I think Realtors are the only industry where we are asked to reduce the amount of how we make a living. I think it is unfair to assume that the commission was 6% in the first place. Often I find houses for my clients where the commission is as little as 1.5%. The selling agent is always subject to what the listing agent took the listing for in the first place then how much they want to split with them.
The other down fall that comes into play is buyers not researching and acknowledging the difference between a well educated agent that knows what their doing compared to any flight by night Realtor.
Finding the house is the beginning. Knowing contracts, timelines, inspections & investigations is a whole other animal.
Just like doctors & lawyers there is Realtors at there that excel at their profession and protect the buyer and their best interest.
Would you walk into a store and ask the clerk to pitch in for your groceries because you don't have enough and she is just standing there anyway?
As a full time educated professional Realtor that makes my living by providing the utmost service for clients I hate when people discard how good I am. With that being said I would always pitch in if I felt it right AND appreciated.
1) Negotiate, Chip.
2) Talk to several agents and make it clear that you want to renegotiate commission on the fly in an ongoing negotiation.
The conversation might go like this.
"When we get to negotiating, I'm going to stop raising money when I'm about to leave my comfort zone. I want you to start lowering your commission."
"I want you to make sure I win any bidding contest."
"And how do you propose I do that if you won't offer more money."
"Simple. You're going to make a lot of money on this deal. Let's use your commission."
"That's funny. Why don't we look for something that is within your means?"
"No, I'm serious."
"OK. How much do you want?"
"The last deal I looked at I needed 10K but the closest the agent would come is 3."
"Let's look around. Four is what I can work with comfortably."
"I'm already starting to regret this."
"4 and a half."
"Thanks for coming in."
"4 but I don't want to be held to that."
"The receptionist will validate your parking."
"Have a good day."
"2 and that's final. Well as final as things are with me."
It was my hope to have you see this a little more objectively. And, I hope humor is the way to do that.
If you engage the services of an agent, it is clear how the agent will be paid. You can negotiate a bigger rebate. But do that before signing on with the agent. Just note that the agent is running a business. The agent has a comfort zone, too. Negotiate and arrive at what is workable for both of you. If that agent isn't willing to rebate back more, then move on.
You might have more success with locating an agent who has the experience, knows what it is worth and has some flexibility. Even more important, they are a good communicator and a good negotiator. But even the best negotiator might not be able to steer you clear of disappointment.
Just one more thought, if this has already been done, please forgive me. A purchase price of $640,000 may generate a commission of 3% for the buyer's side which is $19,200 for the selling office. Of this amount the buyer's agent may receive a split of 50%. Some offices offer more but have other monthly expenses the agent may have to pay. Assuming a 50% split, this leaves $9600 for the agent.
Of the $9600 they will likely be paying their own self employment taxes, benefits, MLS Dues, NAR Dues, Auto Insurance, gas and a host of other expenses.
This agent offered you approximately 1/3 of what they hoped to take home before their expenses. You were requesting 84% to 104% of what they were hoping to take home. I offer this not to chastise or shame you, but to let you know that there are things the average buyer or seller may not be aware of when it comes to buying and selling homes. Based on my assumptions, this seems pretty generous.
Next time you find a house you really want, make an offer that reflects your desire to own in it regardless of what your agent may offer. You sound like you can afford it more than they can.
Particularly entertaining are all the responses asking if you would ask your doctor, lawyer or accountant to reduce their fees. First off, doctors, lawyers and accountants have to go to college for four to eight years before they can start their careers. You donâ€™t even need a high school diploma for a real estate license in California. You have to be 18 years old and take three classes. Seems the height of arrogance to compare yourselves with doctors. Iâ€™ve negotiated fees with lawyers and accountants many times. Theyâ€™re business people who realize you donâ€™t always get full pop pricing. If they find a project thatâ€™s easy to do they reduce their fees and still make money. They still do a good job and donâ€™t whine about it.
This is a public forum and to treat it as a place to back slap each other is short sighted. There arenâ€™t many agents in this thread Iâ€™d be interested in working with.
If you don't want to work with or pay an Agent (or any Professional for that matter), do not seek them out. No questions asked. It's either DIY or seek help, even if the help comes free. I have often brokered rentals (GOOD ONES that commanded nice fees, with a ton of negotiation required) for friends for no pay at all in order to pay it forward and prove that we aren't all out for a buck, so it's not really about money and "what we are worth", it's about the discussion and agreement of compensation and work expected from the beginning.
There is no use continuing to try and explain the ins-and-outs and the whats-and-whys of what is going on here with this guy. Either people are ranting, or I have even seen self-promotional posts saying "hire me, I'll split my commission with you!!!" - clearly not the point of the thread and a shameless plug.
Bottom line: if you hire an Agent or a Broker, then you have hired them. Discuss terms, expectations and budgets up front - do not overextend, and do not expect that your "living beyond your means" should come at a cost to someone working for you, either the bid for employment and work expected at this price is accepted or it's not. It is highly unfair during negotiations to suddenly demand re-negotiation unless both parties agree without being under duress. I have seen sellers at closing refuse to cut the Agents their checks, leading to law suits and complete messes.
If you think you hire a General Contractor and his staff to build a home for $800,000 and then in the middle you say, "You know what.....never mind, I only want to spend $400,000 - but seriously, I need you to finish the house...we had a deal here".....do you think you're going to have a complete house? No, in NY you'll end up with a Mechanic's Lien on the Property and a bunch of plywood and dirt, if you're lucky.
Respect work and respect professions, that is all any of us has asked. Just because you don't understand something, doesn't mean that you have the right to judge or regulate it - or state that it's not "real". You are entitled to opinion, yes, but you are also entitled to go it alone and leave the Agent alone to pursue viable work.
I've never seen $6 million in cash, but that doesn't mean there is no such thing as $6 million in cash. I've never extracted a molar but that doesn't mean that it can't be done. Just because you don't understand something or "believe in it", don't make that anyone else's problem - use the energy you use to discredit to educate yourself. I could probably yank my own tooth out with pliers, but the reality of it is, even though i "could" do it, I would go to a professional - 99% of us would. That is why there are educational institutes, licenses and accolades, and ultimately - professionals. We need help doing things we don't understand. Agents and Brokers are no different - we are here to help you make possibly one of the largest financial investments you will ever make - and make it as easy and painless for you, (not us...for sure).
I can only hope one day everyone stops thinking of us as hacks and starts to understand our real place in the world. I can't speak so much for other states, where "for sale" signs and "foreclosure" signs line the streets, but here in NYC, if you don't have a Broker, you are up the creek, no paddle - and everyone accepts that and is learning that we actually have value. For a select few, we are still just a joke, but the educated, well-off individual working 12 hour days simply doesn't have the time to do the work and the search and execute Leases and contracts. They value us with their biggest life choices, and are demanding, as they should be, but always infinitely grateful in the end once the emotional duress of the move has passed and they are home. It is truly hard to hear how poorly Agents and Brokers are talked to and treated elsewhere.
This is a little bit off subject, but I would add that I don't have any problem with anyone's business model. You want to give away 75% of your commission that's your choice, but you should present the level of your services accurately, and buyers need to understand that the idea that agents are interchangeable and all add the same value (or lack of it) is just plain wrong. And so is the idea that the hard part is finding the property - that is pure nonsense. While it usually takes more physical time to locate a property than close a transaction, the skill set comes in once the property is identified. A great agent/broker can save you a lot of money - sometimes hundreds of thousands of dollars as I pointed out earlier - and help avoid problem buildings. Discount brokers who offer lesser services do not do that.
Highly skilled people usually get paid for what they know, not what they do. While our industry certainly has its fair share of less than excellent providers, there are many ethical, highly skilled, expert negotiators who truly look out for their clients. If you have chosen a rep simply because they give you a few bucks back or they are a friend of a friend - don't complain, you deserve what you get.
Perfect example: In a partnership dissolution a few years back I started out with an atty who billed about $225 an hour. I soon learned that every time I asked him a question he had to research it. I then decided to hire a senior partner in a law firm who charged $535 per hour. The latter atty didn't have to research anything, so the same question that took the $225 guy an hour of research to answer took the more expensive guy 5 minutes. I needed to dissolve the partnership either way.
You're buying a house, you can hire the listing agent whose real responsibility is to the seller, some guy/girl you met at an open house, or you can do some research and interview agents/brokers till you find the right one. Pay them directly or not, you're hiring them. I continue to be shocked at the cavalier manner that buyers and sellers choose their reps when there is so much money on the line.
Perhaps in a market where houses are inexpensive having someone great is not as important because the risk of loss is not as high, but here in San Francisco where 1 BR apts can cost over $700K and there are seismic issues and old buildings, you're nuts if you hire someone who doesn't do more than essentially fill out the paperwork. And having someone who is known as highly skilled and a great negotiator can win you things on reputation alone sometimes. You think my ex-partner wasn't a little daunted by who I hired?
Bottom lines for me:
Great agents/brokers add huge value.
If you're the kind of person who thinks you can do online research and do better than those highly skilled people who are in the business every day so you can get a few thousand back in commission rebate, knock yourself out. Just don't complain to us later.
As Agents most of our work starts when the contract is accepted.
When you want discount pricing, you get discounted services.
"Most of you come off as whiners who are far more concerned with your own pay than the best interests of your clients."
Excuse me Mr. OC Shopper but I took the liberty to go back and re read every comment and couldn't find anyone who showed a lack of concern for their client. In fact, unless I'm missing something everyone expressed just how much time and effort they afforded their client and just how complicated and time consuming it was to service their them.
Additionally, your assumption that:
"You donâ€™t even need a high school diploma for a real estate license in California. You have to be 18 years old and take three classes."
is way off the mark. For your information it's really very difficult to find a RE professional, especially in today's economic climate, that doesn't have quite an extensive educational and/or experienced background.
You may want to log onto the profiles of the many RE professional you[ve offended and take a little closer look at some of their backgrounds before you embarrass yourself any further. I think you would be extremely surprised at how many college graduates i.e. CPA's, attorney's, MBA's, etc as well as all the additional certifications that practically every RE professional on this site has achieved during decades of earnest service in this industry.
Granted there are a lot of RE licensees in the business that shouldn't be. There's rotten apples in every barrel. But I'd be hard pressed to find many on Trulia. I've worked for some pretty shoddy attorneys in my day and have even been instrumental in taking a coupe down. There's quacks in the medical profession, sex perverts in our churches and universities and crooked politicians making millions on insider trading deals.
Let's not paint the real estate industry with such a broad brush. By the way OC shopper you never mentioned what pond you've been fishing in. It would be interesting to know just what it is you do that makes you so much holier than thou.
I have been and still am a very active expert witness in the construction industry for the past 20 years. I work with myriad attorneys nationwide. I have yet to see just one of them ever discount their fee. I personally take offense to your very broad based and ambiguous comment about a RE professionals qualifications inasmuch as I've been a successful general contractor, manufactured home contractor, manufactured home dealer, developer, investor, property manager and RE broker for almost 3 decades and have had years of college education along the way.
Lastly, I think if you took a few moments to scan through a few of the many questions that folks are seeking viable, credible and substantive answers for you would see that the cross section of the members on this forum go out of their way with facts, information, knowledge and above all experience that lead the unwary consumer down a positive path to resolving their RE issues whatever they may be.
You could be nicer, too - you could consider that we actually have difficulty finding a profession that is really analogous to ours. Maybe a real estate brokerage is like an auction house, although Christies will ding you for 15-25% as a seller AND tack a buyer's premium on top of that, all without having an agency relationship with you.
Or maybe a stock broker; "Hey, get me 1000 shares of Apple today; here's $450,000." Well, it's at $455. "Well, take it out of your commission. I only want to pay $450." I don't think so.
Perhaps an insurance agent, although I don't know enough about the industry to imagine a six-figure purchase or five-figure commission.
Even doctors, bless them, I love them. But you know what? They drive home at the end of the day past homeless shelters, they can't serve everybody whose paths they cross. And to see one? There's somebody at the front desk who wants to know, how are you going to pay, and if it's through insurance, let's see the co-pay.
It's not arrogance, and it isn't all about "being nice" - you're not a client until you become one, and you shouldn't become one if you don't agree with the compensation. And as far as "being nice," does any buyer or seller really want to be represented by an agent that can't even stand up for themselves?
Finally, be honest. Did you negotiate with your attorney and accountant before they went to work for you, or afterwards?
Thanks for giving me the opportunity to expand on this.
It seems a bit presumptuous of you, to me.
Of course I am biased, it is my livelihood. Sounds to me like you should have amended your price range instead of looking for a home that you could not afford. Do you really think that its reasonable to go ask a Mercedes car dealer to kick you back his fee, in order for you to buy his luxury vehicle? Maybe you should be looking at a Kia?
As Agents we should be informing you of just what we do to earn our money. If it were so easy, everyone would be doing it. It is a tough profession today, rewarding at times, but not always. Like if someone were to ask you for half of your wages...
Also the commission we earn is payable to the company, not the individual. Our company runs a business and would not allow such an action. After they receive the commission, they then split the income with the Agent. The Agent also has business expenses, salary, taxes, etc, before they make a red cent.
Just being realistic and honest.
From my perspective, the benefits of having a great agent/broker are not in locating properties, but kick in once a desirable property is identified. What happens from there is what separates the best from the rest, and here are just a few things great agents/brokers do:
Making sure all paperwork is accurate and reading between the lines of disclosures
Finding out as much as possible about property history and owner mindset to best position an offer
Negotiations often get very tricky, and this is where most deals are lost. Why would you disincentivize your representative?
Agents/brokers only get paid when deals close, and if they're good they work very hard for their money. I have been asked several times over the years to change my fee. I have only done it once, and that was because long-term tenants wanted to buy the house they'd been living in and both parties were happy with the price. Otherwise, my rates are my rates, and if you're not willing to pay our fee to get the best you're welcome to hire someone else.
Lance King/Owner-Managing Broker
Best of luck to you...
Lance, are you trying to turn this inot a bidding war? I'm afraid to up it above 1000 so I guess you win. LOL!
John, like Peggy you can opt out. Personally I think some of the answers are very interesting and informative. It's kinda nice to study human behavior. Plus I think Chip has opted out along time ago. In fact he has yet to acknowledge but one comment.
There are a number of scathing responses in here, and in the event that you read all of them, including this one, You must realize that the agent representing you is not paid by you. They are paid out of the seller's funds received at closing via the listing agreement with the listing agent. If you had no buyers agent representing you, then you would have absolutely NO shot at reducing commissions because you have nothing to do with how commissions are paid out.
Unfortunately many buyers feel they will get a "better" deal by not using an agent to buy. Trust me, that commission is going to someone, and the likelihood it will reduce the net purchase price of the property is low, unless you are dealing with the listing agent as Dual agency. In this case the agent cannot fully represent your interests in the property due to client confidentiality.
I would have to agree with other agents in that the house was bid higher than you were comfortable to offer, and nothing is wrong with that. Frankly, you should be grateful that the agent offered to reduce commissions in efforts to give you a better shot at getting this property, your certainly would not have faired better on your own.
I know no two homes are alike, but you must move on from this one and find the right home for you within your budgetary requirements.
Best of Luck,
If I jump in and give that incentive, can it not be misconstrued down that line that I talked my buyers into buying the house - which they may end up underwater in the future?
I wouldn't do it. Too risky.
The fact that your budget is 640k, you should try to stick with that and not over pay.
You still have a 10k in closing cost that you have to worry about.
I wold recommend you to stick with your price or find something cheaper.
It is unethical and unfair to request an agent to reduce their commission. We work hard for our commissions and charge the percentages we do for a reason. Just because you would like to purchase a home out of your budget, does not mean your agent should suffer. Be fair to the one you have employed pay the full commission or buy a house you truly can afford.
Selling Real Estate is just like any other business. If you do not make a profit you will soon be out of business.
What do if your job asked you to work for 1/2 your pay so the boss can save the money to buy a new car? If you chose to accept the offer to work for 1/2 pay what would that do to your budget?
My business model is my business model, and it is a part of why we have been so successful, no doubt. But I would NEVER give someone an additional rebate so they could buy more house and it's classless to ask one to do so. My point way back on this and remains: If you expect me to work for half, let me know up front. I'm guessing that this buyer would have a very difficult time hiring anyone if they took this approach.
Kudos to all the hard working agents here who took their valuable time to respond and hopefully dispel any misconceptions about the value of realtors and brokers as professionals. (Did I mention the fact that they're also human beings?)
Remember, if you can actually go out and find the home for yourself and then have to bring it to the attention of a realtor.....Seems like the anxiety of purchasing the home drove you to informing a realtor about the home. Try not to get caught up in the scheme of buying and selling a home. These things were done PROFESSIONALLY by indivduals in the past without a third party expert.
Do your homework on each home you want to look at and are interested in, then if you choose, contact the listing agent of the property you are wishing to inquire about. Don't be fooled by fancy pictures and words that are deceptive to begin with.
The real reason you didn't get the home is you were stretching to buy a home above what you were comfortable affording and another buyer wasn't and could afford more it's a simple as that.
Given that you only met one time how would your agent know what you're ideally looking for? The purpose of an initial meeting is to sit down with your agent, to talk about the process, how they work and for you to articulate what it is you're ideally looking for. I will rarely go out and show homes to anyone the first time we meet. Your agent has already given you several hours of their time and is prepared to give you as much additional time as it takes all without any guarantee of ever earning anything. Would you work like this?
Finally do you have any idea how much time they will spend showing homes and talking to people and will never earn a penny, as agents we accept this and realize it averages out. I have buyers I've been showing homes to for months, and they haven't bought yet. I have others who can look at 6 homes and buy 1. There's never any way of knowing.
I think you should thank your agent for their generous offer to help you and stick with them and have absolutely no expectation that they will ever offer to reduce their commission to help you buy a home. If they do you thank them for their generosity.
I have no problem with an agent who decides to throw in a portion of their commission to make a deal work. I do have a problem, however, with a buyer (or seller) who insists on a donation from the agent.
Any reduction in an agent's commission should be voluntary, not obligated. You asked for honest, and boy, you got a boat load of honest on this thread, didn't you? Personally, I don't feel there's any logical reason why I should subsidize the purchase of your home, by throwing in any of my well-earned commission. But if I decide to do so, I think it's highly disingenuous of you to question the amount I've offered, and feel that I should have offered more.
Your agent offered over $3,000 of her commission... which she didn't have to do... to help close the gap... and for some reason you feel entitled to triple that amount. This isn't about defending percentages, of just how much real estate agents should make... it's about integrity. Is your thinking fair... no, honestly, I don't believe it is.
Laura points out the grocery analogy, but in Chip's case - he had the money, he just didn't want to spend it.
There's a vibe that real estate agents give off that it's not about the money money money, it's not about the price tag - but, that's only true AFTER we've agreed upon the money.
None of us service-minded professionals want to be out there working with clients for months on end who aren't serious, which is why the smart ones of us set up an agreement with the client before hand. Sometimes it's written, but often it's just a handshake or verbal understanding - yes, I'll be your agent, and the seller will pay me, let's go shopping!
To my mind, that's the end of negotiating my commission. If Chip wanted $10,000 rebate, he could have mentioned that beforehand - "Agent, here's the deal. If we see something great this weekend, we want half of your commission." In that instance, the agent has the opportunity to respond honestly, yes or no. Which I think we all agree is the agent's right!
But to play this game of, "We really love the house, but we love your commission discount more . . ." I'm sorry, Chip, but I wouldn't have helped pay for your house, either. If you didn't love it enough to come up with the dough, I don't love the deal enough to cut my fee.
All the best,