Question Details

Marina, Home Buyer in Baton Rouge, LA

Dear Pros! The common advice to homebuyers to find a great exclusive buyers realtor. They say it is free for

Asked by Marina, Baton Rouge, LA Sun Oct 28, 2007

you. From here the problem starts. May be I'm too old to believe in free lunches, but it is clear that it is not free but includes in the sale price. Seller will pay to his/her agent and the sellers agent will split the price with the buyer's agent. Why it is problem for buyer? There are reasons:
1. Both agents - get payment as percentage from the SALE price, it means both are interested to make the transaction as high as possible. So insted of find reasons to convince the other party to lower the price MY agent rather will convince me that the list price is fair.
As a buyer I will pay homeowner taxes from the agent fee for years.
How pros see the problem? Do they have any resolution?

Help the community by answering this question:

Answers

13
BEST ANSWER
Hello Marina:

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.

Best,
Sylvia
4 votes Thank Flag Link Sun Oct 28, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
Marina,

You can always pay me an hourly wage, and all my expenses, IE: Cell phone, gas, faxes, copies.
Kinda the way you would pay a lawyer, CPA, Doctor, Labor, Carpenter?

Thanks that`s a great idea.
4 votes Thank Flag Link Sun Oct 28, 2007
Mr.P, Other/Just Looking in Arizona
MVP'08
As Patrick said, you can always find a buyer agent to work with you as a consultant. This will be by the hour or with a fixed fee. I work that way. I am an Accredited Consultant in Real Estate, (ACRE). Search your area for an ACRE and they will help you out.

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.
Web Reference: http://www.valleymarket.com
2 votes Thank Flag Link Mon Oct 29, 2007
I can understand your point, and it makes sense from a buyers point of view. If you have had a bad experience talking to a realtor, or just got that feeling that they are not working in your best interest then your problem just might be you have the wrong realtor.

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.
2 votes Thank Flag Link Sun Oct 28, 2007
Marina:

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.
2 votes Thank Flag Link Sun Oct 28, 2007
I recently helped my client negotiate a purchase a home at 15% under market value. She bought into instant equity. Not once did it cross my mind that I should've tried to get her to pay full or near full price (even though comps in the area consistenly sold at only 2-3% under asking price) so that I could pad my commission. I was actually thrilled that she got such a great deal.

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.
1 vote Thank Flag Link Mon Oct 29, 2007
Patti Pereyra, Real Estate Pro in Chicago, IL
MVP'08
Contact
Getting paid a percentage of the sales price is how we get paid. As Sylvia pointed out, the percentage of what we get paid over what you paid for the house makes very little difference. For us, if we don't do it to the buyers satisfaction it is just one paycheck. If we do a great job and the buyer is happy, we could get referrals, which would result in additional paychecks. Would you be more focused on one pay check, or multiple pay checks.

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.
1 vote Thank Flag Link Mon Oct 29, 2007
Hello Marina. I suggest that you conduct a keyword search on Trulia regarding your concept. Believe me, this subject has been discussed here at nausea. You are not the first and will not be the last person to raise the question of who really pays the commission. You are right, in some ways, the buyer pays the commission for everybody indirectly, but you also have to consider that all the sold prices that are used to come up with the fair market value also includeded the commissions.

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.
Web Reference: http://www.theMLShub.com
1 vote Thank Flag Link Sun Oct 28, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Marina:
There are 41 answers to this post:
http://www.trulia.com/voices/Market_Conditions/Should_the_Re…
It should help answer your question as well.
Ruth
1 vote Thank Flag Link Sun Oct 28, 2007
Ruthless, Other/Just Looking in 60558
MVP'08
I disagree with your basis...you need an agent that aims to serve your needs...and this means negotiating the lowest price for your money. If you are dealing with people that are interested in making a few extra dollars, for the short term thinking they are going to make a quick buck off you, that is the wrong type of person you are dealing with

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.
Web Reference: http://iansellsnola.com
0 votes Thank Flag Link Wed Oct 31, 2007
Dear Pros! Your answers are very "traditional" : good agent will act against his/her best interest. A little unbelievable. Getting the agent paid per our? It will create even more conflict of the interests, as we can imagine easily. Even now, when the agent is interested to show me less houses, he/she do not do it in the most efficient way. I do not blame - I only think how to buy a home and remain alive, not more!
0 votes Thank Flag Link Mon Oct 29, 2007
Do you think the seller will let go of the house for less if there is no agent involved?
0 votes Thank Flag Link Mon Oct 29, 2007
Marina the "key" here is to be selective with the agent you choose to represent you. You need someone who is looking after YOUR best interests and not their pocketbook. Ask for references, the agents record of sales, list price vs accepted price, etc. A good professional agent who knows his/her market should know whether a list price is fair or not.

Best Wishes,

Freddie
0 votes Thank Flag Link Mon Oct 29, 2007
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer