It makes it a whole lot easier to lower the offer price or to ask for closing cost credits...there's a ton more going on than just writing your own contract for the 3% commission--that is the easy part!

In California, I don't think it's a bad idea for your attorney to preview your Realtors contracts. Obviously, you will incur attorney fees and some attorneys have a reputation of monkey wrenching deals.

LOI = Letter of intent. Pretty funny I am working on one right now for a commercial lease. Not very common for a residential transaction her in California, but would not be surprising if a buyer was going "commando" on the purchase.

LOL!!! Ted...

I didn't have the patience to write out what you just wrote... But you are right on!!!

Thumbs up from me...

Just to clarify an error below. Lenders are not allowing cash out at close of escrow. It would have to be a concession on the Seller's proceeds or a reduction of the sales price.

For all the people answering that are not in CALIFORNIA... Please butt out of this discussion. Real Estate transactions, escrow and closing are handled differently in this state. Attorney's are not used in a transaction here. All your input is creating confusion and issues that just don't apply here. A consumer purchasing in California needs to know how it is done here. How you people do it in Donkey Spank or where-ever you are from does not matter.

I am still trying to figure out why people on the east coast think they are going to pick up a California Buyer by answering questions on Trulia in California...... to me it just looks like a bunch of people with poor time management skills and lack of focus on their own trade areas....

Sorry for the rant but come on people lets get real

First, Kathleen, your time line is off. Please scroll further down in this thread, and you'll see that my first answer preceded yours. My second answer was meant to 1) help support Andy's, 2) to further expound on my previous one, and 3) to address some of the issues that you raised.

Second, I'll restate what I wrote the 2nd time another way using your example to help clear up a few misunderstandings.

Yes, Janet (or any other buyer)--without using an agent or attorney--can write a LOI that contains her offer, and present it directly to the listing agent or the seller for that matter. She can also give her LOI to her buyer's agent, and have her agent to present the offer to the seller or seller's agent. She also may tell her agent what she'd like to do, and have her agent to write up the offer (using the state approved P&S agreement or a LOI).

No, I didn't state anything about cutting anyone--or anyone's proceeds for that matter--out of the deal. In fact, I tried to hammer the point--several times--that the discount or cash-back has nothing to do with both the seller's and buyer's agents commissions.

The transaction you described is dual agency representation (in which case I believe that the agent involved deserves to receive the full commission [6%]) with a rebated commission. If she were to receive any cash back from the transaction, those proceeds by definition would not be a commission--because she's a principal in this deal. An agent/broker helps to facilitate a deal, and typically isn't also a principal in that deal. In most states (especially the ones in which I invest), facilitators have to be licensed. Keep in mind that it's possible for an agent/broker to also be a principal in the deal--in which case s/he may collect a commission and request a commission rebate. (The commission is the fee for facilitating the deal, and the commission rebate is the cash that the principal receives at closing.)

I hope this is clearer now.

Kathleen,

Actually, Andy is correct. Any buyer can request a broker's commission rebate (aka commission rebate) in his/her offer. Although this type of request isn't as common in residential real estate, it happens quite a bit in commercial circles. The request has nothing to do with the seller's broker/agent or his/her commission.

Please understand there's a big difference between a commission rebate and a rebated commission. You're speaking about the latter; whereas, Andy and I are speaking about the prior--something different. Just to hammer this point home--and hopefully to leave no stone unturned--a commission rebate also has nothing to do with co-broking, the buyer's broker/agent, or his/her commission too. Furthermore, a buyer could ask for a 10% or 20% commission rebate.

Nevertheless, most of the residential agents with whom I've worked haven't heard of commission rebates (and I've encountered a few that tried to fight me on it--until I after I explained what they are [and provided references]). At least 1 or 2 agents told me that I should have simply lowered my offer price or asked for cash back, and I took their advice: I lower my offer price (more often than not--at least on residential deals).

Janet,

As a buyer, you can legally ask the 3% as your rebate. You do not need to be licensed. If you are not either seller or buyer in a transaction, you should have a real estate license for obtaining this money as your commission or referral fee.

Typically, seller should not pay you this 3%. This amount is for the role that helps the seller and listing agent to find a buyer and use he/her professional experience to make the transaction smoothly.

I know some real estate companies do that. It is because they can not provide enough professional service to you. They do not know they still have full legal responsibility. Finally, you may get damaged and they may get a lawsuit.

Now, the problem is everyone wants to deal with them and nobody wants fight with them. Then the real estate business is getting worse and uglier. Misconducts and illegal behaviors keep coming out.

Andy

Quickly...

Only a couple agents touched on the fact that it's SERIOUSLY risky. If you go in it alone, you are really leaving yourself wide open to be taken advantage of. Think of it this way... Let's say you had to go to court to resolve an issue (completely unrelated to real estate). Would you go to court without a lawyer? Worse yet, would you go to court and use your opponents lawyer (dual agency)? Hopefully your answer was, "no"!

Then why would you NOT want someone representing you on the biggest purchase of your life?

Ryan

Hi Janet,

You may also ask the seller to contribute to your closing costs. It's not uncommon in this market to negotiate for the seller to cover half or possibly all of your closing costs. It just depends on the seller's situation and how motivated they are to sell. Beware thou of these companies who offer part of their commission for your business. Ask yourself why would a company advertise a willingness to give up a portion of their commission before you have even spoken with them in person. Remember you want an agent that can fight for you and negotiate the best deal for you and your family. How strong of a negotiator can they be when they cannot even negotiate their own worth. It's my experience that companies like this are simply desperate for business. How hard do you think they will work for you if they are simply desperate for a paycheck. Find a strong agent that will help find the home of your dreams at a great price and your agent will earn the full commission that they deserve! Best of luck.

Matt

1. Use an agent and work out a deal.

2. Some "cash back" deals, like builders will give you, are not strictly illegal, but can certainly cause tax troubles. Plus they skew the market (that is usually the purpose) to make it look as if the selling price was higher that the true cost.

There are legal ways to do what you're asking to do--even in CA. Yet, if all you're trying to do is save 3%, then why not use an agent and discount your eventual offer price (as determined by the CMA/BPO or appraisal) by another 3%?

Janet - I have a different take on this. The commission is a seperate contract for services. It is money that is given usually by the Seller to his Agent's broker. The Broker then shares a % of that with the Buyers Broker (Unless dual agency). As this amount is commission, when you check the state law you will see that only licensed real estate brokers/agents are allowed to collect a commission on the sale of real estate. So even if you do not use an agent, leaglly the Seller's Broker (who collects the entire amount of the commission) cannot give it to you.

Now, I have been party to some contracts where the agents may contribute to the buyers costs. But in my former office, they still reported the entire amount the agent would have received as income - so there were not to many transactions like this.

I guess in theory you could ask the Seller to put the 3% towards your costs and only pay the Sellers agent the rest, but I Sellers broker would have to agree as, once again, it is a seperate contract for services. And keep in mind that some lenders have limits of how much sellers can contribute to the costs.

Janet,

I wanted to add to Barry and Jeff. You can write your own contract all day long, however you cannot receive compensation in doing that. Jeff is unaware that in the State of California, attorneys practicing Real Estate need to be licensed, interesting issue. Real Estate agents/ brokers are not above or equal to attorneys, but the use of attorneys in Real Estate transactions are not as common in California as other states.

Janet,

I posted a video answer on my Youtube Channel. There are a bunch of issues with your question...too much to type. ;)

http://www.youtube.com/watch?v=nmdZA6xQSWk

Janet:

While Barrys answer may be correct in CA, that would not be the norm in almost all other states.

A real estate purchase contract may be written and entered by the principals in most states. No matter who writes it, I would have the family attorney review it. RE agents are not attorneys.

I understand your asking for the 3% cash back at closing. That would be helpful for many different reasons rather than off the loan balance.

Jeff

Hi Janet,

Buyers cannot write their own contracts if they are unlicensed. However, by utilizing the services of a shrewd agent, they can negotiate lower purchase prices, seller paid closing costs, down payment funds and a plethora of other seller paid credits. So, even if you could write your own contract, would you rather pay a higher price for the property and get 3% back, or possibly save $50-150K off the listed price. I can show you where several of my buyer's have purchased properties for huge discounts off the listed price. Have a nice weekend!

In order for you to legally be paid a real estate commission you must be licensed by the Ca. Dept. of Real Estate. A different way to accomplish the same goal would be to negotiate a lower price consistent with the amount of the commission which would have been paid. HOWEVER - pursuing this course of action is VERY RISKY! There are many GOOD REASONS sellers and buyers employ the services of an experienced licensed agent. They are well worth the fee, generally paid by the seller, and if you employ a Buyer's Agent he/she will know precisely how to protect your interests as the buyer. "Going it alone" is far too risky in my professional opinion.