Chip, Other/Just Looking in Los Angeles County, CA

In this situation, by how much should an agent reduce their commission so I can win the house for $640,000 price range?

Asked by Chip, Los Angeles County, CA Wed Jan 25, 2012

We had met last Saturday for the first time & had about 6 properties we were going to. We didn't like one of the neighborhoods so we took out 3 of the homes & ended up just seeing 2. We REALLY liked the 2nd one & wanted to put in an offer right away.

Our budget was up to $640K, but we really liked the house, we have well over 30% to put down & so we squeezed it to offer $655K. I brought the home to the attention of this agent without her first telling me about it, I feel that she hasn't done much work at all so far. We learned there were multiple offers & in an effort to beat out the other buyers our agent offered to reduce her commission by $3100 if we raised our offer by $2500, to make it work. We learned that we were still beat out by one of the other buyers. We feel our agent should have offered to reduce her commission by at least $8100-$10000 total, since it would be an easy quick sale. Is our thinking fair? Please be honest!

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Answers

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Aimee Anderson’s answer
No, you thinking is not fair. Honestly, you should be ashamed of yourself! First off, you were looking in the wrong price range and of course you fell in love with a home that you could not afford. Then you asked the agent to basically make up the difference so you could get the home. Do you work? How would you like it if someone comes into your office and asks you for part of your paycheck because they preceive your job as easy?! Second, the easiest part of our job is selling our clients a homes, the hardest part and where we earn our money, is getting the home closed. That process is long and complicated. We do a lot of behind the scenes work that you are unaware of to keep the process as stress free, on you, as possible. So, note to self, only look at what you can afford and don't ask for donations from realtors because you preceive our job as esay.
8 votes Thank Flag Link Mon Feb 6, 2012
BEST ANSWER
Hi Chip,
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.
Web Reference: http://www.laura4homes.com
4 votes Thank Flag Link Wed Jan 25, 2012
That's not true. Car salesmen and contractors also are asked to take hits to their pay. It's due to the nature of the barter system.

really tired of all these agents coming back with "doctors" and "lawyers" etc those are strawmen arguments. Doctors and lawyers only charge a couple hundred dollars, not a 20,000 dollars for their services, and yes I think the doctor, lawyer, pc technician, auto technician, and realtor are doing equivalent amount of work with the realtor on the bottom end of that scale (about an hour each on average, with the realtor doing the least of all) and yet the realtors are the ones complaining when sellers are like "wow, you couldnt sell my house for anything CLOSE to what you promised, why am I paying you full commission for shoddy work?" Of course we are going to question your ethics and ponder why we needed you at all. Maybe the system is out of whack, maybe the realtors should get bonuses for selling for more than list price?
Flag Sun Jul 14, 2013
Two things.

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.

Chip:
"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."

Agent:
"How's that?"

Chip:
"I want you to make sure I win any bidding contest."

Agent:
"And how do you propose I do that if you won't offer more money."

Chip:
"Simple. You're going to make a lot of money on this deal. Let's use your commission."

Agent:
"That's funny. Why don't we look for something that is within your means?"

Chip:
"No, I'm serious."

Agent:
"OK. How much do you want?"

Chip:
"The last deal I looked at I needed 10K but the closest the agent would come is 3."

Agent:
"4."

Chip:
"8."

Agent:
"Let's look around. Four is what I can work with comfortably."

Chip:
"5."

Agent:
"I'm already starting to regret this."

Chip:
"4 and a half."

Agent:
"Thanks for coming in."

Chip:
"4 but I don't want to be held to that."

Agent:
"The receptionist will validate your parking."

Chip:
"OK. 3."

Agent:
"Have a good day."

Chip:
"2 and that's final. Well as final as things are with me."

Agent:
"Security!"

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.
7 votes Thank Flag Link Mon Feb 20, 2012
Chip,
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.
6 votes Thank Flag Link Tue Feb 14, 2012
As a non real estate person who reads these blogs I find this whole topic very interesting. Most of you come off as whiners who are far more concerned with your own pay than the best interests of your clients. Granted, Chip’s request might be unreasonable and it sounds like most of the agents here couldn’t afford his proposal even if they were willing. However, it seems you could have been nicer in your responses. A lot of these responses come off as insulting and arrogant to an outsider.

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 don’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. I’ve negotiated fees with lawyers and accountants many times. They’re business people who realize you don’t always get full pop pricing. If they find a project that’s easy to do they reduce their fees and still make money. They still do a good job and don’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 aren’t many agents in this thread I’d be interested in working with.
6 votes Thank Flag Link Tue Jan 31, 2012
Frankly I never cut my commission. You don't ask a doctor or a lawyer for a discount so why ask a realtor for one? If someone asks me to cut my commission the answer is no - pure and simple. As said elsewhere if you were going to expect the agent to kick in her commission up front she chould have said no and you could have moved on.
6 votes Thank Flag Link Mon Jan 30, 2012
I say let's go for 1000. You can never hear," don't ask me to reduce my commission," enough times.
5 votes Thank Flag Link Wed Feb 22, 2012
It sounds like you were lucky enough to land a very giving and business-minded agent who wanted the deal to work without severely lessening his or her value as a real estate professional. He/she went out of his/her way to help you by reducing a commission that is customary in your area (or so I gather from your question). The fact that you were beat out by other buyers seems to be the reason you think less of his or her value, not the effort put into trying to make your offer win. The "amount" of work done by your agent had yet to begin in the very early stages of viewing properties and making offers. The majority of the work comes soon after the negotiations, between the acceptance and closing. In my humble opinion, your thinking is unfair and your agent not only deserves an apology, but a pat on the back for trying to do you a huge favor. The fact that the favor wasn't "big" enough to make the deal happen isn't the fault of the Realtor.
5 votes Thank Flag Link Wed Feb 15, 2012
Do I understand correctly that you are asking your realtor to reduce her income, so that she is not be able to afford to pay her bills, feed her children, put a roof over her head because you want to buy a house you can't afford?
5 votes Thank Flag Link Fri Feb 10, 2012
I think the real bottom line here is:

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.
5 votes Thank Flag Link Sat Feb 4, 2012
If I were the listing agent on this property, your scenario would have been a red flag in my book. In a multiple offer situation I advise sellers to not only consider the best and highest offer, but also look at the financial soundness of each. If a buyer needs their agent to ammend the commission, or rebate part of the commission, where allowed, back to the buyer, clearly a buyer can not afford that much house. $3100 is "chump change" when talking about a number upwards of $600K. Could it be that your agent did not show you that home becasue she knew it was stretching your budget or likely to enter into a multiple offer sceanrio ? To assume that you lost out because of her unwillingness to further reduce her commission is erroenous. You need to have a great deal more appreciation for the fact that she was willing to do so initially. How much do you know about these other offers and the contingencies written into those contract ? I am sure that there were extenuating circumstances aside from a sales price. Who is paying the commission anyway ? If it is the seller, it will make no differenct to him. You also have to understand that when we receive commissions we typcially have split with our Brokers / companies. Ffrom there deduct the costs of doing business, insurance , professional feeds , advertising , et al and you will realize that the numbers get whittled down pretty quickly. Evaluate your agent based on her overall success and committment , not on how much she is willing to reduce her commission !!
5 votes Thank Flag Link Sat Feb 4, 2012
The agent offered to reduce their commission in an effort to help the deal go through - which is going above and beyond - to ask for more seems to show that you didn't appreciate the magnitude of that gesture. You may be feeling like General Custer at the Little Big Horn at the end of the day.
5 votes Thank Flag Link Tue Jan 31, 2012
She was being very nice reducing her commission to try to get the deal. In this market a standard sale or a bank owned property will get multiple offers if the property is nice. That is just the way things are going right now. If you were offering more the 5% off of the list price that is most likely why you didn't get the deal. If it was a bank sale then reducing the commission wouldn't have mattered to them. For an agent to reduce commission by $10,000 would be insane. There are brokerage fees to pay off that commission and if the total commission was 2.5% at your offered price the agent would end up with about $5,000 if they are on a 80/20 split with their broker. There is also self employment taxes that would come out of 15%. Honestly ask yourself if it would be ok the next time your boss goes to pay you if they ask to take 75% of your paycheck!
5 votes Thank Flag Link Wed Jan 25, 2012
I think you were UNFAIR expecting this agent to give up her commission all together. Do you think that being a realator is easy? And it sounds to me like you are being UNREALISTIC in your idea that and agent give it up for you. lol I think you need a reality check. Did you even think the the could have possibly been against you to begin with ? YOU can't blame the agent because you didn't get the home ...
4 votes Thank Flag Link Sun Feb 26, 2012
Firstly, I am going to be very honest, your agent was very kind to offer to reduce their commission, obviously they were trying to make you a satisfied client, however I do want to say that in all honesty-I wouldn't have lowered my commission. A real estate agent's commission has nothing to do with your offer, I personally work an average of 60 to many times 80 hours per week and just because you happened to mention the property, I can assure you the entire process of escrow to getting the property closed is not something that is easily done as so many variables can come up. The commission your real estate agent earns is because of the knowledge and education they have, and frankly I think you take this for granted, it sounds like you had a good agent, one recommendation is next time look in the price range you qualify and respect the agent you are working with, otherwise find one that you do.
4 votes Thank Flag Link Wed Feb 22, 2012
Fortunately we have not had that happen, but that would irk me, too.

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.
4 votes Thank Flag Link Sun Feb 12, 2012
You are incorrect to think you lost the house because of your Agent. You lost the house because you could not afford to compete. When I come up against a multiple offer situation I counsel my clients that the house could go for over the asking price.
As Agents most of our work starts when the contract is accepted.
When you want discount pricing, you get discounted services.
4 votes Thank Flag Link Wed Feb 8, 2012
I am a Professional,I am a Realtor....I make money.......by helping people.Do I stop making money? Or stop helping people?
Web Reference: http://EastTnHomeSearch.com
4 votes Thank Flag Link Tue Feb 7, 2012
Most of the work your agent would have done would come after your contract offer was accepted. The agent not only finds and shows you the property, but they are heavily involved in making sure any and all contigencies in the contract are satisfied, deadline dates in the contract are met, and coordinaiton of any inspections you may want. They are also heavily involved in making sure the closing is scheduled and happens as scheduled. So, the agent in most if not all cases will earn their commission, and cutting commissions will often lead to cuts in service to you. All top agents do not typically cut their commissions, and they are justified in feeling that they are worth what they are making on any given deal. If you end up buying a house and later find out you bought a lemon you would have been happy to have had a good agent who earned their commission.
4 votes Thank Flag Link Sat Feb 4, 2012
Mr. OC Shopper. Your insinuation that the commenters on this thread are whiners is laughable and ridiculous at best. Why, in an extremely depressed RE market, should a RE professional have to get slapped around on a $640,000 home for a few thousand dollars? In the over all scheme of things I think that very trite and small minded quite frankly. I'm more than happy to pay a person in full for the effort they put forth in any field of endeavor they participate in as long as they're offering up an honest and earned contribution on their end.

"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 don’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.
4 votes Thank Flag Link Tue Jan 31, 2012
Sure, we could have been, but - we weren't. So sue us.

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.

Best regards,
4 votes Thank Flag Link Tue Jan 31, 2012
In New York (where I am licensed and practice), unless you have hired a Broker to represent you exclusively (which is extremely rare here), it is considered common practice that the Seller generally pays the commission as an incentive to lure brokers into advertising - to get a quick sale at top asking. This thwarts this situation of "who pays whom" from ever even being an issue. There is really no reason to pay a broker to find you a home that is for sale here in New York, especially if you are working with a broker showing you units where the seller is paying a commission - though I will say, no matter what the case may be, if you hire a broker, you hire a broker. If you want to find an apt or home, whether it be to rent or buy, and you don't want to pay a dime - do the legwork yourself. No Broker or Agent goes into anyone else's office in a different profession and says, ex: "I want to have my cavities filled, but I don't feel like paying you for your services, how hard could it really be??" Think about the work involved and respect the profession the way you would want yours respected before judging any actions or making statements like "they didn't even do much work". If the work was so easy, perhaps you should have done it yourself? Personally, I am tired of hearing, "I don't want to pay any fees, but please line up 15 appointments and waste a whole day on me". If you call a professional to provide a service, and you receive said service, you owe compensation. Otherwise, pick up a phone, make some calls, and do it yourself. See how easy it is then when you aren't braced with paperwork, and you have no connections or insider relationships like a Broker does. Also, in your case, why should the Broker make less money to get you a home, when you don't even respect her position? Clearly she negotiated and did dealings for you on your behalf. Just because you didn't have the funds or capacity to outbid, why should she be left footing the bill to make your dreams a reality while she may be struggling to feed family? Brokers and Agents are humans. Trained, licensed and in a real profession. Once the world understands we are all not just "key turners" in cheap suits, things might be a better place. If you spoke to the agent in the way that you have voiced your opinion here, I can see why she wasn't thrilled to continue fighting for you. You wanted her to fight harder and harder to get you what you wanted, it seems - while taking away more and more of what she was earning for fighting on your behalf.
4 votes Thank Flag Link Tue Jan 31, 2012
It is always a good read when these questions come up... I also like the fact that Chip lists himself as "Other/Just Looking", not "Home Buyer"...
4 votes Thank Flag Link Tue Jan 31, 2012
Chip, I can appreciate you thinking that it is okay to ask an Agent to reduce their commission, at your request. But...I am not sure what you do for a living, would you willingly give up half of your pay if someone asked?
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.
4 votes Thank Flag Link Mon Jan 30, 2012
Mack, I couldn't agree more. You expect me to cut my fee in half, I expect to hear about that before we ever look at anything. If you can't afford the property look at something less expensive.
4 votes Thank Flag Link Mon Jan 30, 2012
Your agent has done far more than most would. You asked her for a pay cut when the real work in protecting your money and your investment has just begun. I think that a number of the agents below hit upon it very well. In essence, you get what you pay for! If you want a good Realtor to do an outstanding job in protecting you and your money, a pay cut should not even be in the discussion. However, if you want an agent to shuffle a few papers...without your best interest's at heart...who wont care when other affiliates in the transaction choose to gouge you, then proceed with that cut in pay.
4 votes Thank Flag Link Wed Jan 25, 2012
Chip,

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.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
4 votes Thank Flag Link Wed Jan 25, 2012
No, your thinking is not fair. Actually offering to reduce her commission at all to make your offer more competitive was a generous offer. Although you feel your agent hasn't "done much work at all," the process has just begun. Even if you had gotten your offer accepted, she would still have much work ahead to help you successfully navigate the transaction and close escrow on this home. And since your offer wasn't accepted, she'll be continuing to show you homes. Your reasoning that perhaps she deserved less commission because you'd brought the home to the attention of the agent doesn't make sense. It sounds like the reason she didn't bring it to your attention was because it was a little beyond your budget. Unfortunately, her effort to bring it into your budget by cutting her paycheck wasn't successful. But cutting her paycheck even more shouldn't be the answer. Ask yourself if you would consider cutting your own paycheck for the financial benefit of your employer. Would you consider that to be fair? My guess is the answer would be "No."
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4 votes Thank Flag Link Wed Jan 25, 2012
That's asking a lot. Representing a buyer is a lot more than helping you write an offer. We take on a liability when representing buyers and a lot of work is done throughout the escrow process. I think your agent was being generous by reducing their commission to help with your offer already. We split our commission with our broker, have fees and costs of doing business, and our tax rate is also extremely high. This agent would end up working almost for free to reduce by $10000.

Best of luck to you...
4 votes Thank Flag Link Wed Jan 25, 2012
I my self would never lower my comission even if it cost me the deal . I work hard 7 days a week and have huge expensies as compared to other businesses , like insurance agents for instance . Our dues, fees, gas, office expense , closing gifts , insurance , and it goes on and on makes our profit margin relatively small and they typical consumer sees us driving nice cars , and dressing professional i feel gets the impression thet we have a huge profit margin and in reality that is just not the case and a the contract stage your agents job has really only just begun . I mean really you can go onto Realtor.com and se the same information we do and pick out the house and you guys pretty much had an idea of what you were comfortable with spending , and most clients get an idea of if the property is priced right just by looking at the nearby homes. My question would have beenn Do you want to pass on your dream home for 8500.00 at today's interest rates thats about 35.00 or less more a month and the downpayment would increase at the most 1700.00? So getting the home of your dreams is not worth 1,700.00 out of pocket ? and if the cash was that tight I would probably suggest you speak to your lender about premiuim pricing the loan to remove the origination fee, or refer you to Bank of America for one of their special programs that eliminates your house payment for three months while you get settled...If you want it I can make it happen and fit within your budget
3 votes Thank Flag Link Sun Feb 26, 2012
Real Estate Agents are professionals, just like Doctors, Lawyers, or Architects. An agent does alot more work than most clients realize and it is unfair to ask them to reduce their fee just as you would not ask your Doctor to reduce his.
3 votes Thank Flag Link Fri Feb 24, 2012
Peggy, you have the option to opt out of this question. Why should the rest of us have to? LOL! This is starting to get fun. Gotta add a little humor into the day.

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.
3 votes Thank Flag Link Thu Feb 23, 2012
Chip,

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,

Steve
3 votes Thank Flag Link Wed Feb 22, 2012
At 640,000 I understand the agent the buying side is getting paid 2.5% which amounts $16,000. Lets assume the agent is gettinga 60% share of the fee with the broker keeping 40%..Net to agent is now $9600.....From that $9600 the agent will pay at least 14% for their self employment tax of about 1350 before state and federal income taxes...........Net to agent about $8000, about 1.2 % of the transaction. .......Then the agent figures their other business expenses and time on this transcation. .......Now the buyer and agent may consider the value of the agents experience, and the agent may consider the time and talent needed to professionally represent this buyer.
3 votes Thank Flag Link Tue Feb 21, 2012
I feel strongly that cutting my agreed upon commission to "make a deal go through" is in effect, a liability issue.
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.
3 votes Thank Flag Link Mon Feb 20, 2012
The agent is not compensated by you directly. I am not sure how he can offer to rduce his commission.
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.
3 votes Thank Flag Link Mon Feb 20, 2012
Chip,

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.
3 votes Thank Flag Link Fri Feb 17, 2012
Hey Dan in Baton Rouge, good luck finding an agent who will lift a finger for you. Glad all buyers don't have your attitude. I wonder if anybody has every tried to cut your pay by 99% and how you felt about it?
3 votes Thank Flag Link Tue Feb 14, 2012
Actually, Dan, the buyer absolutely cannot change the amount of commission paid by the seller to the co-broker. The buyer is not a party to the listing agreement and has no right in the matter whatsoever.
3 votes Thank Flag Link Mon Feb 13, 2012
From time to time we luck up and put a deal together with little effort. Then there are many times we spend days and days showing people homes and they never buy anything. Also we spend thousands of dollars advertising. Our web sites that let you search listings for free are not free to us.
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?
3 votes Thank Flag Link Sun Feb 12, 2012
I think it's amusing that the discounters have chimed in about how this thread is helping their business model. The fact is that our business policy is to rebate 20% of our commission to all clients, every time, no more, no less, but rebates are not the issue. The issue is that the buyer asked the agent after the fact to cut his fee significantly so he could get more house than he could afford.

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.
3 votes Thank Flag Link Sat Feb 11, 2012
The bottom line...if you personally went to work and contributed your expertise and talents to your employer, only to be told after much effort that you weren't getting paid - or that your employer wanted to "split" your pay with you - then you would understand what it's like to be your buyer's agent. Try to take the agent's perspective, not just your own. You don't work for free, and she shouldn't have to either.

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?)
3 votes Thank Flag Link Sun Feb 5, 2012
Your thinking is fair! Why? it's your thoughts not anyone else's. Using a realtor is only an option of the homebuying process. They present themselves as experts in a business that is common to all humans who want to live in a home. You are choosing to seek their advice and opinion on a decision for your family. Only you and your spouse can decide if something is fair and just.
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.
3 votes Thank Flag Link Sat Feb 4, 2012
Your agent was under no obligation to reduce their commission at all, and has nothing to do with your not getting the house, You didn't get the house because you didn't bid enough plain and simple. Your agent was gracious enough to try and help you. The fact that you only looked at two homes and found one you wanted to make an offer on is more luck than anything else. Is your agent worth more because they show you more properties. Will you pay them more after they show you more homes? How about offering to pay her up front by the hour regardless if whether you ever buy a home?

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.
3 votes Thank Flag Link Sat Feb 4, 2012
So if you expect her to reduce her commission, then are you also expecting her to reduce the amount of work she does for you, too?
3 votes Thank Flag Link Fri Feb 3, 2012
It is always easier to look back on this situation and critisize the agent because the offer was not accepted. I have been in Real Estate for 27years. No agent likes to cut commissions. I learned a long time ago from a very good broker that if you as an agent become too involved in the money making of the deal it very rarely if at all ever benefits the agent long term. What if the agent in this case did cut their commission by the 10,000 and you still didn't get the bid accepted. That buyer would then expect that similar committment or more on the next negotiation. Every negotiation is unique to each deal you do. Yes, there may be some similar tactics used in negotiations but with different seller's come different situations unique to that deal. Emotionally the agent should aways separate themselves from that buying emotion expressed by the buyer. I would also point out that every time i have been asked to cut commissions i ask the buyer or seller i am representing what part of my skills don;t you want? If they are an accountant, or lawyer, or airline pilot, ask them when they go into work tommorrow if it is alright for them to work for less that day because it would make it easier for the company they work for to make a living. There is no steadfast rule. Each agent must decide how they choose to conduct their own business.
3 votes Thank Flag Link Wed Feb 1, 2012
Wow... what a great topic, and that's quite a bit of participation.

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.
3 votes Thank Flag Link Wed Feb 1, 2012
Alan May, Real Estate Pro in 60201
MVP'08
Contact
I think Chip just set us all up to get a good rant out of us.
3 votes Thank Flag Link Mon Jan 30, 2012
Well Chip, my question to you is.. what type of business are you in? Would you reduce your pay, or in this case your commission to make a sale? Would you work for free? That's exactly what you are asking her to do. Your agent went beyond her obligations to assist you in getting the home. After all, you're the one purchasing the property not her. We all do our best to help our customers, but how good of a negotiator would she be if she didn't know when to say no? She made an attemp to help you, what did you do to help youself?
3 votes Thank Flag Link Mon Jan 30, 2012
So, we can continue!

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,
3 votes Thank Flag Link Mon Jan 30, 2012
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