Thread: Question about real estate agents and commissions

GSM, I can't speak for all agents, but I know I'd never cut my commission in half for the benefit of a buyer who I don't represent. Normally, on a listing that I take, I write a variable commission clause, so if in addition to listing the property I also bring in the buyer, then I lower my commission (i.e. listing contract is for 6%, if I work both sides of the deal, then I'd do it for 5%). I'd strongly recommend being represented by your own agent, who would be working on your behalf (not the listing agent, whose fiduciary duty is to the seller). What area are you in?

Originally Posted by gsm113

Hence when it comes time to make an offer, the seller's agent can forfeit half the full commission to help the seller arrive at the offer price.

Can is the key word here because unless the listing agent and seller address a situation such as an unrepresented buyer in the listing contract, such as what Maui or myself do, then the commission WILL NOT be cut just because another agent is not involved.

A good agent does much more than find the properties! I agree wholeheartedly with Maui that you need an agent to represent you & your interests.

Thanks for the responses.

So let me understand. A normal commission structure might be 6%: 3% to the buyer's agent and 3% to the seller's agent. If there is no buyer's agent, the seller's agent gets to keep the whole 6% (unless otherwise specified in the listing contract, such as maui does).

Why then would it not be reasonable to state in the offer that the seller may reduce the agent's commission to 3% to help arrive at the offer price? The agent would still be earning their normal commission. Is it the seller's decision or the seller's agent whether to accept such an offer?

There is not a normal or standard commission amount. Maui was just referring to the amount he may negotiate with the seller.

The commission is set by the agent/RE company and the seller in the listing contract. You are not a party to that contract. There is no reason for you to reference the commission in your offer, just make your offer based upon recently sold comps. It might appear to you that by not having an agent to represent you that you are going to save some $. This will not be the case in the majority of situations. If the property is overpriced by 10%, do you really save as much as you could have IF you had an experienced agent representing you? Also there are many other considerations beyond just the price to consider when considering the terms of your offer, such as inspections, closing date etc etc.

Again, you need a buyers agent. Please take our advice and ask friends, family, coworkers and neighbors for their recommendations and then find an agent with the experience in the area, price range and type of property you are looking for. It is very possible and normal in most situations that the commission for the buyers agent is actually paid for from the commission that the listing agent is paid. Free professional and experienced representation to protect you and your interests cannot and should not be under estimated!

Good luck and best wishes with finding an agent to ensure you get the right property for you at the best possible price and terms. The nature of your questions indicate that it would be in your best interests to have a buyers agent to represent you. Again, I kindly suggest that you retain the services of an experienced buyers agent.

Crunch the numbers and see what you'd possibly be saving. You said you're buying a small condo, is that like $75,000? If so, 3% of $75,000 is $2,250, right?

Let's say you somehow negotiated the listing agent to come down that much so you save that from being factored into your loan amount (assuming you're getting a loan and not paying straight cash). $2,250 amortized over 30 years is less than $15 a month. Plus, you went through the transaction without being represented, which means you're much more likely to make mistakes, encounter headaches, or possibly even be liable for things you didn't even know existed.

It's sort of like doing a medical procedure on yourself without any medical training, or representing yourself in court when there's several thousand dollars on the line.

Most people will buy and sell about 7-10 houses in their lifetime. A good agent sells that many each quarter of the year. Who do you think has more knowledge and can find a better house for you, and get your a better deal, while also reducing your hassles and liabilities?

And to boot, you're not paying them up front for the job they do as your agent. It's financed over a 30 year period.

To me, is just makes sense to work with an agent, ESPECIALLY when you're a first time buyer. Trust me, no amount of watching TV or reading books can prepare you for what buying a house entails. I personally went through 90 hours or training, took 2 tests, and had read several books and watched countless videos and TV shows about real estate, and I was still clueless when I did my first deal (which was my own house). If I had trouble and didn't know what was going on, no regular buyer would be able to do better.

Remember, your home is most likely the biggest financial transaction you're ever going to make, and you are thinking about trying to do it on your own for the first time.....learn from the mistakes of others before making the same mistakes yourself. There's a reason Real Estate Agents exist and are in business today--most people need them to be guided through the home buying and selling process.

Originally Posted by gsm113

Thanks for the responses.

Why then would it not be reasonable to state in the offer that the seller may reduce the agent's commission to 3% to help arrive at the offer price? The agent would still be earning their normal commission. Is it the seller's decision or the seller's agent whether to accept such an offer?

Even if you and the seller write in the offer that the commission will be only x% it won't change the contract/listing agreement the seller already has with the listing agent.

The offer is between you and the seller and the agent has no part in it.

The listing contract is signed before you ever show up and is between the seller and the agent and no one else.

Your friend used to cut their commission and now they no longer sell real estate. Go figure.

Originally Posted by Greg

Your friend used to cut their commission and now they no longer sell real estate. Go figure.

Actually she used this to cut the other agent's commissions, not hers. She used it when buying her home before she was in real estate. And she no longer is in this industry despite her success.

Based on what I'm hearing this is possible especially in a buyer's market. Of course I know the listing contract is between the seller and his agent, and that the buyer has nothing to do with it. I don't care what's in the contract. When I make an offer, and there is no agent representing me, they can work it out between themselves how to split the difference. Makes no difference to me. If the agent wants to make a deal in this market I don't see why not do this. I do realize this would be more effective on a higher priced house.

What I don't understand is why the agent who would normally earn 3% would now demand 6% for doing the same thing. Seems like the perfect negotiation point to me.

Originally Posted by gsm113

What I don't understand is why the agent who would normally earn 3% would now demand 6% for doing the same thing. Seems like the perfect negotiation point to me.

Actually, if you are unrepresented, the agent will have to do the work of your agent. An agent that is unfortunate enough to have to deal with certain types of unrepresented buyers deserves 150% of whatever commission amount is on the listing contract.

Yes, you need your own representation. Someone who will be working for you and you only.