Home Selling in New York>Question Details

Tom McGiveron, Real Estate Pro in Patchogue, NY

Buyer Agency: I just had an interesting conversation with a listing agent - he told me that 1% was the pay

Asked by Tom McGiveron, Patchogue, NY Sun Jul 20, 2008

out for buyers agent. I attempted to explain to him that my fee for service as a Buyer Agent was 3% and that my fee is built into WHATEVER HIS SELLER DECIDES TO ACCEPT as an offer. Ultimately, I said to him, Is it in your clients best interest to sell their property or worry about what they're paying a buyers agent? As a seller - you just accept an offer - period. Buyers bring the money to the table. Thoughts?

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Seems to me there are two issues here. The first is the fiduciary issue--whether the listing agent is acting in the best interest of his client.

However, from a contractual standpoint you two are talking about two different things. The listing agent has an agreement with his client. And whether the client's agreed to pay a 10% commission, or 6% total commission, or a commission split that might be specified in the agreement, that's the amount that the seller has agreed to pay.

Fair enough.

On the other hand, you have an agreement with your client as a buyer's agent. What your client has agreed to pay you is between you and your client. Now, if the seller has agreed to pay x% as a commission, and that fits in with what your commission will be, that's fine. But if there's an apparent mismatch--as there appears to be here--then the agreements (in this case, the one you have with your client) makes clear where the additional compensation will come from.

I'm not even sure I'd try to educate the listing agent. Just make clear that you're comfortable (and your client's comfortable) with the details and the arrangements. Here's the offer....
1 vote Thank Flag Link Sun Jul 20, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
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Again I come back to the topic of ignorance. Most listing agents who feel this way are parroting their brokers, who don't understand buyer agency. All you can do is educate the listing agent. Or try to.
1 vote Thank Flag Link Sun Jul 20, 2008
I'd like to clarify something I said in my last response. When I say "what the seller agrees to pay", I am not talking about what they agreed to pay as per their listing contract. I am referring to what has been NEGOTIATED. Yes, it is an ART - and it doesn't necessarily come with years of experience, though that is how many come by it. And if done properly, you have a "meeting of the minds" and everyone gets satisfied and goes home happy and with more money in their pockets and satisfied clientele.

Buyer agency works for the listing broker to limit the liabilities stemming from the misdeeds of others. As for the buyer rep, it ensures a commitment from the buyer to guarantee a fee at minimum for services provided. The intricacies of negotiation is separate from "how buyer agency works". It is a technique, not a service.
0 votes Thank Flag Link Sat Jul 26, 2008
"Dealing" with a buyers agent is simple- build the fee into the deal-period. TOM'S RESPONSE BELOW.

Here's where the confusion seems to be. I'm advocating that if the SELLER has agreed to an amount to co-broke to a sub agent, or brokers agent, the same amount should be available to the buyer for a buyer's agent. Outsiders are well past sub agency, or the ambiguous broker agency in New York.
If a listing agent in NY advocates to the seller to offer less to a broker offering a buyer represented by a buyers agent, in this or any market, they don't understand buyer agency, and it's permanence. Those that decide to engage remain loyal to the practice, for both sides. This is a buyer vehicle that is going to overtake the antiquated alternatives.
With that belief, I also don't agree that the above statement "furthers the cause", and here's why:
A fee for buyer agency is negotiable. "Building it in" is deal-specific, based on what the sellers have offered to other agencies, and what the buyer is willing to pay. It's not about what the buyer's agent is adamant about accepting.
Just as listing agents are under the gun to justify fees, so are buyers agents- with fiduciary to the buyer first (which includes putting their financial best interest above all). At least, in NY.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Sat Jul 26, 2008
At the end of the day - We're all in this to make deals happen...or so you'd hope.

I think as time progresses, more agents, both new and seasoned - will realize how buyer agency works and how to negotiate a deal - in general - given any factors that may arise.

Clearly - the ART of negotiating is NOT something every real estate agent understands - but that's been apart of the business long before I got involved.

Anyhow - thanks for the feedback!
0 votes Thank Flag Link Sat Jul 26, 2008
You're nto clueless. You are right in acknowledging that there are two sides to every transaction to view.

What it comes down to is this - the seller is going to pay what the seller agrees to pay towards cooeperation whether it is greater than, less than, or equal to whatever the buyer agent has contracted between themself and the buyer. Typically, all the money is coming from the transaction - first from the buyers "pocket" to the seller (why wouldn't a buyer want a say in how his money is getting split?), then from the seller towards commissions. If the seller is offering less than what a buyer agent has contracted - so be it. At this point, it is strictly up to the buyer agent and the buyer to discuss the remainder of the buyer commission and how or if it will be paid or waived and in no way should impact the seller beyond what the seller has agreed to. Make the deal or break the deal but remember - the client comes first.
0 votes Thank Flag Link Sat Jul 26, 2008
I have to agree that I think there is something wrong with -

1) for a Listing Agent to discourage a Buyer agent from showing a house or presenting an offer becuase they might ask for a certain percent of commission and/or

2) for a Buyer Agent to refuse showing a house or presenting an offer because he might or might not receive a certain percentage of commission

Because unless the house is being shown and the offer is being presented and negotiated, an agent will never know what might come of this. That's called negotiation.

Noticed I did not bother to say which side in the last comment. Without going into an endless loop - the whole thing can be looked upon both ways.

And it does not matter how you dice it, there is a net to the selling price / purchase price. Again, that can be looked at from both sides.

I hope I have not enraged all NY agents because I am getting myself into trouble with both sides coming from a clueless CA agent (again!) and I agree, it's easy for me to say it because I am not in the midst of this.

So sorry. Maybe I have to destruct these postings again! .

Gonna go and get ready.

Sylvia
0 votes Thank Flag Link Sat Jul 26, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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I think that this scenario is being predicated on the fact that the seller has a CLUE that their listing agent is discouraging buyer agency. Common sense: what purpose does eliminating agents with buyers serve for the SELLER? And, as a buyer's agent, to see them pay (in the price of the home, as calculated when the seller accepted a listing fee that INCLUDES a cooperative amount) TWICE- out of pocket, then again, in the listing agent's fee- is unacceptable by any interpretation. As long as the listing agent reduces the final tab to the buyer by the agreed-to fee INCLUDED in the listing fee (which also benefits the seller), it makes no sense whatsoever to limit showings by eliminating a buying contingent. The simple answer is to just not play games with buyer agency- I don't believe that the sellers are aware in the majority of cases in New York. THAT is the responsibility of the listing agent to fix. That there are hold-outs offering 0 is just really unacceptable, unless the seller is completely informed. If they were, they wouldn't agree to this method. I'd love to hear from a seller that has made this decision, and why.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Sat Jul 26, 2008
I see your point Tom, and let me re-explain. Adding "whichever is greater" will cause dialog between the seller and agent. Inevitably, most will say NO to paying more than what you requested specifically. and rightly, that is what you contract for and request - that is what you should get. Consider it a passive negotiating technique that adds dimension and perspective for the seller to consider your specific requested X% more favorably than simply saying NO.
0 votes Thank Flag Link Sat Jul 26, 2008
I think you can argue it both ways - as a listing agent and as a buyers agent. Again, I do both, so I am only saying this because you mentioned.

This is very simple from what I can see - You signed a Buyer Representation with your buyer which says your commission is 3%. To the buyer, you are worth that much.

So, when you put in an offer on the house, knowing that the seller (or L.A. with seller's blessing) will only pay 1% to you, then you should ask your buyer to pay the additional 2% because that;s what you are worth to him, not to the seller. Or his offer to the seller will be 100% (or whatever) with 2% of those specifically goes to you.

Just like you said, you are not concerned about what the listing agent makes, you only care about what you are making. The same argument can be that the listing agent don;t have to care about what you make, they only care about the agreement between him and the seller.

If you are skillful enough, you will negotiate so the seller will accept the 98% or you will negotiate so the buyer will pay the 102% and you get your whole 3%.

If I am a seller, why would I want to pay 3% to a buyer agent so he can negotiate for a buyer? Yes, you brought a buyer here, but again, if your buyer likes the property and the seller offers you 1%, will you not show the house or will you tell your buyer that you two has the agreement that if you found him a great house, you get paid 3%, and now he has to pay for the difference? That is what you are doing, right? Searching for a home for your buyer.

There are definitely two ways to look at things, all depends on which side you are on... ...

Sylvia
0 votes Thank Flag Link Fri Jul 25, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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Interesting conversation.

listing agents and sellers have a goal - to sell the property .

"Dealing" with a buyers agent is simple - build the fee into the deal - period. It makes absolutely no sense for a buyer to pay by separate check - the "extra" fee amount. That's downright ridiculous.

And YES - I like what many have said on here - exposing listing agents who take a 5% listing and pay out 2%....or even 1% - because they "market" the property...lol - yah.

I have wonderful verbage i wrote on my binders that spells out my fee for service beautifully.

Eric - I liked what you said about the "amount equal to the listing agent commission..." - HOWEVER - I am totally not concerned with their fee. Their fee is their business.

MY FEE is 3%. I do not negotiate a listing agent's commission - it doesn't make sense for them to dictate mine.

The real problem is we have way, WAY too many people in the business who just simply do not have a clue. They're not business people. They do not understand the art of negotiation and thus - allow emotion to get involved and say to themselves "I'm not going to let you make more money then me... blah blah blah"

Had a guy almost kill a deal because of this - In order to represent our client - we decided to lower our fee for service - he said, "i've been in this business 30 years...blah blah blah..." The funny thing is - at the end of the day - this....agent (I want to say idiot with 1 year of experience repeated 30 times over and over again) didn't verify c/o's and the deal was killed when the seller pulled his home off the market.

Anyway - negotiation is not about emotion and it's NOT my fault that most agents out there are actually taking 4% listings and some of them are paying out 2%. I come in with 3% fee and they get bent - simply because....they're not business people and ultimately are in the way. I can tell you this - the "extra" percent I am making on my transactions is adding up.
0 votes Thank Flag Link Fri Jul 25, 2008
Both previous points are well taken. With my MLS, as a part of our membership agreement, we must make an offering of cooperation. We can select which types of agency we will honor in the listing. There can be no zero compensation across the board, at least one type of compensation needs to be noted on the listing. The amount the Listing agent retains is never posted. One can assume that the listing agent is receiving equal or greater but that is an assumption.

When writing an offer to include buyer compensation, one can specify the requested amount, and I think it best to also include some language to the effect "or an amount equal to the listing agent commission which ever is greater/lesser". This sometimes may result in a lower than desired commission but an equitable one. Doing this does two things.

It specifies to the seller and listing agent the request for compensation. What it also does is open a dialog for the seller to address with the listing agent, exactly how the commission should be paid. I find sometimes, the sellers are not always as aware of the cooperative compensation being offered and that it may not be equitably split. Remember, as buyer agents, we cannot negotiate what a seller will pay a listing agent, however, as buyer agents, to specify our compensation at a minimum of being equal to the listing commission opens the door for the listing agent to step up and make the deal work it the offer is otherwise acceptable.

If the negotiated commission is less than contracted, then there is a dialog between the buyer and buyer agent on how to handle the outstanding contracted balance. Waive all or some of it or have buyer pay out of pocket are the choices.
0 votes Thank Flag Link Thu Jul 24, 2008
To the contrary, Sylvia, your point is well taken. In our area, unfortunately, what we see often is a "split" (whatever the amount) in the MLS for payment to a cooperating broker under "broker agency" and "seller agency", with a subtantially lower (or 0 amount) paid to a buyers agent. Clearly, the seller anticipates a coop- just not with a buyers agent. I'm assuming that that is the case with Tom, as it's very common here.
Tom knows, via the mls, that there is a percentage offered for cooperation, and is simply requesting that (or a like) amount to represent the buyer, at no extra expense (typically) to the seller.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Thu Jul 24, 2008
J.R. - I have not seen or known anybody in CA that pays 0% or 1% to S.A (buyer agent) unless that's FSBO or flat fee or discount broker. Because that would normally mean the L.A. also gets 0% or 1%.

Our practice is that in Listing Agreement, the seller decides the commission to pay and we split that with the S.A.. However, CA agents do the transaction from start to finish, we don't use lawyer's service. So, I can't answer your question about what happens of S.A gets 0 or 1%.

Laurie - Your statement says it's an inequitable split (in the eyes of Tom's buyer). I re-read Tom’s question a few times. There is no mention whether the whole commission is 2% with 1%/1% split or if it's 3% L.A. and 1% S.A.; and no mention of the BUYER thought it’s inequitable, so I don’t know where you read that?

What I read was that Tom's agreement says he'd get paid 3% commission as buyer agent regardless. This L.A says the S.A. gets 1% (again Tom did not mention how much L.A. is getting). So, to me, Tom is saying whatever price the buyer offers, his 3% commission is built in and it's foolish of seller not to pay him 3% if the seller wants the sale. I can agree if the L.A. is getting much more than the S.A. then there will be inequity, but I don’t know that from reading the question.

I am very curious about this because again, in CA, customarily is commission split 50/50. I recently have a S.A. made a counter offer with commission from 2.5% to 3%, which will cause inequitable split. She sent that offer in along with a (rude) email saying how my seller should do that otherwise lose the deal. In this case, my client is already losing a ton of money from the sale, and she would not want to lose more by paying more commission. I personally would have kicked in that 0.5% just so that it'd work for my client if not for the very low ball offer which would not have worked anyway.

Either way, when I saw her offer, I thought of how greedy she was and how she could have explained that to her client - that the purchase won't go through unless she gets that extra 0.5%. Is it true that her client wants that house but net enough if SHE does not get that extra 0.5%? I could not comprehend. Again, she would have gotten 2.5% which is not a small sum. Where does the fiduciary duty lie in her case? Exactly what I thought at the time and still now.

So, sorry, CA is quite different from NY and Tom is from NY.

Now, if you all think I am muddling the water by bringing up a totally different pracetice, then I will delete both of my answers. .

Sylvia
0 votes Thank Flag Link Thu Jul 24, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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Sylvia, what is included in Tom's question is the line: "whatever his seller decides to accept as an offer". I take this to mean that whatever fee he includes in the offer is subject (as it should be) to acceptance by the seller (as opposed to the amount offered, which doesn't cover his buyer). I don't think that Tom is seeking an inequitable split; he's just stuck with a listing agent that may (or may not) have counseled his seller to offer an inequitable split (in the eyes of Tom's buyer). The result of this foolishness on the part of the seller/listing agent is negotiation.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Thu Jul 24, 2008
Sylvia where I am listing brokers sometimes put 0% or 1% for buyer's agent. What would you do in that case?
0 votes Thank Flag Link Thu Jul 24, 2008
Hi Tom:

I am confused by your question and your reasoning.

I represent both buyers and sellers, but I am not an exclusive buyers agent where I sign a contract with my buyers saying I demand to be paid a certain commission if I represent him/her on the purchase of a home. I usually get paid according to the agreement between listing agent and the owner.

So, now you are saying that is a house is priced at $100,000. The listing agreement says the commission will be 5% split between listing and selling agents. You come in with a buyer, you will then demand you get paid 3% while the listing agent get paid 2%?

And if the listing agent (after he did all the work to advertise and market the property), said, he will split the 5% with you 50/50 as agreed with the seller, you will not recommend your buyer client to buy the house and the seller will lose the buyer and the listing agent is not acting upon the sellers' best interest?

My question to you then is, are you acting on your client's best interest for not encouraging your client to buy the house because you are not getting paid your 3%?

Just a thought to look at it from the listing agent's angle and let me know what you think.

I want to emphasize the fact that I do represent both buyers and sellers and I tried to get the best deal for either depending on which side I represent, so I have no gain in your answer here either way.

Sylvia
0 votes Thank Flag Link Wed Jul 23, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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First, the listing broker cannot determine what fee your "Client" pays you. You can write it into the offer subject to paying a specified amount towards the buyer commission. You can also write the balance of what would be due as a concession, allowing the seller to still "net" his desired amount.

Also note the money the seller is paying commission with is coming from the buyer's pocket to begin with. Indicate this and let the agent know this is what the buyer requests of the seller for their participation in the sale. Basically, it is giving the buyers a say in what happens with the money they spend for your services. NYS does not disallow you to negotiate your fee via the purchase offer. What you cannot do is determine what the Seller will pay his representative in this scenario. It seems this needs to be clarified with the seller's representative for better understanding.
0 votes Thank Flag Link Wed Jul 23, 2008
The property listing contract usually shows the commission the Homeowner is willing to pay a Buyer' Agent or Sales Agent. The Buyer Agent contract also lists the % that the Agent has negotiated with you. When your offer is submitted to the Homeowner, the Agents commission and spilt must be specified. If the Homeowner is not willing to pay your Agent, then your contract with the Agent determines how much you are obligated to pay.
0 votes Thank Flag Link Mon Jul 21, 2008
With respect to buyer agency, at least in NY, it is perfectly legal to request payment via an offer, and equally legal to present directly to the seller, seller willing. When it comes to buyer agency re. the coe, it is again acceptable to request payment, provided that the offer is not eliminating negotiation with the amount- it is up to the seller to counter, or decline, and at that point, up to the buyers agent to negotiate any difference with the buyer, if they so choose. Submit the fee; let the seller decide; work with the outcome. More to the point is the fact that a seller/broker cannot discriminate against a buyer with representation, although it remains up to the seller to agree to payment for the service.
Bottom line: what is in the best interest of both sides of the equation? Certainly not the pocket of the listing company. Practices vary from area to area; New York is notoriously slow on the practice, acceptance of, and cooperation with the whole notion of a buyers right to be represented. Most areas don't give this practice a second thought, nor do they intentionally create problems to the disadvantage of an unknowing seller.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Sun Jul 20, 2008
The code of ethics prevents you from making your fee an issue here. Your clients should guarrantee your fee. Make sure they understand that in this case, the seller is paying 1% and they will have to pay 2%. If they don't like that, then find another property or lower your fee. The fee arrangements should not be part of the contract negotiations.
0 votes Thank Flag Link Sun Jul 20, 2008
Working for a buyer is time consuming for a realtor. In attempting to find what the buyers want requires a great deal of computer research and a good realtor will look at properties for a particular buyer then inform the potential buyer and arrange for a viewing of the property. By limiting the buyers commission means that most realtors will bypass your property. The listing agent is limiting his owners availablity of selling his property.
0 votes Thank Flag Link Sun Jul 20, 2008
It is not the listing broker's business what your contract arrangement is with the buyer, just as you may never know what they are charging the seller for marketing their property.

Realtors are ultimately charging what they believe their value to be.
Web Reference: http://gailgladstone.com
0 votes Thank Flag Link Sun Jul 20, 2008
Tom, it would appear that you are in the not-uncommon-enough scenario where you are dealing with a listing agent who has no concept of fiduciary to his/her seller. You can present your offer with your fee (as decided between you and the buyer, keeping fairness to the seller in mind) on the paperwork, as long as this fee isn't stated as a requirement of acceptance.
The greedy listing agent just wants to collect more from the seller- ignore it, and go to the seller (as is permissable) directly with your offer. THAT'S fairness to the seller.
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Sun Jul 20, 2008
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