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then you state that a property might sell above market value. by your definition, a home can never sell above or below market value.

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I can see the confusion. Property can sell at, above or below "market" value depending on what you are using to determine said market value. In my fixer upper example...the fixer upper selling for $50,000 is selling for market value (assuming you are comparing it to other fixer upper sales). But if you are comparing it to what a house in top market condition might sell for in that neighborhood ($100,000 in my example) then it would be selling for well below market value. But we all know the fixer upper isn't worth the $100,000 market value in the condition it sits.

This is a dynamite thread.

To get back to the OPs discussion, I rarely list homes at 6%, so I take the reduction on my side. I don't want there to be any deterrent that might keep an unscrupulous agent from showing or promoting my listing to their buyer. As agents we have a duty to show and bring to the attention all properties, but we all know there are plenty of agents...doctors...lawyers etc out there who aren't concerned with the ethics of their practice.

Buyers should be aware of the commission being offered by the seller. If they have signed a buyer's representation agreement, there should be a set commission amount in that agreement that stipulates the buyer's broker will attempt to get paid by the seller that amount, but if it is not offered, or partially offered the buyer is responsible for the commission.

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listed our house last week. our agent put 2% for each agent in the contract. she had a client looking for a house like ours. she brought him over before the house went on the market. we had a contract two days later, before the house ever went on the market. we're only having to pay a 2% commission to our agent only

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A friend sold a house to a buyer that was also using her sales agent. A year or so later, the buyer decided she'd paid too much for the house and started making crazy claims about things that "weren't disclosed." My friend claims they were even discussed in front of the realtor. The buyer wanted her to buy back the house. Realtor "couldn't remember if the conversations had happened or not" because she didn't want to offend anyone. So the one person who was supposed to be on her side wasn't taking sides.

This is the way it should be:

sellers should decide if they want to use an agent - if they do, then negotiate a fee for services. Could be flat listing, could be %, could be something creative.


If a buyer decides they like the property, they can make an offer. In the offer they can include an amount for their representation or they can not. The buyer should decide.

-that seems like the most ethical way these should be handled.

Buyers should pay their agents. The question is the best way to align the buyers interest with their agent's interest? The better the deal the buyer gets the more money their agent should get.

Good thoughts everyone. Thanks for chiming in. Will be interesting to see how real estate representation changes over the next 5, 10, 15 years. Maybe it doesn't change much at all and things stay how they've been for the past however many years with 6% being the norm and some flat fee/discount brokerages scattered around. I, for what it's worth, intend on revolutionizing seller representation with a flat fee price AND full brokerage service.

Flat fee? Do you market a $150,000 property the same way you market a $1,000,000 property? If I'm paying you a flat fee then what is your incentive to work harder to get me the best price and terms? Is that flat fee the same if it's a house, a duplex, a small apt complex, raw land, commercial building, mobile home, rental?

A lot of property owners waste realtors time and money with listings they aren't going to sell. Is the flat fee upfront?

Eventually if every agent charges the same flat fee then what differentiates my property as well as my realtor? Are these just Big macs coming off the assembly line?

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Flat fee? Do you market a $150,000 property the same way you market a $1,000,000 property?

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For the time being, yes. If the seller of a $1,000,000 property feels they need to host open houses with drinks, hors d'oeuvre, give-aways, etc...I'm not your guy. I believe in the power of the MLS and the exposure it brings. I don't believe hosting open houses and spending hundreds (or thousands) to get looky loos through the door.

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If I'm paying you a flat fee then what is your incentive to work harder to get me the best price and terms?

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Feel free to browse my website to learn more. I take a portion of my flat fee upfront and a portion at closing.

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Is that flat fee the same if it's a house, a duplex, a small apt complex, raw land, commercial building, mobile home, rental?

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Nothing is set in stone. As far as a rental...no...I don't have a flat fee rental listing.

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A lot of property owners waste realtors time and money with listings they aren't going to sell.

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So is this the Realtors fault or the sellers fault? I'm not interested in taking a listing just to take a listing. I do full CMA's for my sellers and if a seller wants to sell for a ludicrous figure...I'm not really interested in wasting my time for the small upfront flat fee. In the long run, it won't be worth my time and the hassle it is sure to bring.

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Eventually if every agent charges the same flat fee then what differentiates my property as well as my realtor?

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If every agent charges the same percentage based commission, what differentiates your property? There would be no difference between a flat fee or percentage based commission as it relates to differentiating your property.

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If I'm paying you a flat fee then what is your incentive to work harder to get me the best price and terms?

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. Wait a sec if you use that argument then wouldn't you have to take a similar stance on a % fee for a buyers agent. What is the incentive for the buyers agent to get you into a less expensive home or get you the bet deal on a home you want.

As someone who recently did a FSBO, I am whole-heartedly in agreement that buyers should pay their own agent! I've sold two homes...I found having my own (seller's) agent to be most helpful when I had to move out of state before the house sold. She and her assistant took care of EVERYTHING, but I was really ticked that she had to split the 6% with a buyers' agent who was a complete PITA! I think the seller paying the full 6% encourages less than professional behavior from some agents.

When I did FSBO, I talked with jmazz about his service. For my property (<$250k), he would have provided a GREAT service. However, I knew in my market that the buyers' agent would still expect 3%...and that was the case. In fact, I heard from other agents that in the BCS market, there are quite a few agents who won't even show their clients FSBOs because so many sellers are unwilling to pay any commission. I went into it expecting to pay up to 3% buyers' commission, but by the time the transaction was complete, I resented paying the buyers' agent anything at all! After sending me a completely low-ball offer, the buyers' agent was unwilling to lower his/her commission at all to get the deal done (My impression at the time was that this was an issue due to the need to pay out to the broker. Feel free to correct me if I'm wrong...). It just left a bad taste in my mouth. And when the "acceptable" variance in appraisals (2-5%) is pretty much equal to the typical real estate agent commission, I just think we need a different model.

Letting buyers roll their portion of their agents' commission into their closing costs is the fair thing to do, since the buyers' agent is acting on behalf of the the buyer only.

Double post


[This message has been edited by TXTransplant (edited 4/11/2014 5:44p).]

I heard a story recently about a Buyer's agent who freaked out when she heard the house she just showed her Buyers was 2% to her.
Why she had to 'hear' this instead of reading it on the listing tells you that a lot of Buyers agents are just assuming Seller will pay them 3% and therefore their Buyers are assuming the same thing
And further therefore , Buyer Agents are getting away without putting Buyer's Rep Agreements in place because they don't want to spook their Buyer with a commitment- hence the freaking out agent.
I agree with JMazz, commissions are negotiable. I think agents should charge more than 6% sometimes (bringing contractors in, mowing lawns, etc...)
A sort of a la carte commission system. You want this, pay this amount, you want open house, food, etc... Then this amount, I manage property while you're out of town, etc...
I further agree that Buyers should pay Buyers agent - but then Listing Agreements would need to change . Try being the first with a 3% listing but 0% to Buyer!
Lenders may need to help finance buyer commission, etc...
Paradigm shift, indeed. I'm game. Let's do it.

Good thread JMazz

Is it unfair that the Seller pays the Buyer's Agent to represent the Buyer's best interest? Yes! However, there is a very similar process in auto sales. Again, legal fees can be shared unfairly. In most cases and with most products, the cost of the salesperson is absorbed by the seller. When a market analysis is conducted the commission paid is never removed prior to a listing price being recommended. It is included and factored into the list price. I use Buyer representation agreements especially under certain conditions being 1. loyalty of the Buyer is in question or 2. The Buyer is requesting a property search for unlisted properties. If I have a previous relationship or a favorable feeling of loyalty, I will forgo such a demand. There is an old saying in real estate that "Buyer's are liars". This is based on the lack of loyalty to the agent, and the embellishment of the earnest intentions of the buyer. While I'm certain all of us in the profession will not argue that there are some tarnishing the reputation of our profession, there are many that take great pride in the job and service we provide. I would recommend that when interviewing agents for either Seller or Buyer Representation, you ask directly for the ability to cancel any contract for lack of or poor performance. If those being interviewed are unwilling to guarantee their service, I would assume you received a clear insight with regard to their value and integrity. Last, I would ask all on this thread complaining about paying Buyer's Agents when selling, how many have personally paid their agent when purchasing.
I would add that I pay Buyer's agents on my personal properties whether selling or renting. I also will use Realtors from areas outside of my market because I value the service they provide.

[This message has been edited by aggiebear99 (edited 4/11/2014 10:47p).]

Interesting thread

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Is it unfair that the Seller pays the Buyer's Agent to represent the Buyer's best interest? Yes!

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I look at the fee paid to the buyers agent as a finder's fee, and not a reimbursement for services rendered to a buyer. There is no value to a seller for the buyer being provided any services other than bringing the buyer to the seller as an earnest and interested potential buyer.

^That's a good way to look at the buyer's agent commission. Now...why 3%?

Also wanted to be the 50th post on this thread.

Carry on...

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Now...why 3%?

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You can offer anything you want as this number. The more you put in this box, the more realtors will bring buyers.

In the current scam of real estate agents. Why doesn't someone just be a buyers agent and advertise that the agent will actually pay any buyers who sign with them $1000. Seems like a no brainer

I know commission is negotiable and you can offer a buyer's agent whatever you want. More might be more enticing to an agent but not a buyer. Agents aren't supposed to steer their clients one way or the other so if you have a property in a desirable area or that you know will sell (like the recent 1.5% and 2% commission to buyer's agent listings I've done)...why give away more than you need to?

Carnwell...there are agents who offer buyer rebates. They give a portion of their commission back to the buyer. It's a grey area but it's out there.

Carnwell - Your theory works for Buyers who do not have a relationship with any particular agent, and place emphasis on a $1,000 rebate. The fact that this theory is not the norm speaks to the value a quality agent brings to the table as well as $1,000 being substantially less than 1% of the price of the property in most cases. An experienced buyers agent can save a buyer a much greater amount in many transactions.

Rebates to the client are clearly stated as ethical and legal by TREC, and they are becoming more prevalent. Just as the flat fee service is growing within the industry. I agree with Jmazz that the Buyer's agents value to the seller is bringing the client to the table, but make no mistake as a Seller you are paying for their representation of the buyers best interest.

don't get stuck on the # i threw out there. $1000 was just a round figure...could be anything.



Ultimately - the most ethical and straightforward way to handle the transaction is for each party to have representation paid for by themselves.

Who actually does pay the commission? Yes technically the seller, but if there is no buyer than no commission is paid. One could make a really good arguement that the buyer actually pays ALL the commission.

IMO, The best way to look at it is that the transaction pays the commission and not any one party.

For the people thinking all realtor fees are too high and should be lowered.. do all of you lower your fees for services you provide at work? Why should I have to pay lenders origination fees? Why should I have to pay title fees when I refinance my house? Why do we need car salesman? WTH do they do? This list could go on forever. Point of it is.. if you do not want to pay for a service, you can usually always find a discounted one or try it yourself.

"but make no mistake as a Seller you are paying for their representation of the buyers best interest."

This is spot on. We just sold our house. The folks who were buying it were nice and as cordial as could be. Their buyers agent was pushy, rude, and just flat out unnecessarily cold to us.

Kept running through my mind how we were basically paying x thousands of dollars for her to treat us very poorly.

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Who actually does pay the commission? Yes technically the seller, but if there is no buyer than no commission is paid. One could make a really good arguement that the buyer actually pays ALL the commission.

IMO, The best way to look at it is that the transaction pays the commission and not any one party.

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This is only true if ultimately the home sells for at least 3% more than what the seller paid for it. That's why I did FSBO...I knew it was pretty much impossible that I would get 6% more for the house than what I paid. I was darn lucky to get just under 2% more. When it was all said and done, I technically lost money on the transaction. I felt fortunate to get back enough to return my down payment and most of the original closing costs that I paid. Although I tried, I was not able to pass the entire 3% buyers' agent commission on to the buyers.

My thought is that this is exactly the kind of situation that would appeal to a client of jmazz. There are a lot of reasons why a homeowner might have to sell before they have significant equity in the home (above the original down payment). You add to that the buyer requesting that the seller pay closing costs (if the buyer asks for them and the seller feels pressured to pay them), and a seller could be in a world of hurt. Of course, the seller paying the buyers' closing costs is another ridiculous request (at least for resales - maybe not so much for new builds that often come with all sorts of incentives), but that's a topic for another thread...

I also disagree with the fact that the buyers' agent brings buyers to the table. Every house I've ever purchased (there have been 3), I found the house myself, either on the MLS or by driving around. Only AFTER I found the house did my agent show it to me at my request. When I sold FSBO, the BUYERS contacted me to set up a showing. And then came to the showing with their agent in tow. When the buyers' agent submitted the offer, I also received a form to sign where I acknowledged that I understood the buyers' agent was their to represent the interests of the buyers and the buyers only.

The times I used a buyers' agent, it was to protect my own interests and to help me navigate the process (help with inspections, appraisals, dealing with paperwork, etc.). Fortunately for me, all three homes I purchased were brand-new builds and the builder already had an agent under contract and the cost factored in to the price of the home. However, I would have gladly paid the buyers' agent fees because of the wonderful service that I received from the buyers' agent once I was under contract.

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I also disagree with the fact that the buyers' agent brings buyers to the table. Every house I've ever purchased (there have been 3), I found the house myself, either on the MLS or by driving around. Only AFTER I found the house did my agent show it to me at my request. When I sold FSBO, the BUYERS contacted me to set up a showing. And then came to the showing with their agent in tow

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This is true in many cases. I had a client randomly call me about a year after I helped them look for rentals. They still had some time left on their lease but wanted to look at a house. (A $500k house nonetheless.) They found it on their own and just needed me to go open it up. They ended up not liking it but I stood to make $15,000 for answering my phone, driving about 10 minutes from my house and opening the subject property. Now...there would have been some additional contract work, negotiating, inspection coordinating, etc...but that's what I do daily...no big deal. Certainly not justifiable of a $15,000 pay day. Don't get me wrong, happy to take it but if I'm being honest that would've been a huge pay day for not much work on my part.

Don't sell yourself short, LOL! The times I used a buyers' agent, I did not necessarily expect the buyers' agent to FIND that perfect property for me. I'm a picky buyer, know how to navigate the MLS, and am just not the personality type to sit back and let someone else find the "dream home" that I'm about to spend the next 30 years of my life paying for.

But, all of that contract prep, the negotiations, time spent scheduling inspections, appraisals, etc., has a value...and that value is significant (especially if the buyer is out of town). I certainly have expected my buyers' agents "earn" their commission, but in truth, most of that effort has occurred after the offer is signed. But again, all of this work is on behalf of the buyer...all the more reason why the buyer should contribute to the buyers' agent's commission.

Currently using a flat fee full service agent and offering buyer 2.5% if a different agent brings in the buyer. If my listing agent brings in buyer and represents both sides, it's only the flat fee. History for this agent is 50/50 on him listing both sides.

In the market I live in (way outside of Texas), paying 6% on the median home value is 40k. Almost nobody in the market here pays 6%. Flat fee, 4%, and 4.5% is more common. It's the first thing everyone here negotiates and the agreed upon amount is in my listing agreement.

Bottom line, as both a current seller and buyer, I found an excellent agent and was up front about negotiating the fees. They agreed and we moved on.

One way would be to have buyers pay their agents commission based upon a combo of factors - price below appraised value + financing costs saved + closing costs saved + repair costs saved. Overall the better deal the agent gets the buyer the more money they earn.

Maybe a flat fee plus an increasing percentage of money saved in these 4 areas?

Something that aligns the agents performance with the buyers' interest.

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Is it unfair that the Seller pays the Buyer's Agent to represent the Buyer's best interest?

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Do people really still believe the seller pays the full commission?

Sold my home last summer. If someone had walked up to my door with a cash offer for less than I actually sold my home for, with no buyers agent fee I'd have gladly taken it had my net worked out the same in the end. Guess who just made money on that hypothetical deal? Not ME (seller)!

If I wasn't switching states (or had know jmazz services were out there!) I would have done FSBO or used a discount brokerage. But moving out of state I used a Realtor and I feel she earned her money. She was called/e-mailed me regularly, was there to let people in/out (carpet cleaning, electrician to fix a few items after we'd moved out, checked on the house while it was vacant for a few weeks, etc.) But if I had been moving across town, I'd have just done it myself.

Agents certainly have value, but what value depends on your home and circumstances.

Hey now...just to be clear...although I'm a discount broker I'm still FULL brokerage service...thus the reason I've coined my offering 'Unique Flat Fee.' There are some limited service flat fee brokerages out there that just slap it on MLS for a super low flat fee and then step out of the deal. That's not me.

Just listed another property offering 2% to a buyer's agent...already had a showing on first day on market. We shall see...

there is a popular agent around our area that sells houses for .33%

is it strictly a volume deal? what would the catch (es) be?

It's a volume deal. No catch really. There might be some things here and there that differ from 'full price' brokerages but the proof is in the pudding...MLS exposure is where the value lies. 3 showings already on the 2% to buyer's agent listing I listed last night at 10:00.

jmazz-

Don't hate! I paid 6% (3% to my agent, 3% to buyer agent) I knew the market was good, but we had 16 showings (with buyer agents) in 3 days and 4 solid offers on the 3rd day. Next time MLS with a flat fee JMAZZ or try to be a "trend setter" and offer 0% commish to the buyers agent and let the buyer pay the agent 1-3% for the work THEIR agent did for THEM.

Now, tell me how much MLS listing of king oaks property will do? I am not sold on that just yet. Not sure if you've done CMA's out there recently, but things are beginning to move pretty well. They certainly won't allow FS signs. Whats your take on that area now.

blasted triple post

[This message has been edited by RXAggie02 (edited 4/16/2014 7:29p).]