"at the same time 6% commission has not be standard any more, mostly its 5% and some are even 4%."
Incorrect. In actuality given the time it takes to sell a home in todayâ€™s market, advertising and marketing costs... 6% is actually the standard and 7% is quite common for those motivated sellers wanting that want to get their homes sold. In the current market I have not seen a 4% listing in a long, long time.
Although it is not the case in my business, there are many agents that will place the 7% listing on the top of the "letâ€™s see this house" pile.
â€œI don't see a difference between you and our NJ state workers who refuse to contribute for their own benefits " Big difference. Not even a close comparison.
But let me know what happens when your boss comes to you and says.. look, my big company is taking a hit this year. No, itâ€™s not your fault.. It is the market, but, I am NOT going to take this loss on my own... So I need you give me $3000 to cover the next shipment of sprockets" Yeah, I know I said I would pay you $50,000 but, The sprockets went up in price.. I will make less and so will you... yeah, I know you work hard.. We all do. O.k... I am taking out of your next check.
Oh, sorry.. not willing to renegotiate your current pay scale?
Private, you are entitled to your opinions but a lot of your comparisons are just plain absurd. To use your words, I would think it is unethical for a seller, buyer or attorney to think it is ethical to attempt to break an agreed upon signed and initialed contract to sell a home, a car, a boat or anything.
@Samone, I am sure that when the time comes you will do just fine!
Actually Foxtons went out of business IMHO because of their practices. They initially listed a home (they were listing agents only) as uncirculated listings...meaning it could only be shown to someone in their office/company. They wanted to sell "in house" because their commissions were only 3% (2% to foxtons and 1% to BA , or 3% in house if sold by Foxtons).
Then when they made it circulated, so any agent/office could show it...once you had a buyer with a legitimate contract, you could not reach the listing agent for days sometimes a week or two to get them to negotiate the contract.
I had that happen several times, and my buyers eventually withdrew their contracts. After that I never showed a Foxtons listing. To be honest, at 1%, when their agents did absolutely NO work, or minimal work, after a contract WAS signed, it was not worth MY time to do the work of two agents for a pittance.
Then, apparently Foxtons also realized that their agents weren't making enough money to sustain themselves, and they started having BA's as well. Thought they could take advantage of getting 2.5 or 3% on one of MY listings, while I would only get 1% if I sold one of their listings. So what happened? Almost every agency started to list their houses with a caveat that the commission would be "reciprocal".
My clients are aware of my value to them as a Realtor. Every listing I have has said the words.. John I HOPE you sell this yourself, you deserve it!
The scenario below you make it seem that the agents are the bad guys here as to why the deal fell apart.
The deal fell apart because of the market.. Not the agentâ€™s commission that they refused to reduce. There is a cost of doing business and whether you believe it or not, most agents for the time and money that they spend on advertising, marketing, jockeying people around, phone service, computer, office split and so much more that goes into the listing and of sale of a home.. Most agents are just above the â€“breakeven- point. When this scenario is posed to me.. Usually by the attorneys.. I tell them fine, as long as you Mr. Attorney's reduce your fee's and you Mr. Mortgage representative reduce your commission by the same and we have a deal..
After all of them stop barking, I say no. My position is worth what I was hired for and negotiated with the seller.. or agreed to accept from the seller on a home sale.
The fact that your home did not appraise changes nothing but the appraisal. Not the commission of any of the people involved.
I have been at closings where the buyers decided they do not like the refrigerator and thought it would work to hold up the seller at closing.. the attorneys look at me and say.. Well.. will you kick in for a new refrigerator? And I say sure.. If all four of us split.. Two attorneys and two realtors.. if that is good letâ€™s do it.
He gets it and does not care. He wants control over the commission the buyer agent makes. Or get part of their commission given back to him.
He found someone willing to do that. It is legal now to give a rebate.
Several websites are promoting it.
My suggestion is to thank your agent for her efforts so far rather than challenge her livelihood.
And if the home you are buying is in Warren, welcome to a great town!
By "doing the legwork", do you mean you looked online and chose the houses you wanted to see then the agent showed them to you? To be honest that's just fine, but if that's what you did, you wasted your time because your agent had all the active houses at his/her fingertips through the MLS system.
To be honest, any agent can show you homes, that's the easy part of selling a home.
Negotiating the best sales price for/with you is just one of the things a good BA does. AFTER the contract is signed is when the agents do the MOST work. SOOOO many things can happen along the way that can ruin a transaction, and often times, behind the scenes, it's the agents who get the transaction back on track. There are too many things to mention that can go wrong but believe me, we work HARD for our paycheck once the contract is signed.
Sellers pay commission from their net proceeds, and the percent is negotiated at listing between the seller and agent. so if the total commission on a $650 K purchase is 6% ($39,000) the seller would net $611,000 before paying of any existing mortgages etc.
Let your BA do the work for you, you are NOT paying the commission. The house will sell for fair market value, the seller pays commission on that sales price. It's not coming out of your pocket.
FYI, the 3% you mention does NOT go all to the BA. Depending on their commission split, more than likely they BA will only get 1.5%. Remember the commission is paid to the broker (AGENCY), then the broker pays the BA. Also many agencies charge a "desk fee" or take a percentage off the top ot that 1.5% for "agent maintenance".
@Don....terrific answer BTW !!!
Here's what you do.
Find a buyer's agent. Interview several, and select the one you wish to use. For the paperwork--and I'm not a lawyer so this isn't legal advice--identify the specific property you wish to buy. Make sure the paperwork says that the buyer's agent will be paid only from the commission paid by the seller.
Then make an offer.
You won't hand a penny to the buyer's agent.
Hope that helps.
Pay a fair fee and hire the best agent you can find - then listen to her, price smartly out of the gate, expose your property to the max, most especially online, and start packing!
And as an agent that lives and works in the Warren market, can I just take a moment to say how very sad it is to see the devastation from the snow storm. Still no power for many in Warren and so many beautiful trees are down ;-(
Unwavering Commitment to Service, Unsurpassed Results
In my last transaction, of all the homes (listings) that we have looked, there was literally 1 listing that had 6% and 95% or above had 5% commission. I have seen some listings with Bonus for BA's (in addition to 5%), if they close within certain time but not single 7%. You are a Broker and I am surprised that you are saying 6% is standard in this market. May be your listings but not all. I hope you are correct, else you have just discredited yourself with your colleagues.
"Although it is not the case in my business, there are many agents that will place the 7% listing on the top of the "letâ€™s see this house" pile. "
This is very true and this is exactly what I have problem with. In this scenario agent is not acting in the best interest of their clients. I see them as no difference than vultures. I even wonder, should that fall under your fiduciary duties, may be not. There are several agents who would push a property over another just because they are getting 0.5% more for themselves. How Pathetic and how this set of professional could expect respect back?.
"But let me know what happens........................"
Wake up my friend, this is exactly what's going on in the whole world and I am victim of the same too.7 out of 10 people have taken a hit (both pay wise or in the revenue wise). I personally forego a business oppurtunity, as my gross margin was less than 2%, guess what I learnt later that I lost the client to my competitor and all future business is gone along with their potential referrals. If I was smart enough I should have kept my client and atleast made by volume. Learn from my mistakes. I realized and I am adapted to the current environment...
I quote (some where I read)
10 years ago, we had "Steve Jobs, Johnny Cash and Bob Hope", but today we have "no jobs, no cash and no hope". Wake up.
You don't have to break a signed contract as long as the same terms are maintained, if the terms (like sale price due to appraisal) change there is nothing wrong in changing your compensation. if I am in your shoes, I would and I have in my line of work. Its called ADAPTABILITY, COURTEOUS to your client.
The seller was not only greedy but foolish for not accepting the appraised value. Everyone lost out. Why not ask everyone to contibute? Why just the agents?
FWbangs, I have even once thought that RE commission is way too high for the agents, however I have been convinced that for a right agent, they are worth every single penny (probably more too). Its all how your offer is presented to the sellers agent and how agents market you to the seller. Please keep in mind, real estate transaction is more of emotional rather than logical or sensible. I even read once from an experienced investor that stock investing is emotional too (though 99% think they are following the technicals). Just think about listing agent telling the seller, hey here is the offer but I think buyer is PITA, do you think seller even talk to you. How often we have gone out of our way to help some one at work, just because we like them and how often we have not done our job, just because we don't like someone. Same thing applies to the relationship between selling agent and buyers agent. I also believe in a transaction, buyer agent does more work than a selling agent especially after an offer is extended.
If I am in your shoes and if I think I don't need a representation I would talk directly to the listing agent that, they could act as a dual agent, as along as they reduce their commision from 6% to 4%. Its a win win situation, however I think you need a good agent on your side to represent you. Its like having a good attorney or a good doctor, though you know how to represent you or treat you.
If agent doesn't need to worry about her compensation, I am sure she / he will represent you with best intentions for you. I even had an agent once, who sent me a FSBO listing without worrying about her compensation (I indeed voluntarily offered 2.5% , irrespective of seller was offering or not). If you take all the time that they invest in you (with no assurance of if you ever buy or not) from start to finish (I am sure you will not see your first property and extend an offer), its easily more than 6 months sometimes even a year, in that case they were underpaid at 2.5%. In my view, again only few agents fall under that category. If I come across an agent who would put my priority over his/her compensation, I shall make sure they never have to worry about their compensation ever with my referrals and proper compensation for their service rendered.......
It is very interesting that you feel you got "hate mail". It was help mail. You asked and so we answered.
You have a very interesting perception.
Would you like to directly pay for Buyer representation? You can and have always had that option. Then the seller would not have to pay out anything from their proceeds to the buyer side. It would be disclosed in the contract.
You assume we don't know that their are web sites promoting "give back" of commission but you are wrong. It's been going on for a long time. Everyone has their hands out trying to take agent's commission not just clients.
We are self employed. No health insurance or benefits of any kind. We can not get any compensation directly. It goes first to the Realty. What is left for the agent must cover taxes, licensing, MLS, training, advertising...
I agree with you that our industry gave away the store but the agents did not have a say in that. The long term fallout is... You see no value in what we do: our education/training or expertise. You see that all the Listings/ information needed is on the internet.
I wonder how you would feel if you were asked to give up half your paycheck to one of your clients who felt they did some of the legwork? The answer is?
It's called the "Me" generation for a reason.
Welcome to Warren!
Hungry - we are all hungry - but some of us are better at what we do than others.
Glad to hear you've found an agent that you are comfortable with - good luck to you.
I don't think you realize how this works. The buyer doesn't "hand 3% to BA", the seller does via the seller's broker. The seller agreed with the Seller's broker how much the commissions are going to be and how they are going to be split between Seller's and Buyer's brokers. It's written in the listing contract and cannot be changed. The only option the Buyer has is to hire BA and be represented or not to hire BA and let Seller's agent to pocket entire commissions.
Let me know
I have seen great listing from Rich @ http://www.century21ah.com/ with low commission and Full commission as well, yet great service.
I agree with BA's not showing when the commission is low, that's the reason we need to find the right realtor who would put their clients priority over their's. I am willing to comp the realtor with that kind of attitude . May be buyers should be more aware of this. I am sure, this thread will get bashed or agents will stop responding. Nothing personal agents, but you have to adapt. I see more and more FLAT FEE listing and FSBO than ever before.
Again that model is there to stay and realtors are adapting to it http://www.c21carter.com/.
@John If I was buying and selling a home today, you will be the last person I will be doing business with
All I am saying is, Seller was willing to pay 6% as long as he was willing to net X. When that equation changes, I don't think there is nothing wrong in realtor taking a point hit. Should the realtors adapted to the market condition, they would have still walked with 2% at the end, they did lose whole 3% and lost the client as well.
I agree everyone has their own overheads including seller and buyer, however if market forces everyone to take a hit, then realtors are not immune to it either. If you are going to stick to the fact that, no matter what happens I need my 6% then I don't see a difference between you and our NJ state workers who refuse to contribute for their own benefits (guess what you and me are paying through our property taxes). If the system is unsustainable, then its unsustainable. This is a capitalistic country, when we repead benefits when the market has been good then we should be willing to take a hit when market takes a hit too.
I have high regard for relators and my own purchase happened due to a realtor, however it does not mean realtors are immune to the market condition. Or may be realtors should come up with tiered rate structure 6% at full market price, 5% at market price - 5% and 4% at market price - 10%. I don't think taking 6% @ market price - 15% or let the deal die is ethical. If you do, then You as a realtor are not serving the priority of either your buyer or seller, I understand its painful so it is for seller and buyer. Only people that are currently immune are appraisers and UWR's even for doing a bad job. Just my 2 cents
Appraisers and UWRS should be held accountable for their mistakes like RE agent and Loan producers are. We need a new system like NMLS, where we can report a specific appraiser or UWR to be investigated. They both have tremendous discretionary power and many of them are abusing it. Too much power in their hands. They have such an influence in the market indirectly. As long as UWR's / appraisers are not controlled, real estate industry will never flourish. I have seen an appraisal of 380 and 320 on the same property with same exact comps within 3 months apart. Go figure......If properties are losing values at this rate, then US (ofcourse china too with 1.5 trillion us debts) would have been bankrupt long time ago (well we have FED to print money to artificially keep us afloat , which is a whole different story:-))
In my case, UWR would accept the money order and Cashiers check from my tenant as RENT, however if my tenants paid through their own company then UWR would like to see that they have been employed by their company and that they had been paid regularly so that they can afford the rent. What a bull. I am not making it up, its my own experience. My take is, I have a lease and I have a payment, end of story., its UWR's none of their business to investigate my tenant's employment. Why do they care, who pays.
I had to challenge the UWR to their VP and ofcourse I had to use the word discrimination / Dept of Banking to get their attention. But Yet VP begged me to submit the copy of the paystub which I would have collected at the time of renting to prove the same. I was told, its not worth fighting. Yet, I cave in just because I wanted to close. How Pathetic.......
Next Title agency, I never understood their business why am I paying thousands to them even with refi with the same title agency. In old days, they need to physically go to county office and search ledgers to look for lien etc......Now everything is computerized, push of a button from their office and they walk away with thousands at closing. An ordinary collection agent is able to find all assets and liabilities at a fraction of the cost. There is suppose to be 1 titel insurance policy per borrower per property, there should not be any need to buy new policy as long as its with the same agency. This is ridiculous........
I believe, most of the hard work in any real estate transaction is done by RE agent and Loan consultant, however these 2 people are underpaid in my point of view. All people who potentially screw up the transaction are yet paid, irrespective of its outcome. Best business to be in Appraisers, UWR's and Title agency.......If anyone is mad at the RE industry, then these 3 are the culprits. My 2 cents........
Agents, As someone said I would not LIKE to cut my compensation voluntarily however if that what market dictates I have left with no choice. I will adapt, if I have to survive. As FWBANGS mentioned, your industry shouldn't follow the travel agents industry just because travel agent doesn't want to adapt and be competitive with the technological advance. Same applies here as well (Please keep in mind i am not undercutting your profession but stating the fact), all listing that are available to you are available to us as well, all resources (tax, neighborhood, crime rate, school system, etc) are available to us as well. However when I pay an agent, I am paying for their experience, professional advice and their NEGOTIATING SKILLS, nothing less.
A first hand information, I believe in this below scenario agent was greedy and not adapted to the market condition.
Friend of mine extended an offer on a since SFM for 725K with 6% commission. Offer was accepted, however appraisal came quite low. Seller was willing to walk away with no money as along as they don't have to pay out of their pocket to mortgage. Buyer pony up extra cash, there was a difference and it was proposed to both agents to reduce 1% from each of their share, so that they could just close. Both of them refused, contract fell through. after the contract period (3 Months) was over, seller listed as FSBO, same buyer went ahead and bought the same property and they split 6% between them which they were suppose to be paying agents (each saved additional 2%). In this scenario, agents not only lost their commission but also lost all potential business opportunity from their friends and family. TRUST ME, you leave 1 client with a sour note, you are literally losing 20 potential clients over a period of time.
By the way, I always thought, foxton was a good model,what happened to it?
A buyer agent should not cost you anything, a few charge extra money but not all. If you are expereinced in buying you can work directly with the listing agent. if you are not comfortable then you may need a buyer agent.
good luck with your purchase
Again I own 2 homes and this is not my first purchase so I know what I am talking about and on the same note nobody gets paid tell the buyer makes the payment so whether you agree or not it's eventually coming out of buyer's pocket.
Finally, I am not against anybody livelihood but on the same note I cannot hand out free money. Your industry has undergone a technology transaformation and you either adopt or phase out (any priveleged information you had or knew is already out there). Look at travel agents ................................
Your BA would be paid by the seller who already negotiated a commission with
his agent. If you do not have a BA getting half the commission, the seller's agt
will get all the commission - and you won't have an agent working for you.
Get your own agent and don't think about the commission, which will never
touch your hands, nor make any difference to the negotiations.
You seem inexperienced and should have an Agent representing your best interests,
It is not just the writing or signing of the contract that commission is paid for. The true work comes after the contract is submitted. Nagotiating, getting the offer accepted: price. terms and conditions must be agreed to.
Then comes inspection. Negotiating issues.
The agent is there to answer all your questions and help guide you through the entire process till the end to ensure you get the results you are satisfied with.
I tell all my clients that whatever I know, they will know. The Agent's vast experience and knowledge gives the buyer an advantage in the nagotiation process.
Also the agent will give you comps to ensure you don't over pay. Research the assessed taxes, zoning, easements on the property.
If you had an agent working for you, you would have known the commission is paid by the seller, not you.
Agent's don't get paid till the deal closes. If you back out of a deal, for whatever reason, you still owe your Attorney money in most cases.
My clients know I am there for them even after they have moved in. I am their resource for life. They call for Advice on remodeling, fighting to reduce their taxes, references for plumbing, electricians, flooring, daycare for their children...I just got called from a client who asked about catering and DJ for their House Warming party.
I see it as a life long relationship. I go to their weddings, funerals and celebrate each child that is born.
The word Client means they care about you!
I read the previous answers so I will not repeat the process of how the seller pays the commission to both the listing broker and the selling broker. If the house you are buying is listed with a real estate agent, someone will have to assist you with your offer. If you don't have your own agent then it'll be the listing agent who will then become a disclosed dual agent representing both you and the seller. The listing agent will then get the entire commission (listing and selling side) so either way the selling commission will be paid by seller so there's no reason for you not to have your own agent representing you.
What is the reason you think you are responsible for paying the 3%?