As you noted and other expert professionals have confirmed, ALL professional fees are negiatiable and the seller CAN dictate the compensate provided..
Many sellers get cranked when a portion of the compensation they agreed to provide the buyer's agent is handed to the buyer. If you are a buyer, working with a rebater, you may be hurting your position.
Buyers are trying to purchase the best house possible for the money they have available. When the FSBO discussion takes place and they realize their OUT OF POCKET expenses will increase by MULTIPLE -THOUSANDS of dollars, they typically say....'Don't show me any houses where the seller is not fully compensating the buyers agent." This includes many homes submitted via flat fee and discount brokers.
Then there is the situation Marge Draper suggests. An non-vetted seller can become a serious issue as the process gets closer to the closing table. I've encountered FSBO's attempting to sell before the estranged spouse found out about it. The live-in was presented as and assumed to be authorized to sell. A HIGHER fee is merited. Much higher.
commissions are negotiable, and the seller with his Broker's assistance sets the compensation offered to the buyer's Broker. It is recommended the compensation be competitive with that being offered in the same market area
$$$ BUYER CASH REBATE 50%-60% / SELLER DISCOUNT 50% $$$
See "ACTIVE" listings for sale in real-time in Palo Alto
See "ACTIVE" listings for sale in real-time from San Francisco to San Jose
Flavio Tejada, Owner/Broker, Realtor, MBA-Finance
As a FSBO, the can opt to cooperate with buyer's agents/agencies or not, and they can decide what they choose to offer.... it could be anywhere from zero all the way up to... well, the sky's the limit.
Sellers are usually best advised to set their fees "in step" with the going market rates for your location.
1Â¢ Ignore what the builders pay agents because you can not even begin to compete with what the builders provide to the agents that bring them buyers. Builders have their own sales staff & the 'commission' they offer the procuring agent is really more of a referral fee because the builder's in house staff will do EVERYTHING from selling the property & upgrades, writing the contracts & all the disclosures, explaining everything to the buyer, scheduling & attending all the walk thru.s at different stages of construction, holding the buyers' hands when they get anxious, dealing with the lenders & appraiser's, etc. Not to mention your advertising budget probably wouldn't even cover what they spend on bottled waters for the potential buyers that are walking through the models.
2Â¢ You can rightly assume that some buyers will find your home on their own but 'A FSBO! & he's not paying a commission so we are going to offer him less because we want to save on the commission too! (which is why we are driving around neighborhoods searching for signs & checking out Craigslist)' is what most of those buyers are thinking. (It's the same concept for all those buyers that go to listing agents & say that they won't use another agent, so with the commission they are 'saving' the listing agent & the seller they want to get a better price- matter of fact, they are usually the same buyers).
If you are in an area where buyers are typically in brokerage agreements, they will have a contractual obligation to pay their buyer broker a commission if the co-brokerage is lower than the agreed-upon rate. Let's just say, for illustrative purposes, if the buyer has an agreement that the broker will get $40,000 in commission, and you're offering $25,000 - the buyer will be obliged to make up the difference.
It's also worth noting whether your property is the sort that buyers will be searching for. Starter homes, sure. Move-up buyers and investors, not always. Those "buyers" typically aren't engaged in the market on a regular basis, but are open to phone calls from agents. I strongly suspect that in these circumstances, an agent may not make that phone call if they feel the commission isn't enough. Remember, these agents aren't in brokerage agreements, they have no ethical or agency obligation to go through their Roladex when a new listing hits the market . . .
All the best,
The MLS requires that the listing agent provide some level of monetary compensation to the buyer's agent if they are going to put the home in the MLS for exposure. They don't put any rules on how much that has to be though. It can be whatever percent, a flat fee, a percent with a bonus promised in the remarks if the price is above X dollars or if the home is under contract by a certain date.
Of course, this goes the other way too. We once had an agent simply put the number "1" in the compensation to buyer's agent field. Usually it reads "3.0" for 3% or "2.5" for 2.5% or whatever. My partner saw the other agents name and knew that he agent had a reputation for being shady, so she called him up.
Guess what? The promised compensation was just ONE DOLLAR! But it was within the guidelines.
So the commission is not for a BUYER it is for the BROKER. Then the Broker will share with other side of transaction and those BROKERS will split with the agent.
When a Listing Agent meets with the Seller they will explain the market condition and how buyer agent's work. If a Buyer has a Buyer Broker agreement with their agent, that agreement may state the the agent will work with that buyer without any compensation until and once a home is identified, ratified and closed, then the agent is to be paid $x. If the Seller Broker (Seller) is not offering a fair compensation to the Buyer Broker then the Buyer will need to make up the difference to the agent. So then the Buyer will use that as a basis as to the value of the house to them.
As the other agents have said by law commissions are negotiable. They are set by the seller who can offer any amount he or she wants. Of course the buyer can look for a house themselves. Looking for a house is the easy part. It is getting an offer accepted that is the hard part. With over 90 % of homes in Silicon Valley getting multiple offers the competition is stiff. Buyers often do not know what is involved in getting an offer accepted, that is why they hire an agent to help them.
Ok, so what if you find a house yourself and you manage to get your offer accepted do you know how to usher a home through the escrow process with the disclosures, inspections, loans, closing etc. Do you know enough to protect your interests? While it is not rocket science it is a complicated process that has a lot of twists and turns.
So if trying to save a few to many thousand dollars in commission is really important to you then doing it on your own is possible. However, in this market of low inventory and major competition you will have a large handicap so be prepared for possibly many months of frustration and lost opportunities. If we have another round of appreciation after the first of the year which is typical in this area the time you lose trying to do it on your own may end up costing you money if it takes too long to be successful.
We realtors earn our money whether it is from a flat fee, 1.5% or 3%. From my perspective if I did not offer something of great value to my clients I would not be in this business.
Keller Williams Realty Palo Alto
Many real estate offices have their own minimum commission that their sales agents can accept. The managing broker may make exceptions to the office's minimum but may even have to justify the exception to his management. Whenever an agent participates in a sale they are accepting various financial risks for both themselves and the realty firm they work for.
Violation of the price fixing laws can be very costly. Simply participating in a business meeting with other companies and discussing the minimum commission your firm charges puts the real estate firm at risk of being charged with price fixing.
Home values in Palo Alto can be viewed at http://julianalee.com/palo-alto/palo-alto-statistics.htm
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
Good question. Commissions in real estate in California are negotiable pursuant to Business and Professions Code 10147.5. Thus, there is no regulation requiring a seller even offer a commission at all. There are some regulations regarding what an agent may do but a seller can do what they want.
However, if the seller wants to list the the home on the MLS, the seller must offer something to the buyer's agent.
Hope this helps.
That being said, if I were representing the buyer in a FSBO situation I might want to negotiate for a higher commission. Often times sellers without a listing agent have not completed the paper work necessary in a transaction. Those disclosures must be completed. If the buyer's agent has to provide any assistance, they should be compensated.
You see how complicated it becomes as the others who have responded to your question have indicated.
While buyers may find the home on their own...most buyers still see homes with their Realtors. I would caution you against going too low ...but of course you do have the right to offer what you see fit.
It's all negotiable.
But if the seller wants an agent--a listing agent--then the agent has to agree to the commission rate.
In the case of a FSBO--again, yes. And, in fact, some FSBOs refuse to pay any commission to a buyer's agent, even one who brings a buyer who wants to buy. In that case, there's an in-effect buyer's agreement that the buyer signed with his/her agent that should cover that eventuality.
However, as a practical matter, if an agent contacts a FSBO and has a potential buyer, many FSBOs will agree to compensate the agent, at least in part.
There aren't any regulations that determine what a seller can or can't do. However, there are some regulations that limit what an agent can or can't do. For example, agents can't accept "net" listings. Example: The seller says: "All I want for my house is $200,000. If you can get more, great. You keep whatever you can get above $200,000." That's a net listing--the seller is requiring a net of $200,000, and is allowing the rest to go to the agent.
There are also a whole slew of regulations and ethical considerations that could arise.
Hope that helps.