Home Selling in Minneapolis>Question Details

LBV, Home Seller in Minneapolis, MN

Selling by owner. What fee should we expect if buyer comes with own agent?

Asked by LBV, Minneapolis, MN Wed Dec 19, 2007

I'm a house owner. We will be moving out of state this spring and since the holidays are the slowest season we decided to send out a pdf brochure to friends and colleagues, and list our house on Craigslist for now. We are not planning on going the FSBO route, just to network a bit first. Then when February comes along, we plan on hiring an agent.

We set up the asking price with an asterisk saying that we will reduce it by 5% for private party buyers.

Question: If a buyer's agent comes along, we show the house and the buyer makes an offer, what kind of realtor's fee should we expect?

The buyer's agent didn't do any marketing, no open houses, didn't take out any adds, etc ... all that was done by us. The agent merely (and I don't mean that in any negative sense) came along with a buyer.

Does the buyer pay his fee?
Do we?
What would a reasonable percentage be?

I would love to hear an agent's perspective.

Help the community by answering this question:


Despite what others may have said, in Minnesota, by law, ALL residential real estate commissions are negotiable. Attempting to quote a usual or customary commission is considered price fixing which is a violation of the Sherman Antitrust Laws (Minnesota Real Estate Licensing Guide, Principals of Minnesota Real Estate, 4th Edition, by Rick Larson, revised 2005, page 436). The commission is to be negotiated with each client individually.

Buyers can, but usually don’t pay anything for the services of a REALTOR® during their home search. You will most likely discourage buyers if you expect them to pay any of the commission.

Whether you realize it or not, if you are advertising your home for sale on CraigsList, you are already "going the FSBO" route.

Here are a few points you might also wish to consider:

Today I searched the RMLS for one of my buyers and found 87 homes that meet their criteria. What do you think would make me add one more to the this already extensive list of homes for my buyer to consider?

Do you think professional REALTORs® search CraigsList or other non-RMLS sites for listings? What would be the incentive for them to do so?

Do you have a full time job? Do you want two? Often, part-timers are unsuccessful given the current local real estate market conditions. Would you hire a part-time lawyer? How about a part-time surgeon? This is a very large financial decision. Do you really want to go it alone?

Not selling during the Holidays is mistake based on a common misperception. Buyers who are out shopping during the Holidays are very serious. Many companies schedule their employees’ transfers / relocations in the 4th and 1st quarters.

Research has shown that homeowners who use a professional REALTOR® receive an average sale price that can be 16% higher than those who sell FSBO. For example, say you are asking $200,000 and discounting that down to $190,000 for your friends or those who answer your CraigsList ad - you could get $232,000 by using a professional REALTOR®. That would cover the entire commission and then some.

As a FSBO, do you know how to find and reach relocation buyers?

Many professional REALTORs® provide a choice of several different commission and marketing plans – you are bound to find one that fits your needs.

95% of all homes sold FSBO are sold to investors who demand rock-bottom prices.

Please don’t take this the wrong way, but when a Buyer’s Agent does a transaction with a FSBO, they actually end up doing double-duty. Would you want to do two jobs for the price of one?

PDF files and flyers are nice, but it takes a lot more to sell a home these days – print ads, open houses, and many “traditional” marketing methods are outdated and quite frankly a waste of time and money. There are many more technology tools that you need in order to ensure success – and most of them are either very time consuming and/or expensive – 800 call captures systems, blogging, establishing a network of buyers and sellers, qualifying buyers, drip email systems, utilizing social networking sites, and networking with other REALTORs® are just a few of the tools I use on a daily/regular basis.

Getting an offer is good but closing is the goal. Do you know how to qualify a buyer, cope with a buyer who gets cold feet, or troubleshoot other issues that could cause a sale to fall apart before closing?

Difficult legal issues can and often do occur during real estate transactions. Do you know what disclosures you need to provide to the buyer? Do you plan on using a lawyer to help you with any problems that may arise?

Buyer’s agents earn their pay and work hard to locate and acquire buyers, analyze neighborhoods, qualify buyers, provide buyer’s guarantees, review disclosures, ensure the accuracy of all contacts and forms, and last but not least, hold transactions together.

Buying and selling real estate is, after all, a business - and not one for the faint of heart. If you expect a good job, expect to pay a good wage.
4 votes Thank Flag Link Wed Dec 26, 2007
I guess we are in the same business now. I admire you for taking the opporutunity to learn just how much effort goes into the sale of a home. Short answer 3%. Detailed answer, you need to consider if you will really save yourself any money or will you cost yourself. And how did you arrive at your asking price?

1) You need to consider yourself and families safety.
2) By offering a 5% discount, you have effectivly notified savvy agents upfront what you will do, when you list with an agent
3) While a nice brochure will go a long way, it is but one piece of the deal
4) A buyers agent works much harder than you can imagine. They drive clients around for hours on end, screaming kids, gas, etc. They coordinate closing needs, they provide legal protections to you and the buyer with their knowledge, and they will basiclly attempt to keep everyone happy. and so much more...
5) A sellers agent will provide you with extensive advocacy, when you are facing buyers, inspectors, other agents
6) NARS has performed many surveys over the years, each says the same thing. FSBO genarally gets between 9 and 15% less than an agent can get them. Do you have extensive web presence? realtor.com, company sites, agent sites, blogging, MLS access. I could go on and on.
7) Why risk your time this way? This is much larger than you know! You will need to be available to show you home all the time. If you are not very flexible, the buyer walks. If you do have a contract, who will protect you in the event the buyers become difficult?
8) Pack up your valuables, perscriptions, and never let your spouse show the home alone. When you are represented by an agent who is a member of your local board, they take on the safety risks, However we have training and work with qualified buyers. Who will call you?
9) Until you become a liscensed professional Realtor/Broker, you will never have the experience to sell your own home. You could get lucky...maybe...

Why cut your own hair, drill your own teeth, file your own court petitions...?

Be smart, save yourself a lot of headaches, seller sat open house weekends, price drops, stress, go with an agent who is prepared to market your home till it sells.

Wishing you well and Merry Christmas,
Heather Peterson
3 votes Thank Flag Link Thu Dec 20, 2007
Just as a p.s., something to be aware of: I had a friend who postponed listing in the same manner you are, and found a buyer on their own. The buyer made many reasonable and some unreasonable requests, viewed the house numerous times, and delayed signing a contract for 2 and a half months. In the end it turned out the buyer's wife did not want the house and he was trying to convince her. They finally listed after losing the entire summer and were "annoyed" that their attorney didn't do the work of an agent and push him. An agent would never let a buyer dilly dally like that. So don't get tied up like that if you DO find someone.
2 votes Thank Flag Link Thu Dec 20, 2007
In all honesty, I wouldn't advertise your list price with an asterisk. It sets up a scenario where a buyer will come in with an agent and still want you to reduce the price 5%. Buyers want more than the moon in this market. Let them negotiate with you after they make an offer, but by publishing the extra discount, the negotiations will start without you at the table. I hope that makes sense?

If you have done your research and set a price, go for it. What does it hurt? December is the worst month historically to sell in the Twin Cities, and you are doing the right thing by preparing for the Spring. Just remember to pre-qualify anyone who calls to view your home without an agent. Craigslist is a great resource, but you never know who you might be dealing with, so be careful.

I think the responses have been correct about the fee to expect from a Buyer's Agent. I have brought past buyer clients to FSBO sellers in the past and been more than willing to handle the rest of the transaction for both parties. Just also remember, that any agent coming in with a buyer represents the interests of that buyer. Do not give away any information you consider confidential because the Agent's duty is to then tell their client. Also make sure that the agent discloses they do not represent you and presents you with an Agency Relationship Disclosure. If you would like a copy for reference, I would be more than happy to email you one.

Good Luck to you!
2 votes Thank Flag Link Wed Dec 19, 2007
Ok, I get it. I understand you're trying to figure out the price with your cost basis. Unfortunately, buyer's agents will probably want to know how much commission you'll pay before bringing their clients and you won't know what the offer price would be until after the fact and you can't renegotiate the commission based on your offer/acceptance price. You already know what the reasonable percentage is since you already done some research on this, it sounds.

I think everyone should look out for their best interest so best of luck to you!
1 vote Thank Flag Link Wed Dec 19, 2007
In our market the typical compensation offered a buyer agent is between 2.7 and 3.15 percent. With a FSBO the agent may ask for additional compensation because they feel they will have to handle both sides of the transaction. With all the inventory on the market right now it's tough to sell a home yourself. I would talk to a few agents and see if they offer enough value to you to justify their fee. You might be surprised what a good agent has to offer. If you're discounting the price of your home by 5% to an unrepresented buyer you're close to some agents fees anyway. All real estate commissions are fully negotiable by both parties.
1 vote Thank Flag Link Wed Dec 19, 2007
You might be priced very well, but since I don't know any of the details, I would just say that in general, these days, most people do not get the asking price. So you saying 5% off the asking price if they don't have an agent doesn't really work. The buyers might offer much lower, who knows. However, assuming you've priced it realistically, why would you offer 5% off and expose to a limited # of potential buyers when you can probably get the services of a realtor for about that price and have it exposed to everyone??? Just wondering.

In regards to your question about buyer's agent fees, before showing a fsbo property, many agents will call you and ask if you are cooperating with buyers agents. If so, how much. Then you tell him/her how much you want to pay as commissions are negotiable.

Also, I think you're confusing the listing agent vs. buyer's agent job description. All the things you've mentioned above are the things a listing agent is supposed to do (right now, that's you).

If you think you're priced right and still willing to offer 5% off, then you're not really saving any money by doing it yourself, even if its for just a few months. I realize you are planning to use a realtor in the spring, then either get a listing agent now and get a jump start or just wait until spring. From many miles away, it looks like you might do alot of work and not get much action or even if you did, you might be leaving money on the table. Good luck!
1 vote Thank Flag Link Wed Dec 19, 2007
The most typical commissions on the MLS for Buyer Brokers is 2.7% to 3.15%. You are free to offer them whatever you want but I would keep in mind the following:

Buyer's agents working with an unrepresented seller will wind up doing more work than they would with a represented seller since as a non-professional it is unlikely you will know every step of the process.
Buyer's agents have more inventory than ever to show clients.
Buyer's agents know what they will be paid on an MLS listed property before they even show it.

With that in mind, if you want serious interest from buyer's agents, you should offer them compensation that is fair given what they have to do.

When you go to list your house in February, the total commission the listing agent will ask for includes the commission for the Buyer's agent and can vary dramatically. As with many things, price doesn't always equal service, both low and high. It is best to interview 2-3 agents to get a feel for their capabilities and to compare fees. I am not a "discount fee" agent but believe that my premium service and marketing supports the fee I charge my sellers.
Web Reference: http://www.AaronSOLD.com
1 vote Thank Flag Link Wed Dec 19, 2007
LBV.......I neglected to mention that the agent bringing the Buyer, well, that's key to the sale, as without a Seller and a Buyer, there is no sale!
Web Reference: http://www.toddnorsted.com
1 vote Thank Flag Link Wed Dec 19, 2007
You should be paying out to the Buyer's agent 2.7%. Seller always pays the commission on the sale.

If I can answer any other questions for you, you can get my contact info off my website. I would be happy to help, and would love to speak to you in January about listing in February!

Web Reference: http://www.toddnorsted.com
1 vote Thank Flag Link Wed Dec 19, 2007
Been busy settling down in San Francisco. We ended up finding a good tenant that just happened to know our neighbors across the street. We have a 15-month lease so that if we end up selling the house next year, it will be put on the market in May when everything's nice and green and we can't see the neighbors out back, just the 400-ft of forest.

It's also one less thing for us to worry about since it would have been pretty stressful trying to sell the house being 2000 miles away and maintaining both mortgage and $3000+ SF rent.

To be continued in 2009 ...
0 votes Thank Flag Link Thu Apr 3, 2008
We typical make 2.5 to 3.5% on the MLS listings. So this would be the negotiating range. If they ask for more you can use these numbers as a guideline.
Good Luck and feel free to call me if you haven't sold yet. I have lots of buyers!
0 votes Thank Flag Link Thu Apr 3, 2008
LBV: care to give an update what happened since December?

Did you list? Did you list w/ an agent? Did you sell?

How is the Edina Realty Home Value Tool estimate from Dec holding up?
0 votes Thank Flag Link Thu Mar 27, 2008
It's interesting that folks think that a buyer's agent just opens doors and walks around the place, letting the buyer make all the decisions without any guidance.

Whenever I've been in that situation, it turns out I've had to do the majority of the paperwork for the seller, as well. I wouldn't think of asking the seller for less than 2.7%. We listing agents pay that to a buyer's agent, so why shouldn't a seller? Obviously, you value listing agents or you wouldn't consider listing in February with an agent. You will be paying him, more than likely, 5.5-6%. That's because he is going to pay the buyer's agent 2.7, minimum.
0 votes Thank Flag Link Thu Jan 3, 2008
go with 2.7%, if your home is the best one, and if you are doing all the paperwork on the seller's side. otherwise increase from there accordingly.
0 votes Thank Flag Link Thu Dec 27, 2007

You could probably expect to pay anywhere from 3 - 6% depending on the agent that comes through. There is no set percentage and every agent has the right to charge what they feel is right. I understand that the buyer did not market your home but they have been working with the buyer and most likely for months trying to find then the perfect home and then the one agent has to deal with both sides of the transaction as far as paper work goes. Sometimes working with For Sale Buy Owners the transaction doesn't go as smoothly as it would with an agent.

I personally charge 4%, but again that is a personal choice of mine.

You the seller should be paying the commission but again this is a negotiable item and if I were representing the buyer You bet we would be asking for the seller to pay the commission.

Hope this helps!

Have a wonderful Christmas and Happy New Year!
0 votes Thank Flag Link Fri Dec 21, 2007
I think FSBO thing is one of those things in life that EVERYONE wants to do (or needs to) at least once. It's a bug that everyone gets. From the buyer/seller perspective, the job doesn't look that hard because all they see is what they're involved in. Seriously, if they only knew the amount of work and time it takes to do a GOOD job in THIS market. Know the facts: Professional realtors are leaving the business in busloads!

Anyway, you've got the bug, try it out and get it out of your system. You might be successful and you might find that you really like it. And if I were you, I would take JR's advice to heart and qualify your potential buyers. There are alot of chronic lookers/time wasters out there disguised at buyers in this buyers market! Good luck!
0 votes Thank Flag Link Thu Dec 20, 2007
To answer your question, it is pretty normal to get multiple replies the first day, then see them dwindle down as the days go by. I have even seen some get answers six months later. You are pretty lucky to get so many agents from Minnesota to answer your question the first day. I have rarely seen it...most are from out of state agents that have no idea what the market is like here in the Twin Cities, so their advice isn't always the best.

I hope you have a Merry Christmas and good luck to you in the New Year!
0 votes Thank Flag Link Thu Dec 20, 2007
Without a buyer you have nothing. Normally when a listing agent takes a listing at say 6% they compensate a buyers broker 3% and keep the rest for marketing, advertising, continuing education, etc... The percentage that the buyers agent gets covers his expenses such as brokerage fees, gas, time and expertise. In addition, a buyers agent would have to do more work in your situation because you don't have any experience in selling a home. (Certainly you may think that the buyers agent should not be compensated for work you are proposing to do but you must look at it from a buyers agents perspective... They will have to do a tremendous amount more because you are now unrepresented and dont have a system to run the transaction through nor do you have experience.)

None of this is meant to say that you cannot succeed. You must also consider the fact that there are fewer buyers out there duing this time of year. (There are also many less sellers and therefore less competition.)

My question for you is (What do you do if you find someone who wants to make an offer?) Knowing how to pre-qualify and consult with a buyer are important to any transaction. Many buyers prefer to deal with agents becasue it does not cost them a dime, they can use the agents gas and expertise. How much time are you willing to devote to this? Can you do it with your full time job that you most likley have to support yourself and your family. In addition, you realize that an agent is paid a success fee right? In otherwords, you don't pay a dime if your agent does not bring success. That in itself may outweigh the fact that you could be missing two months of exposure. Buyers at this time of year are much more serious. There are fewer but much more serious.

All the best!
Web Reference: http://www.CarloGobba.com
0 votes Thank Flag Link Thu Dec 20, 2007
You have a lot of good answers, I would just point out that many sellers think this is not a good time to list because of the holidays, but in reality THIS is when the serious buyers come out! We have had a very busy week showing our listings, and I have a buyer coming back on Sunday to make a decision between 2 homes.
I know you didn't mean "merely" when you said "merely", :) but I'd remind you that bringing a buyer to you enables you to sell, which you wouldn't if this agent hadn't brought a buyer.
0 votes Thank Flag Link Thu Dec 20, 2007
LBV.....Good luck with the FSBO attempt! I would highly recommend you advertise a payout to the buyer’s agent of 2.7%+. This will attract buyer’s agents to call you and potentially show your home. 96% of all homes are SOLD by a realtor so for you to neglect advertising the fact you will pay a commission is a HUGE mistake. You have to focus on what you are trying to do; and that is SELL YOUR home. I appreciate the fact you want to save a few $$. If I was in your position I would try the same thing. But don’t try to sell your home the cheap way, do it the right way. Advertise the heck out of it! walk into real estate offices promoting you will pay a 2.7%+ commission and potentially a bonus if you are given a good offer. Now this will get some attention! Heck, if you are offering a buyer’s agent pay out of 2.7%+ I will personally promote your property to my office and be happy to do so. Remember it is about selling your home not saving a few bucks. This market is no place for the faint of heart you have to set your goal, “SELL MY HOME,” and do whatever it takes (within reason) to get it done.

When you are selling your home on your own you neglect to think about how much a realtor will spend on your home when they list it. I am guessing your current budget to sell your home with the advertisement on CragsList.com, your flyers you made, and the networking you are doing might be running you a total of $200. Well, If you were to take into account the advertising my team does (The Johnson & Murphy Real Estate Team) we would spend over $500/month advertising your listing. When you look at the difference it will show you that we are getting your home in front of more people giving you a better chance to sell your home quicker and for more money. Now I am not trying to be arrogant I am just trying to make a point. The point is that Realtors do this day in and day out, day, after day, after day. The good agents know what works and what doesn’t work when it comes to advertising. Yes, you would have to pay a larger commission than 2.7% but statistically speaking you have a much better chance of selling your home quicker and for more money.

Finally, look at if from a realtor’s perspective. Sell the home as if it is a pay check that will help your kids go to college, put food on the table, or allow you to make your mortgage payment. Because realtors are the only sales people who take on the opportunity to make a sale, market it with their own money, and if the home doesn’t sell are out potentially $100’s if not $1,000’s of dollars. There are no other sales people I know of who will take on this risk. So you as a FSBO need to do the same.
0 votes Thank Flag Link Thu Dec 20, 2007
LBV......obviously this was a great question, and you've gotten some great responses I do hope Trulia and those that took the time to answer has helped! It is a great thread......

Happy Holidays!
Web Reference: http://www.toddnorsted.com
0 votes Thank Flag Link Wed Dec 19, 2007
Sorry, last sentence really didn't make sense ... I meant to say that we will consider an agent represented offer that matches our privat party amoung once all the fees are taken into account.
0 votes Thank Flag Link Wed Dec 19, 2007
Jackie ... my point is that without an agent, I forgo the local 7% fee. With this 7% cushion, I'm giving 5% back to the buyer as an incentive and keeping 2% for me to cover closing fees. Our price is already adjusted to reflect the soft market using Edina Realty's own Home Value Tool so that we can make a quick sale and not have to entertain low ball offers.

The reason we're trying to network now is that if we go with an agent from the get go, this option wouldn't be available to us. In two months' time, we will be happy to work with an agent and there will be no shortage of agents willing to represent us. I'm in the graphic arts department so putting together the brochure took me 1 hr including all the formatting and uploading larger images on Flickr.

My work's all done ... I'm just trying a different approach during the slowest season but wondering what's fair compensation should a buyer's agent get involved.

We've already established the amount we're willing to accept for a private party sale, and will not hesitate to consider an agent represented offer that matches that amount.

Is that making any sense?
0 votes Thank Flag Link Wed Dec 19, 2007
Thank you both. That's why I'm asking. I know that bringing a buyer is a service and that it's due to an agent. But also, the house is not yet listed with a MLS, nor is there an agent with a padlock system showing our house. We're still the ones doing all that. But we have to be fair and compensate someone who brings a buyer (if we make a sale that is).
0 votes Thank Flag Link Wed Dec 19, 2007
Often the agent has spent a lot of time getting the buyer information on the community, filtering through the listings to show the buyer what fits their criteria and actually showing many properties. A buyers agent is usually a member of a local MLS so they can access the listing information which costs them money, the electronic key they use to open the lock box is not inexpensive but helps to provide security for the seller. There are still a lot of expenses in being a good buyers agent. There is no set fee, the best way to find out what you may pay in your area is call some different brokerages and ask them what they seek from the seller as a buyer agent fee.
0 votes Thank Flag Link Wed Dec 19, 2007
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