going on, and at the risk of duplicating a post, I think that agents have to accept that some people are always going to want to do things themselves, and since life is so short, if they want to play real estate agent or fix-it person or whatever, so long as they don't harm anybody else, I don't see the problem.
We never know what we don't know, and I am continually drawn to the home handy-person as my DIY model. They're the people that go to the big-box hardware store and leave with a folded green or yellow sheet of paper showing them how to do drywall or plumbing or tiling or laying down a floating floor. You go to their house, they say, "Look what I did, what do you think?" Of course, we say, "Uh, looks great." So in their minds, now, they're freaking Bob Vila!
The fact is, after having done about a dozen or so transactions, I got the idea that I really did know what I was doing, and by the time it gets into the hundreds, it ain't even a question.
So from there, it becomes a question of whether we, as agents, are going to provide our services Ã la carte, or to open up the entire operation pour un prix fixe.. Because, let's not forget, few, if any of our clients use ALL of our services and knowledge.
And, as I wrote there, it makes it doubly important to have a good buyer brokerage agreement, so that your buyer cannot come back and blame their failings on you. After all, you are the professional, and I'm pretty sure a judge wouldn't accept your defense that, "Well, the client said they'd take care of that."
Its just that I am for more widely available, more easily accessible options/choices. Options exist, but they are not widely available and are frankly not particularly successful for a number of reasons, part of which is the "system" is rigged in favor of full service.
This thread highlights this beautifully because a buyer should have the option of paying a flat fee of say, 4k, and having their own agreement with their own buyer's agent yet, as stated we know that commission agreements are between the seller and the listing agent. Even if that wasn't the case, apparently there are plenty of agents who feel that the work the OP described is not worth their while for 4k. Go figure.
Their choice, sure. However lets admit that things are kind of rigged in the favor of using REAs. Its extremely hard to avoid, especially on the buying side. No doubt that we provide a service, and if we do our jobs well, we provide a great service, perhaps even a valuable service. I just don't see a lot of choice or flexibility in the how we are used and the resistance by agents on this thread to Future Buyer's premise highlights that.
"Well, I think we've all missed that part. "
No, SOME of you have missed the part where my desire to raise the bar to entry and professional standards for the RE industry is actually out of a respect and passion for an industry and the REAs who work in it that I have the utmost admiration for.
"What is that liability, exactly?"
My response regarding liability was in regards to Mr. Walin's post. Reread his post and then maybe you will understand.
All kidding aside "... that is why you crusade so vigorously against the industry you are part of."
Just want to make it clear- I am actually crusading FOR the industry I am a part of. The fact that so many agents don't see it that way is sad and disturbing to me at the same time.
And Mack, its our choice to be an agent or not. I came into this business at what could be considered one of the toughest times to enter an already tough, competitive business. My Choice, no one else's. Its not always a sellers choice to sell. I know this because I have found myself in the unenviable position to be among them. NO Choice. Big difference there.
Where's the liability there?
Methinks you overstate the case for the status quo.
With that, I think agents need to readjust their thinking and realize that what sellers are expected to pay in percentage commission these days drives them over the edge.
I truly think that agents, or more accurately their brokers, need to consider, without arrogance, that things are not what they were and adjust accordingly.
I have no control over this. I work for a traditional brokerage, as most agents do and I have to go along with what my broker says. I happen to have the utmost respect for my broker who I believe is one of the best in the business. I also happen to believe that it is only to our advantage to adjust to the reality of this market and perhaps if more agents understood this, the business model would change to one that is more realistic. I truly believe that its possible that the current RE business model is not sustainable with the market being the way it is.
It can only be to our advantage to keep an open mind. It does not mean the end of making a living in RE but perhaps the opposite, with REAs having to adjust t the reality of today's market rather than continuing to insist that it be the other way around.
The streets are littered with the hopes and dreams of reformers and innovators, all warning that they were the new wave and those who did not adapt and accept would be left in the dust. Nowhere is that any more true than in real estate. Home Values, House Gain, Zip Realty, Foxtons. Basic problem? Not enough revenue. We lose money on every deal, but we make it up in volume! So much for the "old guard" being left in the dust.
The economics of real estate sales are rather basic - for an agent to be able to afford a home in the area s/he works, they need to sell roughly between twelve and sixteen homes of similar value per year. (Expenses, splits, desk fees, all play into the final numbers).
If their basic commission is reduced by 25%, then they need to do sixteen and twenty-two just to keep pace. That's just the facts.
Sales are down by half nationwide as it is. Values are down 30%. That doesn't change the revenue requirements for keeping the doors open.
I don't know what the future will bring, but I will tell you that brokerages are not going to stay open if they need all of their agents to do twenty-five or thirty-five transactions a year, any more than the NBA would stay open if they needed all of their forwards to average fifteen points per game.
And it really doesn't matter what anybody thinks about this. For the store to stay open, it has to bring in sufficient revenue, or it closes.
Showing a maximum of 10 homes.Negotiating the contract and handling the associated paperwork
Future is this what you mean?
I located a home I wished to purchase and approached several agents and brokers regarding a substantial rebate of the co-broker commission. Eventually, I located an agent/broker willing to rebate 50% of the co-brokerage. Steven Covey would categorize the approach as â€œwin-win or no deal.â€ I believe that those who chose â€œno dealâ€ walked away from $7.5K of easy money. The RE professional who accepted my proposition collected that commission for just a few hours of commitment and earned an hourly rate of over $1500/hr. I too am a professional licensed in the Commonwealth and I would jump at the opportunity to collect over $1500/hr for my services. I was surprised that 8 RE pros flatly, and in most cases emotionally, rejected this opportunity.
Notably my situation was different was from FBâ€™s. I sought to purchase one specific home that I had already been shown by selling agent. If the deal did not close I was willing to compensate my agent/broker for actual â€œbillable hoursâ€ at a rate to be negotiated. I asked for little assistance and wrote the offer/counter offers myself. My commitment to my agent/broker in this deal was to be as little burden as possible. My agent/brokerâ€™s commitment was to provide as much as assistance as I needed up to that normally provided to any other client between the offer and closing.
I would like to weigh in on the question â€œwho pays the buyerâ€™s agent?â€ The legal facts in Virginia are that a buyer and the buyerâ€™s broker enter into a contract through which the buyerâ€™s broker receives compensation for providing a service to the buyer. The funds disbursed to the buyerâ€™s broker at closing are available to her only through her association with the buyer and the nature of that association is subject to a contract between the two â€“ ergo the buyerâ€™s broker receives compensation through the buyer. Assertions that â€œthe seller pays the buyerâ€™s broker/agentâ€ are in error and if true would be the root of insurmountable conflict of interest. Such arguments are tantamount to an assertion that a personal injury lawyer is compensated by the defendant not the plaintiff. In both the lawsuit and the real estate transaction a member of the public enters into a contract with a licensed service provider who acts on behalf of her client in consideration of a percentage of funds that MAY be disbursed in a future transaction if a legal process concludes favorably for her client. In both cases the licensed professional takes a risk that she will get nothing and she rationalizes that risk by negotiating for a percentage of the potential proceeds in advance. The service providerâ€™s only entitlement to any portion of the proceeds is through the contract her client. The 8 RE pros who believed that they were "entitled" to the full $15K co-broker commission generated from the sale of my home were proved wrong when they got nothing. As a result of their perceived entitlement to $15K, they chose to forgo the opportunity to receive $7.5K for a few hours of engagement. One RE pro believed that entering into a contract with me for the potential to access $7.5K was reasonable compensation for the service I desired. That RE pro worked for me, I was the client who compensated the RE pro in accordance a contract we negotiated and executed in writing. Legally my representative, and in every legal sense compensated by me â€“ not the seller.
I submit that the details of every contract are negotiable when parties are willing and empowered to negotiate. Clearly many agents are not empowered to negotiate, like the cashier or even the manger at a chain store, so there is no point in asking. Many brokers apparently see risk to their long term earning potential if they negotiate commissions that depart from those customary in the industry. A few see an opportunity to earn money that someone else will eventually accept. I would encourage every buyer to remember that purchasing real estate is a business transaction and that the exchange of fees for service is subject to market forces in any business. Those who view their real estate transaction as a business opportunity that they are presenting to a buyerâ€™s agent/broker are more likely to find financial satisfaction.
Future Buyer; you certainly have the right to negotiate (almost anything) relating to your purchase.
And we as professionals have the intrinsic (did I spell that right?) right to say no.
We can even be offended, (as long as we professionals keep it to ourselves.)
Gosh, maybe we should try this the next time we need a plumber or our car repaired. Hey, Future Buyer, what do you do for a living?
- And Mack, you can believe all you want that buyers don't pay the commission.
Thank you, Joan, I don't know what I would have done if you had taken that belief away from me.
Believe me, I'm smart enough to know that when I buy a six pack, I'm paying for the delivery costs and the packaging and the store's overhead and the salaries of the check-out clerk and the shelf stockers and the cleaning people, and I also know that I can get my own growler and go to the local brewpub and fill'er up myself, although I'm still paying THEIR overhead.
But the very simple reason why I wouldn't give a rebate to FB or to anybody else that wants me to just "write their offer" is that I don't want to. It's as simple as that. I work for myself, and as an independent contractor, I get to decide whether to accept employment offers such as these or to reject them.
While I'm interested in the point of view of agents like you who think that $4000 per transaction is enough, and especially of agents like you who appear to think that an agent isn't really worth more than that, I happen to disagree.
And I don't especially feel the need to be polite about it, either. The commission agreement is between the listing agent and my brokerage. The buyer is not a party to the commission agreement, and while it is legal for me to rebate my commission to the buyer, it is also very legal for me to decline the invitation.
I am not against buyer rebates. I just want to point out that last week, Zip Realty announced they will no longer offer commission rebates to buyers. And yes, Redfin is a fine company. But they have a minimum fee they charge to their buyers, $6000, That is $2000 higher than your offer. $6000 is equal to a 3% coop share of commission on a purchase price of $200,000.They offer no commission rebates on collected fees less than $6000.
Finally, it may be legal to offer buyer rebates IN SOME CASES. Many lenders will not approve such rebates. Because it is legal does not mean a lender will approve those terms. Underwriting standards may vary from lender to lender but they do expect to achieve certain loan-to-value ratios. The rebate of a substantial portion of the commission would be considered added value through a reduction of purchase price via rebate. If the effect of that rebate does not achieve their LTV requirements, your loan will not be approved. In the case of an FHA loan where a borrower/purchaser invests the mandated minimum of 3.5% of their own money, a commission rebate would be strictly forbidden by the FHA.
And of course, all financial aspects of the transaction, including rebates, must be documented on the HUD-1. Failure to do so is fraud and the penalties are severe.
However, if the lender will go along with it, and the seller will go along with it, and you can offer some guarantees to your buyer's broker in exchange for deeply discounted fees, it could work. As I said in a previous post, if I could get buyers and sellers to agree to compensate me for my services regardless of the outcome of their transaction, I probably could and would deeply discount my fees as well.
Good luck to you in your home purchase.
Keller Williams Real Estate
Office: (610) 363-4300
Cell: (484) 948-0936
thanks for the dialog and explanation. The only thing missing in your explanation is placing client interests ahead of our own as agents. Also TB treating all parties honestly really means to provide the side you are representing cannot gain expert advocacy, like where should i start off price wise in an offer, what should I counter, do you think I should say this is my final offer. Would you buy this house or that one? Thats what agency is.
The base representation by default should be full buyer agency or exclusive right to sell listing agency. A real estate transaction is inherently adversarial and it is good to get full fiduciary care not dependent on individual agent overstepping the TB boundaries and not represent the transaction. Like a hostile divorce, do you want a lawyer working for you, but really his job is to get the divorce paperwork in order to be completed, not trying to weaken the other side to the benefit of the other. TB is all about "saving the deal" and working to fascilitate the deal closing.
I like your closing question, very well said!
Jack do you practice transactional brokerage, TB as do most agents in FL? So when you say to a buyer you're working for them, and florida has no agency disclosure requirement for consumers defining agency, do you clarify that in fact you work for the transaction and not the party in the transaction? MY pet pieve with transactional brokerage in FL in particular is that Gov Bush two years ago made FL a presumed transactional brokerage state so no one is represented beyond ministerial care on either side of the agreement. Worse yet, folks assume that the friendly FL agent they are workiing with has their best interests and are allowed to provide full fiduciary care, they cant! No reason to sign an exclusive buyers brokerage agreement. Brokerages love the law because it shields from liability since there is no representation, how can there be misrepresetnation? I hear FL agents talk about how bad dual agency is as a defense for no disclosure required, i.e. presumed public knowledge of TB. I gaurantee most people in FL do not know how the florida legislature gave the real estate industry. At least in dual agency both parties get partial representation, in TB they get none!
- Options exist, but they are not widely available and are frankly not particularly successful for a number of reasons,
Could it be because they are not profitable?
Real estate brokerage is like any other business, Joan. The people who work in it have to generate enough income, or they go out of business. In addition, we have the human need of having our work respected and honored, so that they can we can persevere in difficult times. Frankly, if someone thinks my value to them comes from opening the door and filling out some forms, they're right - they don't need me, and I don't need them. I would charge double before working with someone like that.
The marketplace determines what commission levels are sustainable. I'm not sure where any of us get off telling real estate brokers, who are people, after all, that they should take whatever work comes their way at whatever a client might be willing to pay.
I suppose, in the way that things are "kind of rigged" in the favor of using general contractors and architects on high-end remodels . . . Joan, there have been FSBOs since the beginning of time, and probably six weeks after the first cave woman decided to FSBO, there was somebody offering a limited-service brokerage package to her.
To my ears, it sounds as if you are saying that brokerages "need to" cut their prices or nobody will use them, except that they're so ubiquitous that you can't avoid using them.
Future boyer-Call every listing agent on every house you find and look after your own best interests, do dual agency, use a lawyer. This is the same thing as some people wanting to go FSBO but in reverse.
Well, it's tough for everybody, isn't it?
With 30% lower prices, and 50% fewer deals, real estate agents are feeling it, too. A lot of people don't care, and of those, most aren't real estate agents!
Anyway - I don't think Future Buyer asked for our opinion on the matter, just for a volunteer.
I know of three cases where agents were sued for misrepresentation. Any good agent that has been in the biz for a while knows of some former client making a complaint against a brokerage. E& O insurance, error and ommission insurance claims are up, buyers remorse eand seller looking for deep pockets to cover their bad decision. Maybe the swamps of NJ make bad behavior more likely amongst agents there and that is why you crusade so vigorously against the industry you are part of.
your premise is that Realtors are overpaid in the traditional sense and think it is your place to constrain what the buyer agent makes based on what you think is fair. What hasnt been said yet is the full fiduciary care and agency law adhered to the Realtor under a buying agency agreement that raises HUGE liability for the agent. I would not want to be underpaid and expose myself to liability as to you said my kid would go to that school, my taxes didnt go down as much as you said they would, why didnt you show me that house instead of this house I bought... When you hire an agent, you get private advice & consule, confidentiality for life, where according to agency law we are to the place client interests ahead of our own. Nothing else you buy exposes the "salesman" to that kind of liability. You bet I want to get paid industry norm. If a car salesman says this car is the best car I ever drove and you believe him, you have no recourse to put that car salesman in front of a review of peers, fine him take away a license. In these Litigious times I am worth every penny. Doing licensee activities without intent of compensation or actual compensation is really a bad idea.
What is missing from your question is the price range you are buying in. For a $100,000 house this may be generous, for a $1,000,000 this would likely be inadequate for many agents.
My general advice for buyers such as yourself is to reconsider your approach. By focusing on commission, you are eliminating many strong agents who may save you in price and time more than you're picking up in commission. The best agents bring value to a transaction and it translates in so many areas you may not be aware of. Our knowledge of the market, previous sales in an area, experience negotiating with our colleagues, and knowledge of reputable vendors who also bring added value just to name a few.
My advice is to find the best agent available and if they offer a commission rebate or discount service, all the better. But by putting the commission first, you may be eliminating a better choice.
In a Seller's market where homes are going into escrow in 1 week, you really don't need one. Get a real estate attorney and deal with the Escrow company direct.
Process is very simple and the steps are well defined. Just make sure...
Your home is in good shape (to the point where there's nothing known to you that you need to disclose that could torpedo the deal.
You take Pre-Approved buyers only. Pre-Qualified doesn't work. Make sure you know: A) how much they're putting down and where it's coming from and B) verify with the bank that they are cleared for the remaining balance.
From there it's simply dealing with issues resulting from the inspection and signing forms.
NEVER think that paying an agent or broker has be tied to the value of your home/sale. You took the financial risk to buy it, maintain it and realize the appreciation. Don't let anyone think they're entitled to 5-7% of your selling price for doing 60 days of work (again, if you're in a Sellers market).
Future Buyer, I hope your quest worked out for you, but I'm sure by now you have gotten the lay of the land from agents in the area. Perhaps by now you have gotten a real estate license, to accomplish your goals.
I guess the questions remain: Are you buying 10 properties, and paying a flat fee of $4,000 for all?
10x the liabilitiy for a fistfull of dollars. Again, NO.
How in the world would I stay solvent, knowing full well that the negotiations alone would dominate my life for this extended period of time? NO.
Also, upon reaching offer write number 11, do I now get my full buyer side minus office split, E&O insurance, phone bill, internet, etc? Or do you write a check for $4,000?
As with every market, the worm has turned again. Buyers, happy for the great service I give, are in abundance. Actually, why don't you write a check as a buyer's broker fee IN ADDITION to the fee offered by the listing agent, as incentive for me to push the available properties to you, instead of the clients I fairly and honestly work with. (I would never do this, but you get my point.)
I'm all for change, and innovation in this business. I have done flat fee models. The more things change, the more they stay the same. Good service never gets old. How's that internet searching going?
Good Luck to you FB. Thanks everyone else for great input.
You want it . Do it the old fashioned way earn it
You donâ€™t take a hike!
Realtors stay in business for two reasons. Reputation and repeat Business.
The ones that fail are for the same two reasons.
Innovation is not about the fee but how to earn it.
Self value is important but what you are worth to someone else is something else.
My mother has a saying there is a lid for every pot . Find yours.
The proof of your worth to others starts with the effort you put in and the value it serves them.
Agents come and go and so do brokerage houses. A brokerage is only as good as their agents.
There is nothing wrong with the old guard as long as they can learn new tricks.
One of the most difficult tricks to learn is to survive but well. There is no right or wrong recipe for earning a living but there are sure a lot of people that can teach you how to earn more than less.
There are those that know so much if only they had a chance to prove it and put it in practice. Just wait around Mack it will come to you soon . It is easy to pass up food when you are full. You are full but not with food.
Those that we feed and pay so that they can eat so they can watch while we work, can afford your business model .
Why work? That would be too much to ask. I know many listing agents that fit that bill.
I think buyers have come to recognize that too. Perhaps they should do more to get more.
Get with the times Mr McCoy buyers are setting the trend . You stand by your business model and it will be time for you to change professions.
You can believe what you want, but I stand by my earlier statement. To reword it, hungry people are often less selective as to what they will eat. As a sustainable business model, the business only works with the current commission structure in busy times, and less will not create more.
Again. Congratulations on your success. Do not be surprised if this doesn't "catch on."
Thank you for the objective and professional response.
I would like to answer your question regarding what did I â€œpay the broker to do?â€
I paid my broker to provide two valuable commodities.
The first of these was the counsel and oversight of a very experienced RE pro I both â€œhave a clue,â€ and more importantly, an appreciation for all the items that Linda highlights in her recent post. While I may be well informed and generally capable, I recognize that I donâ€™t have the insight gained through decades of experience. The broker I partnered with was ready to provide this and quick to offer me a second opinion where appropriate. Having spent a good portion of my professional life working overseas I highly value the contributions of those I have teamed with who bring recent â€œlocal knowledge and experienceâ€ to a transaction.
The second, and just as important, commodity that I paid for was access - access to a portion of the selling broker commission that could only be available to me through the participation of a willing broker. The win-win here is that no buyer can access that portion of the funds disbursed at closing without a participating broker - and - no broker can access those funds without a participating buyer. The sword cuts both ways. Just as those RE pros who rejected my offer got nothing from my transaction, I could get none of the SBC without a willing partner broker. I didnâ€™t disparage my broker for keeping a portion of the SBC, quite the contrary I was thankful for the portion that was distributed to me. Was there more money available that I could have gotten? Yes of course, but I chose to focus on I what gained compared to those buyers who are content to get nothing. I recognize and value the time and investment my broker made in establishing and maintaining the brokerage through which I received a rebate. My broker and I agree that I paid an appropriate amount to the access the benefits of that brokerage.
I believe I have emphasized from the beginning of my posts that despite concerns or disbelief of some in this thread, my entire transaction was transparent, documented on the HUD-1 and disclosed/discussed in advance with my lender. The points you make regarding LTV considerations in your most recent and previous posts are dead on. Our entire transaction was structured to ensure that broker and seller participation was in meticulous compliance with the lenderâ€™s LTV requirements. In fact we came within a few hundred dollars of those limits. Those are nothing to be timid about, just a consideration to understand and observe. The full details of the arrangement between my broker and me where documented in a contract which was filed with my lender and incorporated into the preparation of the HUD-1. There were no legal, regulatory or policy objections raised by any party to the transaction or any reviewing counsel.
I am confident that all the parties to this particular transaction feel they were treated fairly, with respect and were justly compensated for their part in this business arrangement. Yes - it was a win-win-win-win for those that matter â€“ the buyer, seller and two brokerages that participated in this transaction.
Congratulations on the closing of your transaction. I am glad you were able to satisfactorily meet all your needs.
Your explanation has raised a great many questions that other agents have responded to. I would just like to simply say that I agree with you, this is a win/win industry. Of course, those who determine whether win/win has been achieved are the principals who are involved the transaction.
Of course, I have no knowledge of the specifics of your transaction but it you found the house, toured the house without an agent, wrote the offer, negotiated the offer, wrote the counter-offers, etc. I wonder what exactly you paid the broker to do? It almost sounds like you overpaid for their services.
I would also like to point out that most people in our industry are trying to insure that the real estate transactions are conducted by observing legal, ethical, and fair business practices. Sometimes a perceived win/win could be acheived through nefarious methods which would not be advantageous to any one involved.
The real estate industry is highly regulated at the state, federal, and sometimes local level. Some of those regulations which may or may not seem rational to the average consumer (or the seasoned professional, for that matter) must be observed whether one agrees with them or not. For instance, regulations guiding what a non-licensed assistant can or can not do are statutory in most states. It doesn't matter whether we agree with them or not, they must be observed or suffer severe penalties. I think the speed limits on the local highways are too low, but I ignore them at my peril.
Also, lending institutions have their own underwriting rules that will effect whether they will approve a loan or not. For instance, a substantial rebate by an agent to a buyer could have a major effect on the loan-to-value ratio which would paint an entirely different underwriting picture for that particular loan. To offer such rebates without disclosure on the HUD-1, the transaction balance sheet, is mortgage fraud.
Many would debate such ideas as whether real estate commissions should be based on a percentage of purchase price or who is responsible to pay the buyer agent fee. I would submit to you that since you funded the transaction, it was your money that paid everyone.
Many real estate brokerages have developed a la carte business models where the consumer pays for the services they use. I personally have no problem with that model. Your example illustrates that broker fees are completely negotiable between the consumer and their service provider. We have no set commission fee that we demand from the public for our services.
It just needs to be stated that sometimes, perhaps not in your case, the reluctance to negotiate the terms by a brokerage hinges on things that may not be so obvious to the consumer. A win/win can only exist when everyone agrees it was a win/win.
Again, congratulations. I hope you have a happy life in your new home!
Keller Williams Real Estate
Office: (610) 363-4300
Mobile: (484) 948-0936
Thank you also for supplying a personal example of an agent sharing commission proceeds with an unlicensed assistant. My observation of this, apparently common, practice was during my fatherâ€™s career as an agent, a property manager, a broker and eventually a partner in an RE Development firm. The practice is also common in other regulated professions. I have personally worked as either an unlicensed assistant or supervising professional in four regulated professions. Hence my question was principally rhetorical as I have observed or participated in this common practice. I have also observed that RE pros employ this practice to a large extent, especially in the past when business was vigorous. Of course the defining attributes of the relationship I describe are â€œlegal and transparentâ€ so complying with the legal restrictions on an assistantâ€™s activities and recognizing the ultimate accountability of the supervising professional for that work are given.
I offered that example to provide an analogue to partnering with a buyer, not to open a new thread. I apologize for diverting from the theme.
My point, more plainly stated, is that RE pros have commonly shared commission proceeds via completely legal processes with those who work to facilitate their successful transactions. That practice is generally accepted without an upwelling of emotion in the community. Why canâ€™t the community-at- large accept that, where allowed by law and regulation, buyers can be viewed business partners. I partnered with a broker/agent who takes that view and worked with me to structure a legal, lender- approved win/win deal that left us both thoroughly satisfied.
I believe that those RE Pros who accept the perspective of the enlightened broker/agent I partnered with stand to grow their business much more prolifically than those who support the perspective expressed by Gerald in the second highest rated post of this thread: â€œYou have some nerve thinking you are moving in on commissions! You can go Future off!â€
I just donâ€™t think that is a â€good lookâ€ for the community nor do I think it will ultimately be as profitable as keeping an open mind to those legal, but perhaps not customary, business practices that can make the difference between deal/no-deal in a tight market.
Your scenario is different from FB's in that you identified the property in advance and pre-negotiated your terms. I have nothing against FB from trying and there are obviously agents willing to take them up on it.
Regarding your last statement,
"Why shouldnâ€™t a broker be able to compensate anyone who facilitates a deal, from which they profit, as long that compensation is legal and transparent?"
State laws vary across the country, but in most cases commissions can only be paid to licensed personnel. An agent may have an "unlicensed assistant", a position my wife had with another agent before we got into the business, and her capacity to interact with clients was extremely limited. Anything resembling real estate advice was forbidden.
There are lots of opinions as a forum like this can testify, but an opinion from a licensed person carries with it the weight of expertise as determined by the state. You may have a better piece of advice for someone than a licensed person, but the state cannot sanction you for giving your opinion unless they pursue you for practicing real estate without a license.
Regarding the rebate legality, paying a principle of a transaction is not as strictly controlled as paying a non-licensed third party.
Regarding the calculation of compensation at an hourly rate in â€œmost casesâ€, I will note that this forum isnâ€™t trying to address â€œmost cases.â€ FBâ€™s query refers to one limited case and my completed transaction is one very limited case. The point of both FBâ€™s post and of my post is that, in a market there is always room for more than one transaction model - thatâ€™s one of the attributes that makes it a "market." The essential attribute of my specific transaction was that my broker/agent wasnâ€™t expected nor obligated to do any of these things: â€œtime on the phone negotiating, the time for home inspection, time for appraisal, time to show your friends, time to show the relaitives, time to measure for the new curtains, time in between working on the mortgage, time putting out the many fires the underwriter sets on your mortgage.â€ In fact , during the negotiation phase my broker/agent was on vacation, checking email once or twice a day. An able assistant and I handled the details. I secured my own financing, arranged for two inspections of the home/installed equipment, and worked directly with the settlement agent that I selected for all the details of the closing. My broker/agent and I met in person only at the initial home inspection, the final walkthrough and the closing. I did get all that I paid and asked for while my broker/agent claimed it was the least stressful commission of a career.
Tim, I am â€¦almost, the buyer you are looking for. You will note that for the very limited service of the single transaction I desired to pursue, I was willing to contract for â€“ not wire in advance â€“ a set hourly rate IF we didnâ€™t close and a percentage if we did. I would have certainly considered other arrangements similar to your proffer such as a non-refundable portion of a fixed retainer paid in advance and the remainder at closing. I would also consider paying a non-refundable portion of a fixed retainer in advance with hourly compensation for services rendered if closing falls through, and so on. You make my point exactly â€“ there is no reason why the â€œcustomary compensation modelâ€ has to or should apply in every case.
SuZ, you also make my point. Some see a â€œwinâ€ in the type of deal being discussed here and others wonâ€™t even consider it and see a â€œno deal.â€ Thatâ€™s the diversity of perspective, valuation and risk assessment that makes a market a market.
Emotions aside, my recent experience was that the four parties to my transaction all walked away from closing satisfied. A traditional broker collected a full commission on a home that was listed at price point with very few buyers in this market, the seller was happy to make the sale at a reasonable price, my broker was very happy to collect a full 1.5% of the sale price and I was very happy with both the service and rebate I received. We closed a deal to the legal and emotional satisfaction of all who were actually involved. Can someone objectively point out the downside in this specific case?
I also have to ask: â€œif my broker/agent paid an unlicensed associate a large cash bonus for doing extra legwork on this transaction, instead of to making a rebate to me, would you still find this transaction objectionable ?â€ Why shouldnâ€™t a broker be able to compensate anyone who facilitates a deal, from which they profit, as long that compensation is legal and transparent ?
I agree wholeheartedly with Tim. He's right. The work associated with real estate is enormous. My additional point is the real estate agents in your community work very hard to facilitate a market. Their very presence helps facilitate an orderly market, which saves the consumer money. If there wasn't someone always working on networking as well as buying and selling real estate, the market would be in a very sad state. And, as Tim notes, there is a lot of education that comes into play. You only have to read these Q&As to appreciate the vast knowledge involved. Many successful agents also bring additional skills and knowledge to the picture and that knowledge can help immensely.
I charge the standard commission. To charge less is just not sound business for the service I provide.
Thanks for your question, Future Buyer. I sincerely appreciate the business you will be doing. I hope you will consider a full-service Realtor in your area.
of Longmont, CO
The next thing is there is no doubt some agent will take your offer, however In this world you usually get what you pay for. As a buyer though, you can not dictate what the seller is paying the listing agent.
As far as breaking down a transaction into an hourly rate it is near impossible in most cases, yes you count teh time showing, but also need to include the time driving, the time on the phone negotiating, the time for home inspection, time for appraisal, time to show your friends, time to show the relaitives, time to measure for the new curtains, time in between working on the mortgage, time putting out the many fires the underwriter sets on your mortgage, time reviewing closing docd and the closing. Then the stress and mental anguish in between all of it... If an agent takes the time to track hours, they will get out of the real estate business real fast.
After reading all the replies to your quiry it would appear that you have opened many different sub-solutions, making this a very interestng read. But, feel the answers many have gone off track. Aside from the legal issues (which I would clear with my broker), and I may be wrong but here is my short version of what you are looking for. You want a "buyers Agent" to do all of the work with a promise by you of $4000 as a flat fee, paid to my brokerage, but at closing you want the "buyers Agent" to give it back to you at closing.........So, where in this seniero does the Buyers Agent actually go home with a paycheck. I would walk away from this seniero as I feel that it is totally desrespectful of the Real Estate license that I worked so hard to get.
I am a Florida licensed Real Estate professional.
Good Luck to you.
The old school brokers don't like it so look for a RE/MAX agent or another agent that keeps
the majority of the commission and pays a fee to be part of the office. I don't have access
to the MLS lockboxes in that area. Would you like me to refer you to a good agent?