Home Buying in Sunnyvale>Question Details

El Nino, Home Buyer in Sunnyvale, CA

Do I always pay buyer agent fees?

Asked by El Nino, Sunnyvale, CA Fri Jan 4, 2008

Here's the situation:

I am looking to buy a home
I enlist an agent
I am also actively hunting the publicly available listings such as mls/websites/Open House/sellers agent etc etc on my own
I happen to find a good home w/o agents direct help and wish to buy it

Now the question:
Am I allowed to hunt on my own after enlisting an agent?
Do I have to pay the agent in this case ? (i know seller will pay fees; still I can get that amount as discount for not having an agent)
Will agent try to wrangle money out of me because he had access to same public information?
What's the legal line that divides my find vs agents find ? How can I get the contract set up so that I avoid this situation/ draw a clear line?
what if I have more than one agents ?

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Answers

15
BEST ANSWER
Hi El Nino,

After reading about your "situation," I am having a hard time trying to determine what exactely you are trying to accomplish. First, a seller makes an agreement with a broker, to market their home and pays that broker a fee for finding a ready, will and able buyer. The broker then lists the home in their local MLS, and by doing so agrees to pay a buyer's broker (not the agent personnally) a percentage of their fee (and the buyer's broker will pay their agent a percentage of what they collect), should they bring that ready, will and able buyer to them. The broker owns the listing, not the agent. The broker is owed the full commission at closing, the broker then pays the buyer's broker the agreed upon amount, and then pays their agent (listing) a percentage and keeps the remainder. Many brokers do not want their agent to cut the commission, even if they want to. Most brokers/agents in this area do not reduce the commission amount with the seller just because an unrepresented buyer comes along - they just get a bigger check! In some cases, that I am personnally aware of, there may be an agreement (in writing, on the listing contract)between the listing agent (ultimately the listing broker) and the seller whereby the agent agrees to reduce their commission should they bring the buyer (not have to pay a portion to the buyer's broker). Again, this agreement is between the seller and the listing broker and has nothing to do with any potential buyer. Most sellers want to keep any additional money in their pocket and they are not concerned with the buyer receiving any kind of discount. They may consider a lower sales price based on the fact that their broker has agreed to a reduced commission, but that depends on their situation (bad market,distress sale,etc.).

I think it is important that people realize that, after a lot of hard work and countless hours, most (but not all) Realtors are paid a percentage of the commission owed to their broker. The commission on the sale of a home is a contract between the seller and the seller's broker (who will pay others a portion of THEIR commission as agreed). Most people do not understand commissions at all. If a buyer's agent finds a "for sale by owner" property, that is a different story; in that case the commission amount is between the seller and the buyer's broker, as there is no listing broker.

It seems you are focused on just "finding" a home and you believe that is all that a buyer agent does for his/her client, but I want you to know that is just a portion of the job. I have dealt with enough buyers who paid entirely too much money for their home because they did not have a buyer's agent there to complete a market analysis. I could give you a whole laundry list of reasons that a buyer should have representation. If money is your main motivation, you should know that most buyers actually benefit from having a seasoned negotiator working on their behalf.

Any legal questions you have should be directed to a real estate attorney practicing in the state where the home is located.

I have been on the receiving end of the buyer who doesn't understand the big picture and is calling every agent in town with no regard for the time and effort their original agent has spent on their behalf. I learned a long time ago not to work with a buyer who isn't loyal. At least give any agent you contact the "heads up."

Good Luck!
3 votes Thank Flag Link Fri Jan 4, 2008
it's nice to hear that you have such confidence in a buyer's agent that you're already concerned that they'll try to "wrangle" money out of you.

You are not legally obligated (unless you sign an exclusive buyer's agreement) to pay a buyer's agent out of your pocket ... period. The seller's have already agreed, in writing, that they'll pay the buyer's fee. And while it's possible that you may find a listing agent who's willing to discount a bit, when working with an unrepresented buyer, that discount may be less than you might have ended up had you enlisted the aid of a professional negotiator!

What's the "legal line" that divides your find vs. the agents find?... I guess that would be the one's that he shows you and the ones that you look at without him. But you're not setting yourself up for a very good relationship here. I can tell you that I would be very hesitant to tell you about new listings... (I surely wouldn't call you with the address) knowing that you may decide to go look at it by yourself and cut me out of the deal!

More than one agent?? Yegods man, why? You already don't trust the first one... why add to the pile?
7 votes Thank Flag Link Fri Jan 4, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
El Nino, there is a storm a brewin'. Oh what a tangled web we weave when set out to deceive. Here's how it works;

1) You either go willy nilly shopping on your own and get the representation you earned or
2) You hire ONE agent who will do their job taking excellent care of YOU and your huge purchase.

Why in the world do you think the Seller is going to give you a better deal than an experienced, licensed real estate negotiator can do for you. There is so much more than just finding the house
1) Did you know there are at least two contracts? One is Buyer Friendly and the Other Seller Friendly?
2) There are contingencies and conditions in a contract which can cost you dearly or open you up for law suits?
3) What about the disclosures and inspections. Who is going to review and explain them to you.
4) Is your lender taking good care of you? Agents can review that too. Financing, you've heard about all the short sales, right? Who do you think benefited by them. Short term agents with short term goals.
5) As for discounts the other agent spelled it out pretty well. If a house is $800,000 and the seller is offering 3% commission that is $24,000 commission. What if you could get that same house for $50,000? You just left money on the table. It happens every day. Agents know the value and know how to save you money.

Now let's look at the same thing. You got the 3% off but didn't realize that the contract you used didn't bind the seller to repairs and there is $10,000 in section 1 repairs, and the inspection noted a posible cracked chamber in the furnace (do you know what that means), oh and that the contract said Buyer to pay for certain title, escrow, transfer etc fees, when in maybe your area it is standard for the Seller to pay, now you really have overpaid. But, heck, you saved $24,000.

Let's look at another situation on the same house. Let's say the Seller left something blank in the disclosure statements. You think it means not applicable but find out that they didn't know an answer you were to look up yourself and now you live next door to a sex offender. But that's ok, right, you saved $24,000.

This is not ment to ding a dual agent or scare you too much. But to enlighten you. Buyers agents work hard to make you happy so that you refer your friends and family to us. That is how we grow our business. We work full time, we live and breath Real Estate, we should know a heck of a lot more than you do. We want to get YOU the BEST deal.

If you like to shop on your own by all means do so. But, please interview and pick an agent, discuss their fee schedule and if you agree keep your word and be honest with the others. There are several types of Buyer agents out there and I'm sure there is one that will fit exactly what you are looking for, service and price.
Web Reference: http://www.terrivellios.com
2 votes Thank Flag Link Fri Jan 11, 2008
You've created a little mess for yourself in an attempt to "save/keep the real estate commission." To help clarify. TO ALL BUYERS OUT THERE IN THE CYBERWORLD, a real estate commission is an offer to a "license agent," who provides a buyer ready, willing, and able to buy the home. It is a contract between the listing agent and the seller which is published via our local Multiple Listing Service (MLS). A commision is only payable to a LICENSED REAL ESTATE AGENT who is employed by a LICENSED REAL ESTATE BROKER. Note: these must be California licenses. Unless you have a real estate license, you get nothing!
SInce you have decided to create this lovely legal matter. I suggest that you talk to a real estate attorney. To clarify for you....A real estate attorney is a person who is LICENSED by the State of California to give legal advise. NOTE: you may have to pay for this advise which may create another problem for you....opening your wallet to pay for the knowledge, expertise and experience of a professional. Best of luck to you, you'll need it.
2 votes Thank Flag Link Sat Jan 5, 2008
very simply, because you didn't ask about "procuring cause", and clearly your understanding of procuring cause is not quite right... because it's more than just the first person who showed you the property.

you asked "do I always pay buyer agent fees" and that has little or nothing to do with paying buyer agent fees...

many of us, myself included, answered your question very directly, but we also addressed your concern about realtors "wrangling" you out of money... 'oh, and of course accusing you of crimes...
1 vote Thank Flag Link Sun Jan 13, 2008
Alan May, Real Estate Pro in 60201
MVP'08
Contact
Hi El Nino - you are free to search for your own home even if you enlist an agent. An agent may be paid a commission if you entered into a formal buyers agent agreement that states that a commission is due if you - the buyer - purchases a property with or WITHOUT the assistance of the agent you enlisted.

Without a buyer's broker agreement, a buyers agent may not be due a commission if you find your own property without their assistance. If your agent identifies a property, shows it to you and you decide to purchase the property without their assistance, the buyers agent may be due a commission due to procuring clause - it seems that was covered extensively already :)

My advice is that you are clear with the buyers agent that you are also searching on your own for a property so that the agent is on board with the terms of your search. You may want to have your agreement with your agent in writing, spelling out the terms in which you want to work with the agent - that is up to the two of your to decide - what they will do and how they will be paid, regardless of your own plans for an independent search.

What is important to understand is that the commission that is offered to a buyers agent has already been negotiated with the seller and seller's agent. The coop commission is payable to a licensed agent that is a member of the MLS board in which the property is listed.

If you want to purchase a property without representation, it is up to both the seller and seller's agent to determine if they want to provide a portion of the selling commission to you as the buyer. The seller and seller's agent are not obligated to provide a portion of the already determined commission to be paid to a buyers agent.

The answer is always no if you don't ask - nothing wrong with asking, just know the answer may be no.

One final point of clarification - a buyers agents commission is not ALWAYS paid by the seller. In some cases, the seller may be represented by a sellers agent. The sellers agent may NOT offer a cooperating commission. In this case - albeit rare, but more common in pocket listings, ie listings NOT on the open market or MLS, if a buyers agent brings a ready and able buyer to the table, without a buyers agent agreement in place, the buyers agent will not be compensated. Agents are not entitled to compensation.

I use a buyers agreement that states that the buyer will compensate me if my buyer purchases a property with me. If the seller's agent is offering a cooperating commission, my terms generally allow my compensation to be paid by way of the coop commission. If no coop exists, my buyer has agreed to compensate me for my representation. It may not work for everyone, however, that is how I work with my buyers.

Different strokes for different folks - in my case, I agree upfront with my buyer regarding not only the terms of how I will represent my thm, but also how he/she will compensate me before any transaction is procured.
1 vote Thank Flag Link Sun Jan 13, 2008
What is your goal? If you wanted to find a house on your own and eliminate buyer agent commission, do you realize by your behavior you may have mislead any agents you talked to? So you are now worried that someone will do to you want you just did to them. That is karma, and what goes around comes around.

Realize the majority of RE lawsuits in California involve parties who had NO AGENT representing them. If you are a sophisticated and repeat buyer/seller in the area, maybe you don't need the help. If you never signed a buyer broker agreement. you just have your own conscience to live with. If not, realize that to a normal person it appears you are now trying to steal commission money from a buyer agent who was researching and working on your behalf in good faith whether you had a formal contract or not.

Please recognize your behavior is why other states now customarily have BUYERS pay their buyer agent commissions.

Realize that any experienced seller agent will strongly recommend you have SOME agent represent you (even for $500) to protect their seller's interests and prevent the possibility of future legal actions. If you have no agent, that means seller agent is burdened with the job - and if there's a problem later, who are you going to sue-yourself? No, you will likely try to sue the seller and the seller agent--when, the reality is someone was willing to work for FREE (at no cost to you) and you refused their help.

I know of one situation where the listing agent sold a home private, "farmed out" representing the buyer and doubled her commission but the buyer agent got nothing. Even tho my client was willing to pay my commission, that listing agent STILL would get both commissions so they took the other in-house offer even when my client would have paid more $$ for the seller--that's how they wrote the contract. Sound fair to you?
1 vote Thank Flag Link Fri Jan 4, 2008
It would be ironic if the house you purchase costs you more to buy because you cut your representative out of the deal. A buyer's agent has a primary duty to promote and protect his clients financial and economic interests. ( Fiduciary duty )

By eliminating your own representation, you have only El Nino to look out for El Nino. while the seller has a professional expert on his side.
1 vote Thank Flag Link Fri Jan 4, 2008
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Hi There El Nino,

I think you got everyone rawled up because of the incomplete questions and partial statements above( a little difficult to follow) plus additional accusations that realtors are intending to "wrangle money out of you"

Many Realtors below did mention "procuring cause" but just didn't call it that, as I imagine most consumers won't have a clue or a care what it is technically called which is why the process was described in many ways below.

Good Luck on your home purchase and we all hope you get what you are looking for.
0 votes Thank Flag Link Sun Jan 13, 2008
Why did'nt you guys just say two golden words "procuring cause" instead of accusing me of crimes i didn't commit and your bread that I did not steal.

For buyers looking for a honest answer, I got all my answers at link below.
0 votes Thank Flag Link Sun Jan 13, 2008
You understand that if you enlist an agent to find a house for you, and they you find a house without them and cut them out of the commission, they've done a whole lot of work for YOU without getting paid. How would you like it if you did a lot of work form someone and then they didn't pay you? You'd probably sue them. However, real estate agents do this all the time. If you think a seller is going to discount the price because an agent is being paid, you are thinking that while you are being greedy, the seller is going to be altruistic and HELP you be greedy. As for having more than one agent....I've found there is a large part of the general public that believes the more agents they talk to, the more houses they are going to be shown, when in reality we all have access to the same houses. Some of the public believes we all have secret listings no one knows about except that one agent. I can tell you that if I find out that one of my customers is talking to multiple agents I will bow out of the picture. I don't have time to be involved with disloyal buyers, I'd rather spend my time prospecting.
0 votes Thank Flag Link Sun Jan 6, 2008
Elvis.....you are priceless!!! :)

El Nino~ you are spending so much time avoiding the agents and keeping yourself protected contractually that you're missing out on good deals.
Get off the couch and go buy a home and let the seller pay your agent to properly protect you....you will most likely save more money in the long run and certainly sleep better at night knowing that you didn't miss anything.

Oh wait....you're probably now lying in bed, thinking of ways to take the agent(s) to court now for non-disclosure or such to get MORE money back.....
0 votes Thank Flag Link Sun Jan 6, 2008
El Nino, I agree with the others. Get an agent. Choose an agent that you trust, respect and will use exclusively. It will work in your best interest in the long run. If you don't plan to use a particular agent because they aren't doing the job you need, then go on and use another agent, but be ethical, honest and upfront about moving on....... PLEASE!!!! We get so tired of thinking we are working with someone, searching out properties, going to preview them, and never hearing back from a buyer.

Please give whatever agent you work with the courtesy of respecting them and their time. The only thing an agent has to sell is their time, their knowledge and their negotiating skills. Please don't waste their time if you plan to run to numerous agents and "do it yourself" too! This is why I, and many other agents use a buyer broker agreement. I want to know that if I committ- the buyer committs also!

Good luck on your home search.
0 votes Thank Flag Link Fri Jan 4, 2008
Elvis, that was hilarious! We love it, and we concur!
0 votes Thank Flag Link Fri Jan 4, 2008
Just employ experienced agent. You have not pay any commission to the agent.
0 votes Thank Flag Link Fri Jan 4, 2008
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