Home Buying in Chicago>Question Details

juspichi, Home Buyer in Chicago, IL

I'm maybe making an offer on a short sale condo in Chicago. What's the approx buyer agent commission on a 120K offer? Usually 2.5%, but is

Asked by juspichi, Chicago, IL Wed Sep 7, 2011

there a min I saw the place listed on all large real estate sites that I frequent (zillow, trulia, redfin). I haven't signed a contract on anything yet and was just browsing the commission structure for buyer agents. Redfin says they take a min 6K, which would be a large % on the condo I'm thinking of making the offer on. If I go with the Redfin agent, do I end up paying the different of 2.5% of sale price and 6K? Should I choose another buyer agent?

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Answers

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I do not believe that you have to worry about the commission as it is what it is. That is between your Buyer's Agent and Redfin as they have that all in writing.

So no matter what the commission is, it is based off of the selling price but since it is a short sale, there may be a variance in the amount of commission due to adjustments that the investor/lender may require but that, again is not your worry.

If the agent is the listing agent, they will not receive the full commission from the banks for working both sides of the deal.

My biggest concern is what your Realtor is going to be paid for his/her time and expenses at it takes a lot to time to get these files approved. At the end of the day, I have heard agents receiving only $250 after a deal was done and that doesn't pay anything but the gas bill.

Respect your Realtor and talk to your Realtor. I have concerns when you are reaching out on the internet and not discussing this directly.

Buying real estate is a long term commitment (usually) and the a Good Realtor has alot of experience and time invested and it just isn't about selling homes. It's taking classes, continuing education, webinars, more classes, etc. I, myself, take roughly 4 hours a week in education (either webinars or classes). That's a lot of time but in order to keep up with things, we need to do this. Respect your Realtor and they will guide you.

Bottom is, the relationship is between the Realtor and Redfin when it comes to money.

Barb Van Stensel
Keller Williams Lincoln Square
2156 W. Montrose
Chicago, IL 60618
773.746.5395
1 vote Thank Flag Link Wed Sep 7, 2011
If you decide that you want to buy a property that is listed and you don't have an agent and represent yourself -- The listing agent, by default will either become what is called a “dual agent” and represent both the buy and sell side or they will "refer" it out to another agent for a referral fee – basically collecting both sides of the commission. Either way, there is virtually no benefit to you and the selling agent just gets more money.

Also, by Illinois law – Illinois is a “Buyer Agency” state and that means that an agent “representing” a Buyer legally has a list of responsibilities to that buyer – usually summarized by: Obedience, Loyalty, Disclosure, Confidentiality, Accountability and Reasonable Care. Depending on what states or countries that someone comes from, the laws related to Buyer agency can be very different. Basically, in Illinois, it’s almost crazy not to have an agent representing you on the buy side of a transaction – if for nothing else than to make sure all the paperwork is correct and that you are not overlooking anything – because it really doesn’t cost you anything.

But call around and talk to a couple of agents and find someone that will meet your needs and that you feel comfortable dealing with.

Good luck!

Tom Kelley
Dream Town Realty
Web Reference: http://tomkelleychicago.com
0 votes Thank Flag Link Thu Sep 8, 2011
I sense you want to save money more than anything and so your own research and do everything yourself so you are entitled to contact the listing agent and tell them you did everything and you do not need an agent and would like to make an offer on the property. You will not pay anybody anything. I am sure the agent will help you make the offer. I also assume you saw the property without an agent and you told the agent who listed the property you represent yourself and do not want an agent because if you did not you are asking the agent to represent you and the agent needs to be paid to do that
Web Reference: http://www.joeschiller.net
0 votes Thank Flag Link Thu Sep 8, 2011
It's always interesting to me how many agents don't know the law, the rules (MLS) and/or the Code of Ethics for Realtors. In Illinois -- First of all, from a selling perspective, by law, commissions between a seller and a seller's broker must be negotiated between those parties and must be written into the listing agreement also defining a period of time for which the agreement will be in effect and define a minimum amount of services that will be performed - typically, it does not state what the selling broker will offer as cooperating commission to a buyer's broker. Of course this was a question about Buyer's broker/agent commission. Likewise, a buyer and a buyer's agent may also negotiate the terms of their agreement. Many buyer's agents will represent the buyer for "free" - in other words, they will receive whatever cooperating commission was offered by the seller's agent. However, they can certainly negotiate terms for compensation. Many do negotiate and have their clients sign an Exclusive Buyer Agreement - whereby they agree to compensate their agent a $ amount, a specific or variable commission percentage or even to be paid at the listed co-operating commission or some combination or minimum amount. All of this is perfectly legal.

If you want quality representation in a transaction with a skilled agent giving it -- that is to say, you want an agent that is watching your back and not just their commission check -- it might be worth paying a little something extra for that -- or not!

But the point is, a Buyer's broker/agent can negotiate commissions with a buyer. Also, I am neither endorsing nor not recommending any specific broker/agent. As a buyer, you should do your own homework and talk to a number of buyer's broker/agents before you select one and make sure that they will be representing YOUR best interests.

Good luck!

Tom Kelley
Dream Town Realty
TKelley@Dreamtown.com
Web Reference: http://tomkelleychicago.com
0 votes Thank Flag Link Wed Sep 7, 2011
As others have said, the commission paid to a buyer's agent in Chicago is traditionally paid by the seller. If you are being asked to pay a commission, then get another buyer's agent. You shouldn't have to concern yourself with commission structures. But at the same time, if you are only using websites to search for short sales, then you really do need to find yourself a buyer's agent who specializes in this type of purchase. This is not an easy process. And a website like Trulia is often showing listings that are no longer available. Don't waste your time! Get a true buyer's agent (not one off a site like Redfin) and work with that agent to locate and put in an offer on a property. This is too big a purchase...and a difficult process...to go it alone.

Cindy Wilson
Koenig & Strey Real Living
cwilson@koenigstrey.com
0 votes Thank Flag Link Wed Sep 7, 2011
Hi Juspichi,

Usually a buyers agent services are free to you the buyer, regardless if it's a short sale or not. Agents must disclose, disclose, disclose....UP FRONT.

Once the MLS states what the coop agreement is to the coop brokerage it's a done deal. You shouldn't have to concern yourself with your buyers agent compensation, unless, your agent told you upfront what your options are in the instance they get short changed.

Hope this helps and good luck!
0 votes Thank Flag Link Wed Sep 7, 2011
Juspichi,

I always tell my clients that they should work with a buyer's agent. I am, however, unfamiliar with Redfin agents and their own in-house rules. I do know, however, some agents who will have their clients sign something called a Buyer/Broker agreement, which means that under some circumstances, the BUYER COULD PAY for their services.

On the one hand, I believe that buyer's agents earn every penny in their commission, and you'd have to have rocks in your head not to use one. On the other, I've had it happen where my client had to make up the difference out of their own pocket.

I would take the advice of the realtors below, who tell you to interview several agents and ask the question as to whether or not you'd need to pay anything to the buyer's agent.

MOST (but not all) will tell you "No."

Happy House Hunting (call me if you need a loan)

Matt Bukovy
Senior Mortgage Consultant
Wintrust mortgage
773-938-8214
Web Reference: http://www.mattbukovy.com
0 votes Thank Flag Link Wed Sep 7, 2011
Most Realtors who are buyer's agents don't charge the buyer. I don't know any who do. Sellers pay commissions and the rate by law is determined by each individual seller. And the buyer has no say in it whatsoever. I have heard of some rebates given and that is attractive to buyers, but - that may be the kind of service you will get - discounted. Depends.

And always make sure the people are licensed agents and ask if they have any ownership in the property. You need to be sure you have your own agent and your own representation.

You can verify by going on the website http://www.idfpr.com and looking up licensing. I would definately ask more questions before you sign anything and make sure you understand everything. And consider getting an attorney to protect your interests.

And definately understand all about short sales. The bank is in control and it is true - anything goes. Keep your options open and keep looking - just in case.
0 votes Thank Flag Link Wed Sep 7, 2011
The commission is always paid for by the seller. As a buyer, you get to use an agents services for free. An example. A seller lists their house for 5%. This 5% is to be distributed 2.5% to the buying agent, and 2.5% to the sellers agent. If there is no buyers agent, the commission is most likely still 5%, so the selling agent would just get double the commission.

Use any agent you think is fit for you. Not all discount brokers are good, and sometimes the buck you save, you lose in the negotiation room. Regardless, use who you feel is knowledgable and who suits your needs. Interview two or three agents, and go with the one you mesh best with. I would be happy to help.

Matt Laricy
Americorp Real Estate
Managing Broker/Partner, e-PRO
mlaricy@americorpre.com
708-250-2696
Web Reference: http://AmericorpRe.com
0 votes Thank Flag Link Wed Sep 7, 2011
I'm confident you have reviewed the short sale process already, but just so we are on the same page let me point out a few aspects relevant to you your question.
1. Seller pays all compensation at what ever the seller and listing agent negotiated
2. The agent representing you will be paid by the seller
3. Although the seller is the one who negotiated the compensation with the listing agent, it is the 3rd party approvals that actually determine the compensation.(bank/investor/management/insurance)

Since short sales is the wild wild west of real estate, rules are just an illusion. The banks and other parties will try to do anything because, for the most part, they can get away with it.

4. The 3rd party approvals can impose the compensation they want. What if they decide the agents should split a total 2% compensation? Each agent effectively receives 1%. It is unknown what the 3rd parties will do but we do know what they can do.

Doing the math you will discover the compensation is woefully inadequate to cover your real estate agents expenses and time after spiting the compensation, as required, with their broker.

What is the real estate agent to do? They had an agreement in place when your offer was submitted, but that agreement was changed by an outside party. What if the bank said split 1%? You see the delima.

Knowing the work involved in a short sale, such work I am sure you are aware of, how should this situation be resolved? As you have read, many companies anticipate this situation and pass the compensation fee to the buyer. As you also observed, when doing so, the % of compensation becomes very distorted.

How do you suggest this be resolved?
Web Reference: http://www.MyDunedin.com
0 votes Thank Flag Link Wed Sep 7, 2011
Hello Juspichi,

I am a Broker Realtor in the Chicagoland area and I specialize in first time home buyers. I do not collect any commision from the buyer. It is all paid by the seller. You as the buyer will not pay me a dime for my work to help you find the right property.

You should know that if you did see the property with another agent you may be bound to work with that agent on said property. Feel free to call me or drop me an email to discuss your situation.

John Zloza
708-935-4997
jzloza@chemail.com
0 votes Thank Flag Link Wed Sep 7, 2011
I would recommend against using a Redfin agent. Find a buyer's agent that is familiar with the part of the city you are interested in. As mentioned below, the seller pays the commission to your agent. If you are intent on purchasing a short sale, your agent will earn every penny of their commission. It is best to get someone that will be available for the entire process. Depending on which part of the city you are looking in, I can recommend a good buyer's agent for you. Just email or call me.

Bradley Eggers
Senior Loan Originator
Midwest Equity Mortgage
847-744-0168
bradley.eggers@ardain.com
0 votes Thank Flag Link Wed Sep 7, 2011
Hi,

You may be misunderstanding how the commission is being paid. Just ask the agent, are you being charged a commission. If there are costs to be paid by the buyer you may and may not be able to negotiate the cost down. Even if you decide on another agent to represent you this still may not change the amount the agent is being paid. Regardless of the costs, ask yourself is this a value to you. Regardless of who buys the condo there are commissions, costs, fees already established. Some are to be paid by the seller and some by the buyer. Do your numbers and ask yourself is this a good deal for you. Do not focus on what the agent is being paid?

Regards,
Terry
0 votes Thank Flag Link Wed Sep 7, 2011
Review my web site to see the Buyer Rebate I give. Redfin does not give much, if anything on a price point less than 300K. Ask them. The problem you might have is if you already saw the house with an agent. A new agent who just writes the offer, but did not show you the property might have a problem collecting a commission at all.
0 votes Thank Flag Link Wed Sep 7, 2011
Hello Juspichi,
Commissions are negotiable and usually paid by the seller to the buyer's agent firm. You shouldn't have to make up any difference as you should negotiate the commission due with your agent if the seller's firm is offering less than what your agent's company is requesting.

Did you sign an agreement with your agent regarding what your responsibility is towards the commission fee? If so, check what it says and discuss it with your agent.

Good luck!

Laura Feghali
Prudential Connecticut Realty
0 votes Thank Flag Link Wed Sep 7, 2011
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