I think there are a few things you might have not thought about; everything is not just a simple dollar sign believe or not -
First, as a Realtor, my goal is to build long term relationship with my clients. A person may change their homes several times in their lifetime. My goal is to be their Realtor for all those homes, both buying and selling. The only way I can accomplish that is to provide the best service, to help them find the best house for the best price that they would love. They might even want to recommend me to all their friends and relatives
Second, I want my clients to eventually become my friends and I can't make that happen if I am only after money.
You'd say, sure, that's sounds good and noble, but do I really trust you? So,
Third, we can get down to the core of your question and do a little math, as that's why you asked the question.
For the sake of easy math, i am going to assume that you are buying a house for $700K (I am in Marin); and the seller is offering 5% commission. The norm is listing and selling agent split 50% / 50%, so, my brokerage will be getting $175,000. I wont' go into how an agent split with the brokerage, as that's normally by production level. Now, let's say that you want to offer $650K and was accepted. The commission my brokerage gets will be $16,250. For $50K difference in offering price, we are talking about a difference of $1,250 in commission which, again will be split between brokerage and agent
Do you think I will let you bypass a $50,000 saving for a maximum of $1,250 on my companies commission ? (much less for me due to the split). No way, it's not worth it. You would like the whole experience so much better if you can get a $50,000 discount on the house and I will have so many more opportunities to work with you in the future.. On top of that, you might like me well enough that you';d recommend your friends and families to me. '
So, now do you see why the majority of the Realtors will not try to talk you into paying as high as possible? Honestly, not only is it not to your advantage, it is also not to their advantage.
BUT, when I work as a consultant, I get paid. Period. Whether you buy a house or not. The fee has nothing to do with the price of the house and is not built into the sales price, you pay out of your pocket.
On the other hand, I give people a choice. You can also pay me with a commission. Most people think about it and take the commission route. Some do pay me by the hour.
As a buyer you do not pay our commission, and as you say you do pay for it through taxes. Well there are always two sides to every coin. Calculate the taxes on 3% of 400K that is 12K. at the a basic tax rate of 1.25% thats 150 dollars a year which is about 13 dollars a month.
I wish i could calculate an actual number that a realtor that works in your benefit. I have saved clients over 80K on one deal. and as little as 15K just for closing costs. Calculate one of those numbers amortized over 30 years and it makes13 dollars a month looks like peanuts.
A buyers agent works in your favor, the overall price never should come into consideration when thinking about commission. I doubt that Realtors out there are concerned about not saving you money in order to get a couple hundred dollars. In the big picture if i offer lower by 25K 3% of that is nothing and means nothing. What matters is you walk away happy.
What you also cant see is that there are many legal issues that we are liable for even after a deal closes. We make sure you are protected, and proper disclosures are taken care of. Believe me for 13 dollars a month, i have seen hundreds of occasions where buyers were happy that we had paperwork they lost, and ever after a transaction closed still fought for them to take care to problems. Even after you have moved in your house, each transaction is ongoing in our eyes.
Without representation, any miss step, and it could cost you alot more.
Most of sellers have a contract in place that states what the buyer's agent will be paid, this being in the best interest of the seller to get their property sold. This decreases the net to the seller; not a cost of sale that drives up the price of the home.
Second. You need a professional Realtor, one that has integrity and character. One that puts you, the client, first. By doing this, professional Realtors know that you will refer business to them for years to come.
As a buyer, you will pay homeowner taxes regardless of whether there was commission or not. Most homes sold through the MLS account for commissions - they inevitably become part of the market value as a result.
You decide what price you want to pay for a home, the buyers agent can present you with comps. If you are financing the lender won't let you borrow more than it is worth. The appraiser hired by the bank does not get a cut from the Realtor. You pay the appraiser. He works for you! If the property does not appraise for what the selling price is, the bank won't let you finance it. That is were one of the checks and balances are. The system works, even if you don't understand it completely.
The one thing that I am not hearing from you is a suggestion how the agents should be compensated. Constructive criticism is welcome, but just questioning the system without an alternate viable compensation idea seems pretty onesided to me.
When a seller opts to hire a listing agent, the compensation for the buyer's and listing agent is set. A seller has a legitimate interest in wanting the buyer represented by an agent to avoid unnecessary problems. If a buyer does not wish to buy on those conditions, the buyer should look to buy a home that is for sale by owner. When you question the system, you also question the seller's choice to hire a professional.
We just had someone ask the question about who looks out for the buyer and the question also addressed your concern that an agent will try to drive up the purchase price to get a higher commission. Nobody can force a buyer to pay more than he/she wants to pay. It is the buyer that makes the decision about the price he/she is willing to pay and the agent is not in control here. Once you understand the relationship between the agent and the principal, you know who is in control.
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It should help answer your question as well.
Realtors there for the long term understand this, and will treat your purchase like their own...which means negotiate the best for their client, so in the future they get referrals...for word of mouth is the best and most efficient form of advertising...and saving you a $1000, and costing them pennies on commisions is well worth the goodwill.