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Realtor 3% commission

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2:00p, 5/1/17
Realtors,

Not debating the long held practice of 3%, but how would you itemize / break down your value for the 3% commission?
-Perform CMA and suggest list price
-Help with staging, decluttering, etc.
-Marketing - photos, MLS listing, schedule showings, keybox
-Negotiating contract, inspecting report, etc.
-Closing

On the buyer's side?
-Finding the right property
-Perform CMA on target property and suggesting offer price
-Writing contract
-Negotiating contract
-Help with inspection, finding insurance, finding mortgage
-Closing

Has there been any interest in providing these services a la carte for a flat fee?
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ATM9000
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2:02p, 5/1/17
AG
This gonna be good...
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ktownag08
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2:03p, 5/1/17
AG
Popcorn
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AggiePlaya
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2:07p, 5/1/17
AG
The fee for beating a dead horse is free dollars!
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SteveBott
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2:41p, 5/1/17
AG
And here we GO...

In
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TXTransplant
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2:57p, 5/1/17
I'm just a lowly buyer/seller, but having done both multiple times (both with agents and FSBO), here is my take on it.

The buyer doesn't have a leg to stand on when it comes to negotiating the commission. The seller has already agreed to pay the seller's agent 6% (or some other percent that has been agreed to in writing). How much the seller's agent decides to give the buyer's agent is between the two of them and the two of them only. If you're doing FSBO, it's up to the agent to negotiate commission with the seller, unless the buyers happen to just be really generous.

The exception might be if the buyer is also selling a house and negotiates some sort of discount for doing both. But it would still be tied to the seller's contract.

I would have never dreamed of trying to "negotiate" with my buyer's agent. As a buyer, that is none of my business. There is a reason why real estate agent commission is almost always on the seller's side of the HUD statement.
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jmazz
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In reply to Create Account • 5:41p, 5/1/17
AG
I'm a Realtor/Broker and work mostly with sellers on the listing side but do so for a flat fee versus percentage based commission. I do all of the things you mention in your post, plus some.

I do recommend to my sellers that we offer the buyer's agent the traditional 3% simply b/c that is the norm. I don't know how long that has been the norm but it has been that way long before I entered the scene.

Despite what some might say, the seller pays the commission...it comes out of the sales proceeds. (Whether or not commission is 'baked' into the price is neither here nor there...that's not the purpose of this thread.) So, when representing a buyer, I know what I'd earn based on what is presented in the listing (typically 3% but could be more, could be less). (I could have a Buyer Rep Agreement in place and that would ensure my pay regardless of what is being offered in the listing but I don't ever use those agreements.) Very rarely would I anticipate a buyer trying to negotiate my commission when I represent them. I have, a handful of times, offered 1% of my buyer's agent commission to my buyers b/c...well...b/c I'm a great guy.
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Deats99
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In reply to Create Account • 6:19p, 5/1/17
AG
Create Account said:
Realtors,

Not debating the long held practice of 3%, but how would you itemize / break down your value for the 3% commission?
-Perform CMA and suggest list price
-Help with staging, decluttering, etc.
-Marketing - photos, MLS listing, schedule showings, keybox
-Negotiating contract, inspecting report, etc.
-Closing

On the buyer's side?
-Finding the right property
-Perform CMA on target property and suggesting offer price
-Writing contract
-Negotiating contract
-Help with inspection, finding insurance, finding mortgage
-Closing

Has there been any interest in providing these services a la carte for a flat fee?
See bold. This is where the money is made, the rest is courtesy, handled by the lender, or can be done with ease by "Joe Blow"
A good plan violently executed now is better than a perfect plan executed next week.
-George S Patton
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DallasAggie0
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6:23p, 5/1/17
Long outdated system. In a time before MLS then yea, sure I see the value. Now? Most realtors will just put a listing on MLS and wait. In a sellers market like today, a seller is out of their damn mind giving 3 or 6% to their realtor unless you have a multi-million dollar property that warrants regional exposure. There are services out there that will charge a flat fee that will save you a lot of money.

Now, in the case of a commercial property with cash flows and other variables then it's absolutely warranted.


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ATM9000
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In reply to DallasAggie0 • 6:42p, 5/1/17
AG
DallasAggie0 said:
Most realtors will just put a listing on MLS and wait.


My last 2 homes I sold around Houston, the realtors I worked with did WAY more than just put the listing on MLS and wait and I'd venture to say most realtors do a hell of a lot more than that to market the property.

So how many posts until 'BUT READ FREAKANOMICS!?
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DallasAggie0
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7:35p, 5/1/17
What exactly did they do and approximately how much was your house worth?
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evestor1
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10:40p, 5/1/17
DallasAg0 brings up a great point...jk.


The commission has not changed bc realtors are for the most part worth the money for the seller. Nothing makes me happier as an investor than seeing a FSBO sign on a home I want....bc the house will be priced wrong and the entire process is a beat down for the poor guy (typically an engineer or small business owner.)
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SteveBott
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11:01p, 5/1/17
AG
They have resisted price competition because Realtors work night and weekends. Period.

How many of you would sacrifice nights and weekends to make a career? At your age?

Their is a reason the average realtor has 'blue hair'.

Her nights and weekends are freed up.
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ATM9000
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5:56a, 5/2/17
AG
The realtors job is to get you the most value for the sale of your asset... Notice I didn't say MONEY, I said value. I can't quantify an itemized report for what my realtors have done for me... Hell, I can't even really say if their services were worth 2% or 5%. What I do know is I'll gladly pay the 3 for somebody to market the house, take calls on nights and weekends, provide a solid list price for the house, etc. because bottom line is with real estate you are dealing in a not liquid and observable market to quantify the best price on either direction of a buy or sale... Even in not custom built areas... Tons of factors go into price.

My last home from day 1 when I listed to when it closed was about 60 days. If I had to stop my work daily, take calls to negotiate, market it and work on the weekends and nights, I guarantee you I wouldn't have been near as responsive as my realtor and it would have been longer than 60 days due to my slow responses, my marketing at the wrong price or something like that.
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8:26a, 5/2/17
Thanks for the responses. Most of which had little to do with my OP, only "are Realtors worth it."

Deats99 pretty much boiled down Realtors to appraisers + negotiators. How much is an appraisal? $400-500? So suggesting a list price is $500, negotiating is 3% minus $500, and everything else is free?
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AggiePlaya
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9:10a, 5/2/17
AG
Oh Lawd
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evestor1
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9:44a, 5/2/17
To answe your question...

Yes Crowd (people that benefit):
95% of people - people who know nothing about the market - people that know just enough to understand how pricing works, but not masters - people that think they are brilliant, but really are not

No crowd (people that benefit none)
5%
These people are savvy investors. They watch the market constantly. They understand how to appraise houses as an investor and understand how a bank does it as well. They understand how to read and inspection report and negotiate (by this I mean..,negotiate...not act like a pissed off child that knows nothing about construction). This 5% often uses a realtor depending on the situation bc they are no dumb enough to think that they are god.


If you are asking the question "are they worth it" then you are likely the 95%. When your next sell opportunity comes up find a hot shot realtor that can market (and hope appraiser agrees with your price.). When your next buy opportunity comes up please go find a realtor that has in depth knowledge of construction practices in your area.
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ATM9000
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In reply to Create Account • 10:23a, 5/2/17
AG
Because you can ask the same thing of basically any other job on the planet and the answer to your question is 'hard to quantify'
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AggiePlaya
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In reply to ATM9000 • 10:44a, 5/2/17
AG
ATM9000 said:
Because you can ask the same thing of basically any other job on the planet and the answer to your question is 'hard to quantify'
When you pay big money to Doctors and Lawyers and Accountants, you pay big money for their knowledge and skillset. You are right, it IS hard to quantify.
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DrEvazanPhD
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11:15a, 5/2/17
Reiterating what's been said before, but as a buyer, you can get 95% of what you need on HAR and redfin. Redfin lets you run comps, so you can do all your own work. I never use buyer's agents, as I don't see the reason why i should take on additional debt to pay someone to take me to 3 house and fill out a form for me. I just make the seller aware that i'm representing myself, and take 3% off the price at the get-go.
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jmazz
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In reply to DrEvazanPhD • 11:36a, 5/2/17
AG
If I'm the seller I'm not deducting 3% from my asking price simply b/c you do not have a Realtor representing you. Also, you aren't necessarily saving anything by representing yourself b/c commission is paid through the listing broker. The listing broker and seller decide how to split it. If there's no buyer's agent...the commission is simply paid to the listing broker. The listing broker would have to agree to amend their listing agreement to accept less commission if a buyer wanted to 'represent' themselves in hopes of getting a lower price in lieu of the seller paying the commission they agreed to pay per the listing agreement.
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Deats99
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In reply to Create Account • 11:51a, 5/2/17
AG
Create Account said:
Deats99 pretty much boiled down Realtors to appraisers + negotiators. How much is an appraisal? $400-500? So suggesting a list price is $500, negotiating is 3% minus $500, and everything else is free?
I would call it more gravy, appraisals are neat but usually 90 days outdated up or down, so the agent has to understand the current mark, and know when the market is moving to change the price.

Negotiating is 3%-$500 to infinity. I do not have the chart, but I would bet houses with representation net for 3-5% more than FSBO's.
A good plan violently executed now is better than a perfect plan executed next week.
-George S Patton
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Tonyperkis
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1:12p, 5/2/17
AG
As a real estate enthusiast/investor who looks at MLS/Zillow/Realtor.com on a daily basis I totally get some concerns with realtor commissions and their value. However, I think good realtors are ultimately worth the cost. I would categorize their value in two ways.

1. Time saving - What is your time worth to you? Good agents will hustle for you by calling buyers/sellers agents, checking out properties on your behalf, etc... That time I save is valuable to me. Great agents may also help with logistical items such as scheduling cleanings, stagings, contractors for minor repairs, etc...

2. Market Expertise and Negotiations - If they are good, they will be involved with a lot of transactions which should help them understand the market better than anyone just looking at a computer screen. This is critical when determining what to list and what to offer on properties. Realtors are also worth the price if they can effectively read people (understanding the emotions and motives of the other side) and know how to negotiate.

To the comment stating that realtors are just appraisers. My fiancee just sold her house in Denver for 5k over asking price and 23k over appraisal value. If you were doing FSBO and just went with the appraisal value, you would have lost a lot of money there. It also took some great negotiation skills to keep the buyers from moving on to another property after the appraisal came in so low.
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chuckd
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In reply to jmazz • 1:15p, 5/2/17
AG
jmazz said:
If I'm the seller I'm not deducting 3% from my asking price simply b/c you do not have a Realtor representing you. Also, you aren't necessarily saving anything by representing yourself b/c commission is paid through the listing broker. The listing broker and seller decide how to split it. If there's no buyer's agent...the commission is simply paid to the listing broker. The listing broker would have to agree to amend their listing agreement to accept less commission if a buyer wanted to 'represent' themselves in hopes of getting a lower price in lieu of the seller paying the commission they agreed to pay per the listing agreement.
I did this on the house I currently own. Why wouldn't you deduct 3%? Everyone makes the same. (I would never FSBO though)
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Bitter Old Man
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In reply to chuckd • 1:55p, 5/2/17
AG
Because the Selling agent's listing agreement probably says that they will be paid 6% regardless of the buyer's representation.
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DadAG10
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In reply to DallasAggie0 • 2:09p, 5/2/17
DallasAggie0 said:

Now, in the case of a commercial property with cash flows and other variables then it's absolutely warranted.


And what do you do?
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jmazz
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In reply to chuckd • 2:24p, 5/2/17
AG
1 - Because of of what Bitter said.

2 - Why would a seller deduct 3% automatically if a buyer is unrepresented? Example...

Two sellers, side by side, with identical houses list their property for sale. One hires a Realtor at 6%, one doesn't. Is the seller without the Realtor going to list their house for 6% less just because? Heck no...they're going to list for the same price as the seller who chose to work with a Realtor. Same scenario when a Realtor is or isn't involved on the buyer's side. Why would a seller take money out of their own pocket simply b/c a buyer isn't represented by a Realtor? Everyone doesn't make the same...it's a 3% difference to the seller.
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chuckd
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In reply to Bitter Old Man • 2:27p, 5/2/17
AG
Bitter Old Man said:
Because the Selling agent's listing agreement probably says that they will be paid 6% regardless of the buyer's representation.
They amended their agreement to 3%.
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AggiePlaya
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2:39p, 5/2/17
AG
If I'm a seller and it is a seller's market, I don't give a rats if you are or are not represented...I'm not discounting squat
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Premium
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4:32p, 5/2/17
AG
You guys make no sense. The example as explained has a seller who already agreed to give up 6%. 3% of it which 99.9% of the time goes to neither the seller or the sellers agent - but to the buyers side. So a buyer comes along representing themselves and all of a sudden you want your 3% back which you already decided to give up and will not make the deal work at 3% lower. I'd fire my realtor if he wouldn't knock his 6% down to 3% to accommodate a buyer representing themselves.
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jmazz
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In reply to Premium • 4:39p, 5/2/17
AG
Who is going to open the house and show this unrepresented buyer? Then who is going to open the house again for inspections, appraisal, for buyer to measure for furniture or whatever, then again for buyer's walk through before closing. I assure you an 'unrepresented' buyer is more work for the listing agent than if they had their own Realtor.
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TXTransplant
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4:46p, 5/2/17
If you're representing yourself, shouldn't the onus be on you to negotiate that 3% with the seller's agent and NOT the seller? (If that's even allowed)

Because buyer's agents don't negotiate with the seller, they negotiate with the seller's agent.
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Bitter Old Man
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In reply to TXTransplant • 4:48p, 5/2/17
AG
If you don't have an agent's license you are not entitled to it, by law.
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TXTransplant
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In reply to Bitter Old Man • 4:51p, 5/2/17
Bitter Old Man said:
If you don't have an agent's license you are not entitled to it, by law.


That's what I figured. The only reason I thought it might be otherwise is because buyer's agents are allowed to negotiate commission directly with the seller on FSBOs.
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4:51p, 5/2/17
AG
I bought a house last year in Galveston and the one next to us came on the market. I'm interested in buying it but I'm not in a big active search - just this house or nothing for the next 9 months or so. I'd like to save $10K (3%), or as much as possible, below whatever negotiated price is possible; I sort of know the market since I just bought in it. So I guess I'll start researching my options.
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