Home Buying in Chicago>Question Details

Damien Samuel, Real Estate Pro in 60640

Buyer's Commission

Asked by Damien Samuel, 60640 Tue Apr 28, 2009

I am currently an attorney and confident that I can handle representing my own interests regarding the purchase of my home. I have disclosed in the offer that I will be representing myself and so they can save on commission, but they haven't discounted very much for that fact. I can pretty easily take the sales agent exam in IL before closing. Can I then put my name as the broker on the contract and take the commission check at closing?

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As an attorney you likely are familiar with contract law, right? What existed prior to your arrival to the home you apparently desire to purchase was a contract between the home seller and the agent (and viz a viz the agent's brokerage). This contract did and does what contracts do - it stipulated a time frame whereby the contract is valid, indicated the parties involved, reflected the list price, address, etc. It also specified the fee associated with the successful sale of the home. If the brokerage is like mine there is an understanding as to cooperative commission to be paid to a real estate professional and active member of the cooperating association who brings to the table a ready, willing, and able party to consummate the purchase.

As a non-licensed attorney, you are not that. You are not a member of the cooperative of local real estate professionals. You are a consumer. As such the brokerage is not bound by to give you your sense of a "better" price gained via the fee that a real estate professional would be able to claim for services rendered.

Would the seller or the listing brokerage be bound to remunerate you should you test for your broker's license after the contract was submitted? Good question - perhaps yes, perhaps no. It's not a question I can answer since I am not an attorney. Which I suppose comes full circle to where we began which is that you are not a real estate professional.

Perhaps the most reasoned approach for both parties is to simply gain a suitable and agreed upon sales price without regard to fees or payback. I suppose I will think about this when my medical professional gives me an exam next week or my mechanic does the work at which he is proficient as he ensures that my truck runs smoothly.

All the best!

Thomas McCarey
Certified Negotiation Expert
Accredited Buyers Representative
Luxury Home Marketing Specialist
The Real Estate Lounge Chicago with @properties
3 votes Thank Flag Link Tue Apr 28, 2009
Hi Daniel,

I think all the answers below have skirted around one particular core issue. Here in Illinois, representation does not equal compensation.

You may very well be excellently suited to represent yourself in your transaction.

And, in fact, here in Illinois, attorneys are allowed to act as Real Estate Brokers on behalf of themselves and their clients. For example, if you were handling the estate and disposition of property on behalf of someone that inherited some property.

You would be permitted to act as a Real Estate Broker as their attorney and place advertising, negotiate a contract, and handle the closing.

Here's where there seems to be a bit of confusion: A seller's Realtor (note that I am using the Trademarked term Realtor in this example) - for example: from Big Blue Brokerage - has negotiated a commission from his client, the seller.

And that Realtor has offered compensation to other Realtors through the use of the Multiple Listing Service of his/her service area. Here in Illinois, it's MRED.

And contractually - by joining this association, and by adding a listing to the computer database, and offering a commission in that database, a contract is created between the Listing Realtor and all the other Realtors in the service area who are working with buyers.

However there is no obligation whatsoever on the part of the Listing Realtor to offer any sort of commission reduction or rebate to a buyer who is not represented by another Realtor. (again using the trademark Realtor here on purpose.)

And even though you, as an attorney, may act as though you have a Real Estate License, your real estate license does not entitle you to COMPENSATION. It only entitles you to REPRESENTATION (capitols only used for emphasis.)

The only way you would be entitled to compensation would be if you were a member of the Multiple Listing Service through which the offer of compensation has been made.

Notwithstanding my technical explanation above, many buyers certainly DO go out, and purposefully shop for property without the use of a Buyer's Realtor in order to do just what you are seeking - namely the Buyer's Realtor Co-op Commission. But without the benefit of the contractual obligation of belonging to the local MLS, you are simply negotiating.

And in the case of negotiations, of course, everything is negotiable. Obviously, as the practice is common enough that you are aware that the practice exists, it must happen on occasion. But not always. A Real Estate Agent with a desirable property that might sell without difficulty may be much less amenable to such tactics. A motivated (i.e. hungry) Real Estate Agent may be totally willing to entertain your proposition.

But just because you ask, doesn't mean you're entitled.

In my course of business, I normally am hesitant to give away part of my commission. The reasons are many:

* My offer of compensation to other Realtors is designed for us to cooperate together in making the process of helping our seller clients, and our buyer clients as hassle free and smooth as possible. It aids us greatly to be able to take our buyers to properties that are listed with competing real estate agencies. And vice-versa. And I know that when a colleague from another company sells one of my listings, there is a chance that I will return the favor someday. In your situation, it is likely that you will not be bringing other buyers to my listings nor will you be promoting listings that I would like to bring my buyers to someday. Since it is unlikely that we are going to cooperate again someday, there is no incentive for me to give my commission to you.

* I might be willing to negotiate with a customer who could become a repeat customer someday. But in your situation, as you have already indicated that it is your desire to represent your own interests in the purchase of your home, it is very likely you will wish to do the same when it comes time to sell your own home. So I probably am not going to get repeat business from you.

* Most likely of all - you located my property for sale through one of the avenues that I spent money on. Whether you find a property in the newspaper ads, or on the company website, or on a big National Website such as Realtor.com - that is an advertising outlet that I have spent a considerable amount of money on. And if you located one of my listings through one of those advertising avenues, then it's my desire to be compensated for procuring your interest through that avenue.

Certainly, I should recommend that you may very well benefit from a local expert on your marketplace and save even more money by using a Realtor that knows your neighborhood and the marketplace well. Perhaps you should talk to one rather than focusing on that little percentage?
2 votes Thank Flag Link Fri May 1, 2009
No, you need to be a broker or be working under one. Seriously, you say you are an attorney and you need to ask this?
2 votes Thank Flag Link Tue Apr 28, 2009
Dear Daniel,

I may be missing the point here, but the following occurs to me based on what you've written.

It sounds like your offer/contract may have already been accepted by the sellers. If so wouldn't you potentially be barred from receiving a commission based on the fact that you were not an agent at the time that the contract was executed? If you were not an agent at the time that the agreement was reached, then why would you later be owed a commission?

Also there are ethical prohibitions (and legal prohibitions as well in Illinois if I remember correctly) against serving as both the real estate agent and real estate attorney in the same transaction.

If you have not yet gotten an accepted contract and you are so concerned about these potential monies, then I'd suggest getting an agent (and you can search for a discount fee broker or one who typically credits back commissions) and discussing with them some sort of agreement with respect to the partial refunding of the buyer's commission to you. This arrangement if reached must be disclosed to all parties in the transaction.

Also if you are getting a loan for your purchase, you'll want to make sure that your lender allows the amount of credits that you'd be anticipating receiving back. Many lenders have limits on how much money you can be credited (of the source of those funds).

Christopher Thomas
Broker Associate, Sudler Sotheby's International Realty
773-418-0640 (cell) 773-293-1200 (off) 312-577-0985 (fax)
0 votes Thank Flag Link Wed Apr 29, 2009

The answer to why the sellers are not discounting their price in a negotiation are probably 2 fold.

1- Most brokerages us an Exclusive Right To Sell Listing Agreement. This agreement states that if the property sells no matter who procured a buyer or how a buyer was procured the full commission is to be paid to the listing broker. Most of the "Big Box" agencies will not discount that commission. That means while you are probably getting the listing agent a bit excited about the opportunity of earning a double commission- the seller is not anywhere near as excited.

2- Many sellers, still, even in this buyer's market are so stuck on getting a certain price for their home, almost as a matter of pride. They often need to be reminded many times that it is the net sale proceeds that they should be focused on and not the contract price.

My advice- find a good agent that you can work with. There are many different skill sets that come into play for a smooth and successful transaction. My experience has shown me that a great attorney often has a totally different skill set than a great agent does. While you may be able to best represent your legal interests, there is a lot to be said for someone who has a knack for putting a deal together and holding a deal together when dealing with what is often a very emotional process.

May your home buying efforts be blessed.

Matt McGrath
0 votes Thank Flag Link Wed Apr 29, 2009

Everyone here has good points for you to consider.

Just because you understand how to protect your interest, doesn't insure that you are effectively negotiating your position.

Also, the listing agent may be taking both sides of the commission. The listing agreement likely stipulates a commission percentage, buyer's agent or not.

I guess you could get licensed, find a sponsoring broker etc... Lots of hoops and fees for a single transaction. Negotiate more effectively. It's a buyer's market. Prove your price and make your offer attractive.

Best of luck.
0 votes Thank Flag Link Tue Apr 28, 2009
I am an attorney and broker and the issue you have is there are a lot of fees to become a broker or agent for that matter, close to $1000. The exam is easy but you do need to spend a few days studying. The issue is not whether you are and agent or not, the issue is what the seller feels should be their net proceeds, regardless of any commission. They don't automatically pay 2.5% to an agent without working the number into their net proceeds. Generally, they would always offer 2.5 less than list if they did not have to pay a commission, since their net is the same. My guess is you offered a lot less than that and so that is why they won't budge. I agree with Jim - you are an attorney and you don't know this?
0 votes Thank Flag Link Tue Apr 28, 2009
Take the exam and find a sponsoring broker if you have enough time. I think you're better off with agent representation.

I'm sure they will discount the price accordingly, but only if the listing agent and their broker is willing to do a dual agency transaction AND rebate a portion of the would-be buyer's agent commission back to the seller. 2.5% of a sale price should not be a deal-breaker. There might be more at play here...
0 votes Thank Flag Link Tue Apr 28, 2009
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