I want to add more to my answer, there are so many disclosures that are required in a real estate contract that protects both the seller and buyer. For example - transfer disclosure statement, seller questionnaire regarding the property, etc etc. Are the buyers planning on getting an inspection - are you the seller disclosing all issues of the property to the buyer.

Vicki L.M. Campbell
619-787-0913
vicki@vickicampbell.com
http://www.vickicampbell.com

4% is a good amount - in effect 2% and 2% on each side. When the realtor or real estate agent is representing both parties - one of you is not fully represented. You may want to pick one agent and have them pick another agent - so both sides are represented and if it's any easy deal - everyone wins - everyone is represented.

Vicki Campbell
619-787-0913
vicki@vickicampbell.com http://www.vickicampbell.com

You don't need a realtor, you can just open escrow with an escrow company and pay minimal fees

I would say 2% on each side.
Heather Rickert

I posted the question.

I found a broker who offered a significantly lower flat fee that would apply if, and only if, one of the two aforementioned neighbors purchased the property. (The neighbors are specifically identified in the agreement.) Otherwise the commission would be 5% of the selling price.

I am happy with this arrangement because I can sell the property to one of the neighbors at a small discount without taking a hit in the pocketbook. If either of them is serious about purchasing the property, the broker should be able to get the transaction done with less effort.

Jay,
Thank you for straightening that guy out. As agents we can charge whatever we want. I don’t understand why agents are willing to cut their commissions in these tough markets. We are working harder than ever to get these deals closed.
Jane, if any agent is willing to cut their commission just to try to get you to do business with them, I would ask yourself a tough question. If that realtor is willing to cut their commission so quickly and willing to give up their pay check so willingly, how hard are they going to fight for you when that buyer starts negotiating and asking for items during the escrow process? In addition, in a double ended transaction an agent has to work twice as hard.
John A Cooper
The Cooper Group
Keller Williams Realty
Roseville, CA
Your #1 short sale experts!

Jane,
Your questions pertains to San Diego. Please disregard out of state brokers. Their information is only helpful to buyers and sellers in their state. Also, stay away from discounted brokers. Discounted brokers gets you discounted service.

I cant believe the amount of Agents willing to work for Free. 2%, What part of your services are you not going to provide to you clients?

Dear Jane,

I hope by now you have taken care of your situation. After 20 years in the business all of these answers have me confused, so I can imagine how you must feel.

A few points of clarification from the comments below:

An agent can choose to do a Seller or Buyer non-agency to facilitate the sale on behalf of the other party. So if the agent and Seller choose, the agent could represent the Seller only, and have the Buyer represent themselves - they would need to sign a Buyer Non-Agency Form. You could also choose to do the reverse.

A Real Estate Attorney can prepare the contracts for you. You should consult them for specific fees and procedures.

I truly hope that you are well on to getting your transaction together, no telling how long this thread will last - apparently (unfortunately) agent compensation seems to be a hot topic.

PLEASE
if there is a question about a specific state law, don't answer if you not licensed in that state

Larry,

At least in California, you can have specific fee agreements that are for a specific dollar amount. These are called flat fee agreements.

Brokers in California may represent a buyer, a seller or both. It just needs to be disclosed to all parties

The bottom line is that in CALIFORNIA. A buyer or a seller can choose what broker / agent represents them. It can be the same broker / agent. The compensation to the broker / agent is negotiablke and can be paid by the seller or the buyer or both. It can be set by % or $$$ or both.

A seller needs to decide how much of the transaction they want to do themselves and choose a broker / agent and services acordingly. The same hold true for the buyer, with the normal difference being that the buyer's agent generally is paid by the seller through their listing broker. The amount the buyers broker gets paid is normally determined by the listing agreement between the seller and the listing broker. A buyers Broker may also be paid directly from the buyer if the buyer chooses to do so by written agreement.

Note that all agreements are between the party and the Broker. An agent must work for a broker and is acting as the brokers agent on their behalf. The Broker is the one that must approve it all, not the agent.

Since in this question the transaction is in San Diego, which is in California, what can or may or might be legal in another state is of little value. By saying what can happen elsewhere can only confuse things.

The agemt must be a dual agent if involved in this transaction unless his brokerage has declared itself a buyer agent brokerage. On a simple transaction where all terms are already agreed upon , 2 % is reasonable. Agents cannot deal on a specific dollar agreement.-- it is illegal. That is an attorneys fee.
By percentage commission only.

L.H.
Michigan

Valerie, it's really great that in PA you can do paperwork for someone without an agency relationship.

Not here in CA, you represent a buyer or seller there is an agency relationship.

Don't know what the deal would be if you were represented by a lawyer, but I am guessing it is something similar.

Every state has different laws and rules. Thats why I said what I said about out of state people giving advise.

As far as Jane's needs, she needs to speak with a licensed broker or agenmt or an attorney.

The attorney probubly won't do the work without upfront money. Us real estate people generally only get paid when the deal closes

Hello Jane,

Please know that your question involves more than just compensation. When you involve a broker in a transaction, they are assuming a host of legal obligations and liabilities. The list is two long to explain, however, the first hurdle you must leap is one of agency.

1. Is the buyer okay with you selecting a broker to represent both parties?
2. If so, you have to design the compensation so that both the buyer and seller are represented and consideration (compensation) must be involved to solidify the relationship.
3. Are there any negotiation points that are not clear between you and the buyer?
4. Is the buyer pre-qualified with a national lender?
5. Have you selected escrow and title services or do you want the broker to recommend them?
6. The broker MUST also prepare the disclosures for you to provide to the buyer. Are there any material facts you have not told the buyer as of yet?
7. Have you arranged for a termite inspection?
8. The broker will have to work with the buyer to arrange a physical inspection of the property.
9. Are you aware that the broker must do a visual inspection and prepare a report.

These are just a few of the key points. So as you can see, while a "discount broker" may seem attractive, make sure you are getting the needed service as well.

Let us know if you have any further questions.

Best regards,

Mark and Kari Shea
San Diego Real Estate Experts
Foreclosure, Short Sale & Investment Specialists,
Development Opportunities & Traditional Real Estate

Call a Set Fee Broker they have a menu of services. SetFeeRealty.com

First, stop thinking commission and start thinking professional fees. When you go to an attorney to handle a real estate transaction, they usually don't quote a fee, as many variables may change throughout the course of the transaction. They quote an hourly rate.

You should #1 show the client what your skills are through some sort of folder of information about your qualifications, education and experience, and, #2 state that you will handle all aspects of the transaction that the client would like at an hourly rate. You decide your hourly rate. Say its $100/hr., say it's more, but, don't say its less, thats up to you. Go over all the items that you will handle in the transaction, an estimate of the time involved and have the client sign an agreement with you that in dictates you will be paid at closing, or, if the deal fails, upon demand.

Keep perfect records of each time you are involved in the client's transaction, what was accomplished, the amount of time involved, and a running total of the balance due. Don't forget accompanying the client at the closing to counsel them on proper fees that may be charged at closing (I routinely negotiate all fees with 'providers', especially lenders before closing and cross off a lot of 'garbage fees' that weren't included in estimates at the closing), and, you need to be at the closing (you can estimate an hour or two on your schedule of fees to be submitted to the closing officer) to handle all the unforeseen and hidden fees that pop up at the closing. Dose your client really need to pay; a) $175. to draw the deed? b) a $50 'forwarding' fee? c) a $350. 'warehousing' fee? d) $25 for each notarized signature? e) $45 for FedEx to overnight docs? f) a $50 fee to wire transfer money? (all fees I have seen and crossed out)

There, does that answer your question?

Romeo Danais

Finding the buyer is only one step in the process and might be the easiest step. It sounds like you have the opportunity to have a multiple offer situation. Again, price is only one part of an offer, the term of the contract, how much down the buyers have, if they need to sell to purchase are some of the other items to be taken into consideration. Ask for referrals to agents from your friends. Interview those agents. Don't necessarily pick the one with the lowest commission rate. It is often that you get exactly what you pay for. Good luck and congraduations on having two buyers interested in your home.

A quick story in regards to commissions. First I'm an ex-broker turrned Real Estate Internet Entrepreneur. A number of years ago an owner approached me about selling 3 small adjacent properties in NYC, The owner had a buyer without a broker for $4,750.000 all cash close in 30 days for all 3. I told the owner the properties were worth $6 million. He was doubtful, thinking it was a ploy for the listing. He wanted an exclusion for the buyer. I said no, what if I'm right and I get the buyer to pay another $1 million or $5,750,000. The owner conceded and we agreed to a 5% fee. I ended up finding a buyer through a co-broker for 1 building at $2,150,000 which made the other 2 buildings a steal at $4 million. The original buyer stepped to the plate with an offer at $4 million. Total sale $6,150,000. Net an extra $1.1 million or $5,850,000. Good brokers do more than find buyers, they help create efficient markets.

"Trust me when I say that the statistics don't lie - on average, people who sell their homes by themselves end up selling for approximately 16% LESS than comparable homes sold by realtors, which means that even if you pay a 6% commission to a realtor, you've gotten 10% MORE for your house if you use a professional's services"
---

This again??

a) Statistics don't lie, but the manner in which they're presented certainly can be. Is there ANY organization on Earth that uses statistics in a more self-serving manner (a.k.a. "spin") than the NAR?

b) Even in the NAR's "study" on FSBO, they don't suggest the figures related to "comparable homes" as you're stating. Just median sales price. Undervalued sales to family members, greater prevalence of FSBO in middle of country versus coasts, etc. all easily skew data.

c) If it was an accurate statistic home buyers would be ill-advised to purchase agent-represented homes. Far more effective to wait for the naive FSBO and save a quick 16%.

Dear Valerie,

Respectively this really just confuses the issue for Jane as Agency in California offers Seller's Agent, Buyer's Agent, or Dual Agent.

As Jay noted below I think it would be appropriate for us professionals to answer questions in the state that we are licensed in - certainly best for the consumer.

Jane:

Although I am a realtor in Pennsylvania, and you are a resident of a different state with different real estate licensing laws, here in PA we do have something similar to what you're asking: a Transaction Licensee. This is a real estate agent who is not acting as a Fiduciary Agent for a client, but taking care of the real estate paperwork for the consumer. I have cut and pasted the actual language from the PA Real Estate Code describing a Transaction Licensee (and I've put the link to their website down below, as well):

" A transaction licensee provides real estate services without having any agency relationship with a consumer. Although a transaction licensee has no duty of loyalty or confidentiality, a transaction licensee is prohibited from disclosing that:
• The seller will accept a price less than the asking/listing price,
• The buyer will pay a price greater than the price submitted in the written offer, and
• The seller or buyer will agree to financing terms other than those offered.
Like licensees in agency relationships, transaction licensees must disclose known material defects about the property. "

What that means is that the TA isn't working as your agent, so you don't take them into your confidence, but there's still some things regarding finances that they MUST keep confidential, both for you and for the buyer - they basically do the paperwork for both sides of the transaction if need be, without getting involved at all with the negotiations. A Transaction Licensee can be working for a Buyer or a Home Seller, and the standard fee paid is 1% of the sale price of the house (as opposed to 3% for the usual Buyers Agent or Listing Agent commission fee) - so knowing that this is a standard fee that other states pay for this work this might be a useful starting point for you when trying to find a realtor or real estate lawyer to do this work.

However (and speaking as an agent who doesn't have any axe to grind, since I don't practice in your state and so couldn't represent you anyway!), realtors do a lot more to earn their commission than simply show a house! I'm currently shepherding a house to its settlement that has taken 7 months of patient work - the first contract fell through because of buyer problems with financing, the second contract was 100% financing because it was a government-funded Rural Housing mortgage, so it was far more complicated and as the real estate agent I have to be in contact with the buyer's mortgage company checking on whether their financing is going through; with their title company and the buyers agent coordinating settlement; with the buyers coordinating utility transfers; it's my job to contact the local township and check on whether a Use & Occupancy certificate is required for resale of an existing property and whether an Inspection is required (which nowadays a lot of townships are doing whenever an existing property is sold, in order to beef up their coffers!) - certainly states like Pennsylvania and California don't make their real estate licensing laws so complicated just for the fun of it! We have to make sure that our paperwork is in order, because lawsuits follow when houses get sold without following the proper procedures......

Trust me when I say that the statistics don't lie - on average, people who sell their homes by themselves end up selling for approximately 16% LESS than comparable homes sold by realtors, which means that even if you pay a 6% commission to a realtor, you've gotten 10% MORE for your house if you use a professional's services.

BEFORE you accept an offer from your neighbors, get a Comparative Market Analysis from a realtor as to what your house would actually SELL for - because usually people offer less for houses without a realtor because they're deducting the commission off the price already. A CMA shouldn't cost you anything, and it should give you an accurate idea of what you should be getting for your house. If your neighbor's offer is WAY off, you'll know you should be listing with a realtor in order to get the most for your house....

Anyway, good luck!!

JANE,
FIRST OF ALL, VERBAL AGREEMENT VERSUS WRITTEN AGREEMENT CHANGES BY THE MINUTE. WANTS AND NEEDS BY BOTH PARTIES WILL CHANGE ONCE ON PAPER, SO GET IT IN WRITING.
REGARDING PRICE, JUST BECAUSE ONE BUYER WANTS TO PAY A HIGHER PRICE, DOSENT MEAN THEY QUALIFY. ALSO, KEEP APPRAISED VALUE IN MIND.
COMMISSION SHOULD ONLY BE DISCUSED AFTER THE AGENT IS DONE WITH HIS/HER PRESENTAION. A GOOD PRESENTAION SHOULD ASNWER ALL QUESTIONS.COMMISSION IS A HUGE FACTOR BUT, IT SHOULDNT BE THE DECIDING FACTOR, WHEN CHOOSING A PROFESSIONAL. IF AN ANGENT IS NOT WILLING TO PUT A FIGHT FOR HIS/HER WORTH, HOW HARD DO YOU THINK THEY WILL FIGHT TO NET YOU THE MOST MONEY AND GET YOU TO YOUR NEXT HOME.
REPRESENTING BOTH PARTIES INVOLVES TWICE THE WORK AND TWICE THE LIABLITY. MARKETING IS ESENTIAL TO OBTAINING A BUYER BUT, THE JOB HAS JUST BECONE WHEN ESCROW OPENS. MOST TRANSACTION GO SMOOTHLY HOWEVER, WHEN PROPLEMS ARISE, YOU NEED A PROBLEM SOLVER.

Jane-

Whatever you feel comfortable with is the best answer to this questions. But remember not negotiate yourself out of being properly represented. If the you come to an agreement on the commission make sure there is no negotiation on the quality of service and representation. Traditionally agents receive a referral fee of 20-25%, so you may want to calculate it that way. You are referring the buyer.

If you bring in your own buyer, 10%. If the buyer is being represented by another agent 6%.

A reasonable commission is the one YOU negotiate with the Broker/agent YOU choose to work with.

Dear Jane, I see you are still getting answers to your question. Like Glen notes below it is important that you talk to a few agents and negociate directly with them once they understand the situation. You cannot really find your best options in a public forum.

I recently did a post regarding cheap helicopter ride and the real estate experience - you might find some humor in the post.

Hi Jane, as you can read there are varying opinions on this question and the answer you read will depends often on experience.

The bottom line here is that you as the seller and the representing agent will have to agree to the commission being offered whether it is 1%, 2% or 6%. What you will discover is that the cheaper you go with the commission, or should I say the cheaper the agent decides to go, the greater the chance the service level will reflect that number. Human behavior is very funny yet sad in this industry of real estate.

My thought is this: If you have a buyer already who you wish to sell your house to. Then a commission of 3.5% would be sufficient. If you were to review the MLS as to what is being offered here in the Southern California market, you would discover that commissions range from 2.5% to 4% for the buyers agent. So with that in mind the agent you select will be performing two jobs which equals to 2% per side technically.

Just make sure you interview at least three agents to discover which one stands out, but also look into how quickly they respond to your calls or emails. And be cautious of agent who is offering a big discount, for they may come across as a saving money deal, but their service to you may also reflect that mentality.

Jane,

Thank you for your question. This is a very important question to discuss with a REALTOR in San Diego, Ca. The bottom line is that the outcome should be a win/win situation for every party involved. The REALTOR you hire, the buyer, and you, the seller. Interview each Realtor and hire the one that identify with your goals. If possible, I would like to opportunity to speak with you in person.

Contact our team anytime with questions http://www.LauraSanDiego.com
Make it a great day!

Finding the buyer is the easy part! 

I have presided over processes like this and I won't reduce my fee very much if at all.

There is often twice as much work involved with just one agent who must participate in

Negotiations--Two parties each with their own interests - must be treated with honesty and fairness--and when the parties are friends, family, neighbors or familiar in some way, there is usually some type of 'gentleman's agreement' that breaks down and needs to be restructured from the ground up. MORE work, not less, to get and keep everyone on the same page.

Qualifying--that buyer will need financing or are they a cash buyer? Helping buyer find and coordinating with lender.

Inspections--the buyer will want to inspect the property. Coordinate with the half dozen or so minumum due diligence resources.

Negotiating again--repairs? Lender may require them. A lot of financing now is FHA/VA/USDA and those gov’t loans require additional inspections.

Who is not showing the house? The agent would need to be present at many of these visits.

Escrow--making sure the transaction is humming along so no one is wasting their time on a deal that won't fly.

And more.

Sounds like you have a couple of prospects at this time -- I'd negotiate a minimal reduction on a GREAT agent's commission and get the most skilled professional available/willing to work with you.

An attorney might be appropriate if you truly are going to do ALL the work between you and the buyer. Contracts are only ‘standard’ when they are BLANK. You will want to protect yourself from any future issues with your buyer. Only a professional will be able to put the right verbiage in that contract.

PS FYI even here in AZ, one of the few states who legally permits RE licensees to draw up documents pertaining to the real estate transaction for a fee, most REALTORS are NOT attorneys and getting paid "just to write the contract" could be breaking the law by practicing law w/o license. :)

Good luck with your sale!

Ron, Are you licensed in California?

Oh, I just love when out of area agents answer questions about a local market, especially when they are not even a licensed agent in the state. I would not even think about answering a question about a market I was not knowledgeable in.

For the record, there is no standard commission rate, that would be agaionst the law (at least in CA) 6% may be what most people agree on, but it is completely negotiable. It is somewhat market dependant and unfortunately somewhat dependant on who the broker is. Some of the big name companies frown on a commission under 5% and can make it difficult for an agent to take a listing at a lower fee.

Yes, what to charge does have a lot to do with the work needed and performed. Frankly a buyer oir seller can just go to Staples or find online "standard" real estate contracts and probubly pay under $50. Does that give them any representation? NO

Even in an "easy" ready to go transaction, there can be a fair bit of work. Lets not forget the required disclosures and other documents that are needed. What happens when there is a problem with something?

This is somethoing that needs to be discussed in detail with the parties and a clear understanding of what is included and what is not and at what compensation.

I think 2%, if you are representing the buyer with a FSBO, but between $250 and $500 if representing the seller. A fair estimate can be determined by estimating the time it will take and setting an hourly rate for your time. It's what I've done. It should include an estimate of difficulty and amount of coordination needed as in the case of a Short Sale or Foreclosure, LSR or Proof of Funds, and the condition of the property, as well as the qualifications of the client.
For writing a contract to convey a property to an offspring, from a parent, I found $250 was totally adequate, but the parent had prepared the property (improvements, upgrades, etc) and the children were already living in it for awhile, as renters.

You can always negotiate any commisions.In this case i would consider a 2% discount on the standard 6% commision.reducing it to 4% total. Remember the realtor has alot of liabliaty when writting the contracts,and making sure ethics are in practice when dealing with dual agency.

Jane,

I hold a CA DRE Brokers license, not a salespersons license so I can reporesent you directly if you like

I have worked with an al-a-carte menu of services for a while and the fees really depend on wat you specific needs are. In any case they are very reasonable and I can save you $1000's

I am more than happy to work with you to conserve your equity and protect you in the transaction

Feel free to contact me ASAP

Jay Gedanken
858-605-5639
jay@saveyoucash.com

Dear Jane, It would depend if you want the agent to represent just you the Seller, or both you and the Buyer. If the agent is a dual agent they are really picking up two jobs - trying to represent both in a transaction and will pick up full liability for both parties. Very important is that all appropriate disclosures are provided and the contracts and addendums are prepared properly.

The Residential Purchase Contract is full of lots of "what ifs" which most often don't come into play, but when they do it is important that the contract is structure properly. specifics

As you know commissions are negotiable so you may want to ask family and friends for a few recommendations and interview the agents. Given the of your goals you should be able to negociate an acceptable commission that will get the job done and make sure things are done to a 'standard of care" for the industry. If you are going to buy another home you can negociate with the agent to include that transaction.

The comment below regarding finding an attorney that will write the contact is another route, just make sure that it is an attorney that really understands real estate law in California.

While my experience from 20 years tells me to be wary or a neighbor really wanting to buy your property, or in this case two - you may want to consider putting your home on the open market, maybe your home is worth a great deal more than both the bids and you won't know until you have exposed your home to the maximum buyer pool via the multiple listing service.

Just some thoughts for you, best of luck and if you have any specific questions please send me an e-mail or give me a call.

Remember a cheap man (woman) often pays twice - do your due diligence in selecting the proper agent for your situation.

Talk to an agent you trust and feel comfortable with in regards to discussing commissions. In this marketplace finding the buyer is not actually the hardest part of the transaction. Getting your neighbors to actually put their offer down on paper and then negotiate from there may be interesting. We find that neighbors talk a lot and then when asked to write an offer down on paper things can change a little. An agent will help the buyers write the offers, make sure terms are acceptable to everyone, follow up with the lender and guide the transaction to closing. We see transactions where everyone agrees on terms and then the lender throws a wrench into the transaction. I feel the 3%-4% is reasonable if the agent takes over from the verbal offers you have received and translate the verbal into the written into a successful closing.

Hi Jane,

Congratulations on finding 2 buyers for your home....

Finding a buyer is truly an important part of the real estate process. There are however, a large number of other tasks that are normally split between two agents. With only one agent involved, they will essentially be handling the responsibility and workload of two individuals.

I'm certain there will be varying opinions on your question but in out opinion 3-4 percent of the sale price would be a reasonable fee for this service.

Best wishes

HI,

Appropriate compensation can only be determined between you and the agent. In this particular case I would discuss a flat fee with the seller. Interview a few of the experienced Agents and see which one is the most knowledgeable and reasonable! All ( or most depending on their agency rules) have the ability to set their own rate. You can also contact a Real Estate Attorney to see what he would charge.
annmariebelair@comcast.net