controlling buyer-agent's commision when selling

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Submitted by newdad on September 20, 2017 - 10:26pm

I have never sold a house before and was wondering how commissions work when selling.

The seller works directly with the selling agent and so can specify the commission he gets explicitly.

What about the commission for the buyer's agent? Can you specify upfront that you are willing to pay only x% commission to the buyers agent?

Submitted by ucodegen on September 20, 2017 - 10:57pm.

My understanding is that the standard commission is 6%. Normally that is split up 3% to buyer and 3% to sellers agent when they are different people. As a seller, you generally can not specify what the buyer's agent gets, and you probably don't want to dis-incentivize the buyer's agent. Just assume that the total will be at most 6%. Some buyer's agents will charge less, just make sure that your seller's agent does not try to absorb the remaining amount in that case. A friend of mine sold a house, the buyer's agent had a commission of 2% not 3%. My friend's seller agent convinced them to renegotiate the contract for the seller's agent to get 4% at the last minute of the deal.

Submitted by zk on September 21, 2017 - 8:27am.

I could be wrong, but it was always my understanding that you could specify the buyer's agent's commission in your listing. You can make it whatever you want.

Submitted by spdrun on September 21, 2017 - 9:08am.

FSBO. Make it clear that buyer pays their agent's commission out of pocket if s/he brings a parasite.

Submitted by FlyerInHi on September 21, 2017 - 11:41am.

zk wrote:
I could be wrong, but it was always my understanding that you could specify the buyer's agent's commission in your listing. You can make it whatever you want.

Yeah, read the contract. Anything on it can be changed, if the parties are willing.

Submitted by gzz on September 21, 2017 - 12:39pm.

zk wrote:
I could be wrong, but it was always my understanding that you could specify the buyer's agent's commission in your listing. You can make it whatever you want.

That is correct. We had an interesting thread here years ago on what to set it at.

Normal full service realtors in san diego charge 5 not 6% with an even split.

Personally if I sell my condo I will do FSBO, pay a little to get a MLS listing plus a free zillow listing, maybe pay for premium zillow placement, and not pay a buyer's fee. There are typically like 3-10 condos for sale in all of OB at most times and they sell themselves very quickly.

I am willing to split a flat fee to the buyer's agent to help with paperwork, maybe 2k each.

Areas like mission and carmel valley that appeal to high income job relocators probably you will need to pay a buyer agent to reach that market. But the OB market is investors, long time San Diagans who have always wanted to live and own here, and finally current local homeowners looking to up or downsize, in order of importance. These people do not need agents holding their hand and would rather you pass part of the savings on to them.

Submitted by newdad on September 23, 2017 - 11:18am.

My experience as a potential buyer has been that my agent is there to let me into a house and then do the paperwork if I decide to write an offer. This not to say that he is incompetent, on the contrary he is a very knowledgeable and professional guy to work with. But I would think that increasingly, many people no longer rely on an agent to get the scoop on a neighbourhood or the general market etc. So it does kind of make the buyers agent somewhat redundant.

On the other hand, since purchasing/selling a house is going to be the most expensive transaction for most people , I do not think we are going to see a pure peer to peer market either.

Submitted by FlyerInHi on September 23, 2017 - 11:25am.

newdad, in a seller’s market where inventory is tight, I recommend contacting the listing agent and let him/her handle both ends of the transaction. You have to search for the listing agent.

Put yourself in the shoes of the seller’s agent. All else being equal, which buyer would you most favor?

That’s how I bought properties lately. One time, a neighbor told me the seller’s agent came by and was about to list. I contacted that same agent and had an approved offer the same day the property hit the MLS.

Submitted by gzz on September 23, 2017 - 3:38pm.

Flyer, I did the same thing. Technically the listing agent referred their best buddy at the same agency. Also did an offer the same day as the listing.

I have no complaints since I got a place I love below market price. But the poor seller could have had an extra 25 to 30k if he had done FSBO and priced it better. I know this for a fact because I would have paid more and not cared at all if it had been FSBO.

Yet another example of poor pricing. There was a short sale that was on the market for several months priced like 20% too high. I put in a low ball offer, both by email and telephone. No response at all, though the agent got it because I was added to the agents email marketing list. A couple months later, the price gets cut by almost 25%. This is despite the fact I made a slightly higher offer. Listing agent does not even bother to tell me, the guy who offered more than the new list price in a slow market. I then put in a full price offer, below my prior low ball offer, and got it.

I am sure there are plenty of awesome agents around here, but both of my experiences buying the agent left serious money on the table.

Submitted by gzz on September 23, 2017 - 3:59pm.

Newdad, to add something more specific to flyer's advice, you should drop your buyer agent asap and look yourself for a place online.

When you find something you want, take one of these courses:

If a FSBO, do not use a buyer agent. This makes your offer better than anyone who does have a buyer agent, who will charge the seller 1 to 2.5%. You may have to pay someone a 1500-2500 to handle paperwork that realtors normally would.

If it has been sitting on the market and is otherwise not hot, use a discount agent who will rebate part of his fee to you.

If it is a hot place you will be competing with other buyers, ask the listing agent to refer both a buyer agent and mortgage broker.

A final point, we have been seeing prices rise pretty steadily the past 3 years, with the two years before that showing very large increases. All signs point to at least another 7% or so over the next 12 months.

So if you are looking at the 650k range, you can expect that prices will go up about $3800 per month on average, possibly more like 5k a month. So I suggest you buy something that is "good enough" and start being on the right side of those increases instead of waiting for something perfect.

Submitted by Escoguy on September 23, 2017 - 9:41pm.

My sister is an attorney in Texas. When she bought a home, she had the seller pay her the 3% commission as she represented herself.

The other agent and seller agreed.

Submitted by newdad on September 24, 2017 - 3:38pm.

flyerinhi - I was thinking of switching to redfin to get their discount but it never occurred to me to contact the listing agent directly. That does sound like the better thing to do. Thanks for the suggestion!

Submitted by FlyerInHi on September 25, 2017 - 9:59am.

gzz wrote:
Flyer, I did the same thing. Technically the listing agent referred their best buddy at the same agency. Also did an offer the same day as the listing.

Yeah, I think it depends on the rules of the brokerage. Sometimes the same agent double ends. Sometime, they get someone else in the same office.

I think consumers who don’t buy houses often are too emotional. They get picky about little things that can easily be corrected.
They also get attached to an agent and feel loyal to that person. But that’s not the art of the deal. Oftentimes, listing agents don’t even want to show unless you’re ready to put in an offer.

In this market, you have to identify the house yourself, be ready to offer sight unseen, or right after viewing. If you’re slow, buy new from a builder, if you like living out in new developments.

Submitted by vine2winesd on September 25, 2017 - 4:55pm.

Yes any commission terms can be set or changed. The old 'standard' exists and is always negotiable.

I am in escrow on a house I am selling and using HomeBay which is saving me a TON of money on commissions. Technically they are considered a limited service broker, but in practice its like an FSBO but with broker expertise guiding you through the process.
All transaction related docs are created by the broker and sent via docusign to all parties and kept online. but all the tools, dashboard etc are available. Because they use the MLS, it does get pushed out to all the popular websites such as Redfin and Zillow.
In fact I was able to create a 'coming soon' on Zillow for the house and it went pending in 24 hours after going live.

For me, its been amazing. But I fit the profile for the type of user they cater to. Tech savvy, understands real estate enough to know the process, can market, take professional photos and write a great description.
Nobody knows the neighborhood or house better than I do to sell it (even after speaking with 'local expert' agents ) and can objectively negotiate on my own house and know the best comps and most of all have the time to do it.

They charge a flat fee which is less than 1% of the listing price and I can set my own terms on what the buyers agent gets.
In this case, because of the current market, quality of the house, neighborhood, the buyers agent is getting 2% vs the 2% REX charges and then the 5-6% for a traditional agent.

Again this is not for everybody. But doing it this way, its hard to justify using a traditional agent based on a % of the sales price in a sellers market. If I were trying to sell in a buyers market, I might think differently, but for now its saving me a tens of thousands.

Submitted by gzz on September 26, 2017 - 10:23am.

Vine, did your buyer have an agent already before he found your listing?

It is kind of funny that seller agents are getting squeezed more than buyer agents even though they do more work and have higher expenses.

Submitted by vine2winesd on September 26, 2017 - 12:07pm.

Hi gzz, yes the buyer did. I cant say he was overly pleased with the commission rate when we reviewed terms but didnt actually disagree or cause a stink about them. But I do think its ok to go 2-2.5% depending on your zip code or local market. If you have an exceptional home that will sell itself, then I think you can push for it.

Since HomeBay uses the MLS it showed up in the MLS database and available for any licensed agent. All controlled from my dashboard. It was simply a matter of clicking "list it."

However, if a buyer did want to buy the home or begin that process without an agent, HomeBay would have facilitated that as well. If that would have happened, the buyers commission on my end would have been less than 1%.

I close escrow on the 10th and so far, the process has been great.

Submitted by vine2winesd on September 26, 2017 - 3:38pm.

Well, in my case I am selling the house and doing ALL the work, so in essence I am paying for myself, HomeBay are merely facilitating the contracts and offering guidance. I didn't feel there was convincing enough evidence that a traditional broker or REALTOR could really do much more that I wasnt willing to do or get from HomeBay.

In a traditional brokerage sense, I think an agent is worth their money if a seller virtually does not want to be involved with the business side of things with the house. I totally get it.

In my experience a sellers broker is up front with their %s. Many times tehy have much more overhead to take into account which the seller is obliged to pay for.
But like I said earlier, everything is negotiable. Redfin recently lowered their listing fee to 1% and 3% to the buyer agent.
I think leveraging some of the rebates that Redfin offers as a buyer should be a negotiating tactic for a buyer if they are looking to hire an agent to get some cash back after the deal closes.

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