Before you, as a buyer, go to see homes, there is already a mechanism in place for the agent who opens the door for you to get paid. This is why agents may want you to sign a contract to work with them, but they do NOT rely on you to agree to pay them.
The payment for the services afforded you is already in place. You can choose to know what that is, or you can choose to feel that the service is free. By and large the buying public likes the idea of thinking it is free.
Most buyers do not talk about commissions, do not care what the agent is getting paid and simply look at houses and then buy one. That is how it has always been.
I do not urge you, the buying public, to get into a conversation about commissions in order to rock the boat with regard to the money exchanged. I do it so that you will be sure that your agent understands that he works for you and is paid by you. Most do not. You pay the commission as part of the sale price, so make it your business to know what you are paying AND make it your business to make sure the agent knows he works FOR you AND is paid by you.
When the agent thinks you are not paying him, and you are getting something for nothing...it will bite you in the butt somewhere along the line. So don't step into a house with an agent until you understand what you are "stepping into".
Great post Ardell. This past year at our continuing professional development course, we were told that under the common law, an agent is obliged to disclose to their client how they get paid. The thinking is that a commission which is not discussed could be argued to be a "secret profit." I'm not really sure if that would fly in a court room but I have made it my practice to discuss this at the outset all of the time. This disclosure, and others provide a great opportunity to have an initial meeting with a buyer and I find it leads to a smoother working relationship. I agree with your assertion that the buyer is actually paying and they deserve to understand that.
After the smoke and dust settles, yeah...I suppose its the Buyer who utlimately pays but when pressed on this issue, which is rarely, I just refer to any previous RESPA sheet received at a closing which clearly shows (in Illinois) that The Listing office directs the commission they agreed to charge, accept whatever. I mean technically, in most cases the money came from the profits to the employer who paid the employee who is the purchaser who paid the seller who paid the Listing Agent who paid the Byuers Agent who Paid the referral fee to the Referrer. That could definitely rock the 'commission' boat if discussed at length I think. I'm all for 'Transparency' as I have nothing to hide, including the fact I don't receive a salary and work on a percentage of the sales price.
This is a great topic. I have always believed in honesty and in my first six months as an agent -- I've brought that to the table with my buyers and sellers.
I'm often amazed at the "secret" nature of silly things that are to be kept secret. An easy example, is that we always print "buyer sheets" -- without the DOM and other agency information -- rather than "agent sheets" for our clients. Personally, I always use the "agent" it has more information for them -- and if they call the listing agent to purchase the house, then they weren't really my clients to begin with.
Good luck and keep up the good fight! I may not always agree with you, but I respect the way you say them.
There is a reason why giving the agent sheet is a violation of MLS Rules...you shouldn't say in print you do that...someone will nail you for it
The agent sheet often as things in the Agent Remarks section that IS in fact, confidential. Security alarm codes to people's homes, gate codes to gated communities, personal info about the seller like "seller is away for two weeks".
Rather than depend on everyone reading it carefully enough not to give away those with these private issues, the rules is simply "don't do it!" If you do...then don't say it in writing in public like this...just my advice for good reasons. Not picking on you.
Same as to Days on Market - good reason not to show it. Regardless of the advances of MLS systems, they have never been able to give DOM at a level that is trustworthy from the consumer perspective. 7 days on market could be 18 months on market if the listing agent is savvy. It is part of your job to verify days on market by looking at property history, before suggesting that the days on market shown is accurate. What if they see 7 and say nothing and later find out after they live there that it was on market for 150 days! Not Good...so Days on Market must be verified by agent before told to a consumer.
Some sites don't get this and post it as part of their IDX...not good...and I've told them so :)
You don't have to agree with me Toby...just know that I'm right more often than not and there is a huge gap between "right" and "correct" at the moment in this industry.
Toby, being honest and forthright is something all people (especially those charged with safeguarding privileged information) must strive to achieve. However I'd caution you to avoid confusing your responsibility to maintain confidentiality with being dishonest.
Hi,
I'm a first time buyer and I have a question related to the buyer agent fee.
What is the etiquette in wanting to look at FSBO's when your already working with an agent?
The neighbourhood we are looking in has a small inventory of homes (18 on mls last year), but I can also remember at least 6 that were FSBO's last year. We would like to be able to look at everything that is out there, but we don't want to bypass our agent.
We have no written contract with her, but she is doing such a good job of guiding us through all the little things. I wouldn't want to take the chance of navigating our hot market the first time around on our own.
I would assume that if she shows us a FSBO and we buy, then we would pay her commission. We only have so much cash for down payment, closing, etc. and we hadn't counted on another 7% or whatever. Is there a way that the seller would still split it or is that unlikely?
First, you should establish the fee with your agent whether you are looking an listed property or for sale by owner. Usually the fee for a listed property is about 3%, but check with your agent. Check what the buyer agent fee offered was on the houses you have already seen with her. That is the basis for the fee, as there is some variance from one area to the next.
You don't need to put it in a contract if you don't want, just have a clear meeting of the minds.
It isn't anywhere near the 7% you suggested. That "total" fee includes the seller''s agent fee and your buyer's agent fee, so yours is half of that.
You pay it the same way you pay it in the mls listed properties...as part of the sale price. Usually a For Sale By Owner will save the agent fee for him, but will allow an agent fee for the buyer's agent.
I had this come up just yesterday. Given the buyer's price range, there is very little available and we can leave "no stone unturned". I told the buyer client to check on Craig's list and I would look at mls and Zillow. She emailed me the Craig's list link for a house, but it had no price. I contacted the owner and he already had offers higher than my client could afford. So it was a dead end.
We didn't talk about commissions at all. I had already established commission issues verbally with my buyer client at our first meeting and my primary goal is for them to get a house they like whether I get paid or not. The basic assumption is that a buyer is entitled to representation regardless of how the seller feels about agents and representation. So there really shouldn't be an issue.
You owe it to yourself to see any and every house that might suit your needs and your agent should be right there with you wanting the same for you. Beat every bush and leave no stone unturned...market options are limited enough, don't limit them any further based on how the seller chooses to "list" his house. If you see a for sale by owner sign, stop, call, get the price. If it is in your price range and you want to see it, call your agent and leave the rest up to her.
Mar. 18, 2007 - re: Transparency - The Buyer Agent Fee
Posted by srini
I really appreciate you writing so much about this buyer agent fees. I bought a house 5 years ago, and paid almost a flat fee(shade less than 1%). But then I found the house, did my research(we did not have tools like redfin and zillow, but king county has a great website that they never publicized). The agreement with my agent was I would teach him how to use the computer and he would charge me $3500 to sign the docs. But that was a $420K home.
Now we are in market to spend about $950K, and I dont want to pay Redfin almost 10K. I think there needs to be a business model that would work on hourly basis like the doctors or lawyers or plumbers do.
Last week we saw a house in bridal trails for about $950 listed by a windermere agent. I did not have a agent with me, so I asked the listing agent if I could write up a offer(using my lawyer) and put an addendum to make the SOC 0%, and he gave me some crap that it would be violation of state law or windermere would be out of business. He called me back 2 days later and asked why I had not placed an offer since we liked the house, and I told him that I would place an offer only if the soc was 0%.
If anyone know of any agent that would work on hourly basis. I do my research well, and I know what I am looking for, and will come up with my offer price. Maybe I would need 10 to 12 hours work from an agent to write the offer, give me advise if something gets messed.
I have not experimented yet with an hourly rate, as the keeping of "time records", especially during escrow where lenders and escrow and agents talk with one another, vs. the client, could create problems.
I remember years ago when I was in the trust business, getting a bill from a legal firm for one of my clients for hours when two attorneys in the office "discussed the client with each other" and it looked rather odd. Yet it is true that many of the hours I spend representing clients, does not involve the client being in the conversation at all.
Seems a flat fee still works best for representing from time of writing offer to close of escrow, which is usually a minimum of 40 days. Vacant property - cash close in 10 days might be cheaper than financed offer closing in 45 days.
I'm willing to consider a "time/hourly" experiment if you want to email me, particlularly involving Bridle Trails, as I used to live there. It's easier to do if the buyer takes the "discount" off the finally negotiated sale price, rather than a cash toward costs. Depends on how much the buyer is putting down on the property.
I've been trying to "consider any reasonable proposal" for the last year regarding fees. So email me and make a "reasonable proposal". I'll consider it, particularly if this same property is still available.
Mar. 18, 2007 - re: Transparency - The Buyer Agent Fee
Posted by srini
I still dont see why RE Agents cannot log thier hours. Most of the professions do it and get paid that way. Most of the business consultants or software consultants work on hourly basis. When I employee someone and say your monthly salary is $5000, then I am assuming that for working 160 hours a month, I am willing to pay XXX.
I know someone would argue that sales people get paid based on % of sales they make or revenue they generate. But even for them they have a base salary and then commision after that.
When dealing with hourly rates, I accept the fact that my lawyer spends 2 hours drafting some agreement. If he would say it take 12 hours to draft that agrement, I would say it is too much and move on to another lawyer. Just imagine Jiffy Lube working on your car on % basis on what your car is worth to do oil change. So if you drive a 2007 BMW, oil change would be $1000 and if you drive a 1985 Chevy, it would cost you $25.
Here's a good example. On Friday night the buyer had until 9 p.m. to respond to the inspection request or lose the right, which in this case would have been a $5,000 loss to the buyer, if the response was not delivered by 9 p.m. The buyer waited until the last minute and I waited for the buyer to show up for hours, days even, and then it was all rush-rush at 8:45 p.m.
I could not go to dinner or do anything for many hours and I had to be available up to the deadline. Lots of pressure. Is the payment you suggest for the 3 minutes it took me to fax it? Ten bucks? In that case, I'd say clearly not worth it.
You do not appear to have an understanding of the legal ramifications involved in a real estate transaction. The seller is only offering $28,500 to make sure that he, the seller, is not sued and the sale goes smoothly and closes. The seller offers a buyer agent fee to be sure that the buyer is represented WELL. Otherwise the seller is left holding the bag for your lack of representation.
Think of it this way. When you sell your house and you offer a $15,000 Buyer Agent fee, how will you feel when it doesn't close because the buyer represented himself and only gave the Buyer Agent $500 of the $15,000 YOU offered to make sure everything goes well for both you and the buyer, and closes? On that last day, when it doesn't close, you will have many damages.
You do not seem to be viewing this from both the buyer and seller's needs in a real estate transaction. The seller needs for the buyer to be represented well. The seller needs assurances when he starts packing and moving out that it is going to close. That is why the buyer agent fee is offered from the seller side of the transaction.
The Buyer Agent fee is not about finding the house alone. You seem to think the agent's job is concluded once you have opened escrow. We have gone back and forth both here and in email and you have yet to disclose what you are trying to accomplish.
If you are trying to get a $28,500 service for $100, please be honest enough to say that, so we can all know what your bottom line intention is, both me and the readers of this article.
Mar. 18, 2007 - re: Transparency - The Buyer Agent Fee
Posted by ARDELL
"I still dont see why RE Agents cannot log thier hours."
Agents don't get paid by consumers unless there is a closing. Are you proposing to pay agents you speak with when you speak with them, even if you do not use them? In that case, please tell me where to send the bill for my time to present we have spent "talking" :)
Mar. 18, 2007 - re: Transparency - The Buyer Agent Fee
Posted by srini
We are having a discussion in this blog, so I am trying to explore things. Not necessary that I am trying to milk someone out of $28K in fees and trying to get it for $500, but trying to find out what is fair. You are doing a great service by making some things clear on the secret world of RE transactions. Maybe by giving examples like this, you are showing that a RE agent is not making $30K by spending a few hours but is worth every penny they get.
But there needs to be transperancy when it comes to what people are being charged for. Just imagine, your plumber coming and saying the pipe leak would cost you $20K, as if this pipe starts leaking at 2:00 am again, I will have to dress up, drive and fix the leak, and maybe this will leak and damage the house and you will sue me for $10K. Naturally if that scenario arises the plumber would charge you appropriately.
Now coming to the logic about seller paying the buyer agent fees for peace of mind that the transaction will go through. The buyer agent is not on the hook for anything. Do you think the "seller" can sue the buyer's agent if the transaction falls through because the buyers loan did not close in due time or the buyer did not sign something or the loan officer went on vacation or called sick the day of closing to answer some clarification from the sellers loan company. Please enlighten me where a buyer or seller agent is liable(means a seller or buyer can go after for damages) .If a dispute arises then the case is always between the seller and buyer, and agents are just witness.
You yourself have mentioned in your blog that after all fees it comes from the buyers pocket. So bottomline the buyer agent never works for the buyer, but to make sure the transaction goes through.
Again we are just debating and I have no intentions of not paying the fees or commissions.
Agents, by law, are never "just witness". In the State of Washington the Law of Agency states "a licensee who works with a buyer represents that buyer".
Again, if you take the buyer agent fee off the price, and make it clear that no agent "represents you" in the transaction, then maybe you can pay a flat hourly rate for services without the agent's name and office anywhere in the contract. But once the agent and their office is shown as "Selling Office" on the contract, it is difficult, if not impossible, to strip them of all of the responsibility to ALL parties to represent you well. It may not be possible for an agent to work with you in any way, and not be responsible for all things, given the governing laws that apply.
That being said, I do not think that one fee is appropriate, and clearly rarely charge 3% depending on sale price.
What you are missing is that the Buyer Agent Fee has a Duality of Purpose. It is contracted for by the seller, for reasons that are VERY important to the seller. And yes, I agree that the buyer pays it. But that does not necessarily give the buyer the right to strip out the advantages good representation has for the seller, who offered it in the first place.
Of course there could be a book or weekly series on these topics, and I intend to continue the discussion. I very much appreciate your latest input as this IS now a discussion. Before it seemed like all ask and not give. Thanks for the give and take.
"The buyer agent is not on the hook for anything."
Not sure where you get that from. I had one situation where the buyer wanted to represent himself and even had a real estate license. He asked me to help him "a bit" on a sale of a million dollars. I offered to provide advices for a flat fee of $3,000.
At one point all he had to do was get a form signed and to the listing agent by 9 p.m. to get his $25,000 Earnest Money back. I called him at 8 p.m. and he had not done it yet. He then emailed it (not necessarily a legal transfer of document) AND he dated it the next day, the day after he was entitled to his Earnest Money.
When I called to find out why his Earnest Money wasn't released yet, they said the date on the form was too late for him to get his $25,000.
So I got paid nothing, since it didn't close and spend two days and many hours getting his $25,000 back. So simply following someone's instructions and letting them do most of it themselves ended up with zero for me and almost lost him $25,000.
I guess I've got a zillion stories over 17 years of a few hours one way or the other meaning big bucks for the client. That's the main reason fees are high. You can't handle 25 clients at once and be there at the right time for every person. Many of our hours are about timing and being available at the drop of a hat until 9 p.m. every night. 9 p.m. is "end of day" in NWMLS contracts.
I'm still not saying 3% of $950,000 is appropriate if you find the property "on your own", but you don't seem satisfied with saving $18,500. That seems a bit hmmmm not sure what the right word is there. Agents are accused of being greedy, but I think saving $18,500 and that not being enough to save seems greedy. Just an honest exchange here. Though I do realize it is because you view the agent's "duty" as being clerical for some reason. Maybe you had an agent who operated that way and caused you to feel that way.
But if just the right house comes on market, I have to be ready to drop everything and get you in there. Then one of 30 will go to multiple offer and 10 of 30 will be bad properties, sometimes for reasons the average person can't see. If I am paid adequately, I of course would tell the buyer what's what. But if I'm being paid for the time it takes to open the door, I'd probably keep my mouth shut. Not sure I could live with that.
Maybe if that guy lost his $25,000, I wouldn't be "on the hook", but I couldn't live with that.
Mar. 27, 2007 - re: Transparency - The Buyer Agent Fee
Posted by payal
I am seeing this discussion about Ardell and Srini. I see merit in both the discussion. I feel the real estate brokerage industry is going through a "attack by web/internet" phase. Most of the old style agents are in denial.
I can point to a similar thing that happened 15 years with stock trading. About 15 years ago, you had to go through a broker to buy a stock and pay a hefty commission. Then came the discount brokerage companies, and it was a similar fight for the first few years.
I remember my financial broker talking about bad things happening and not getting good advice or no advice if I went with discount brokerage company. I guess now almost 90% of the trades happen online.
A good reminder that "bad things" can happen whether you are on your own or not, as well as good things.
I like to use the example of Accountants, as I see a stronger correlation between some who can do their own tax return, some who use turbo tax and some who still have an accountant do their taxes.
Back when discount brokers came out (and yes I was in a related field at that time) something else happened. The general public was given the ability to purchase mutual funds, an advantage that prior was only available to Banks and Trusts as part of the Glass Steiegel Act. One of the reasons I switched from the Trust business to Real Estate back in 1990.
Came across this site... had to comment.. Pardon me if I am blunt.
I agree with Srini that the percentage basis does not make any sense and justifying it by citing late 9 am calls and conversations about theclient or the property without the client present.. An hourly rate should be easy to cite and project taking your experience how long you typically spend with a client per house- looking, viewing, researching.
Let me give you a simple analogy
You go to a doctor, they charge you X for the time you visit., say $75 for a 20 minute consulation. Do you realize that this fee includes the time it takes to the doc your paperwork, your insurance work, research if you have some weird ailment that he does not see often, the time to consult other doctors (they typically discuss their cases with other firm partners) etc.,
Now think of how it would be if the doc decides to charge you a tiny percentage of your annual income for each of your visits. Would you take kindly to being called greedy for not wanting to SPEND your money.
The bottomline is this: the seller wants to sell, the buyer wants to buy, real-estate attorneys can be hired by both parties to do the "looking after their respective interests". Real-estate agents do bring a real-value to the transaction, for those that need it.
It includes hand-holding, showing houses, doing paperwork pricing etc.,
If you dont need the hand-holding you should be free as buyer and seller to agree to terms mutually and complete the transaction. The reason that there are not more FSBOs than there are currently is because the Realtors dont show FSBOS to buyers.
The moment that stops being true, selles will see that they dont ALL need a sellers agent and the MLS listings will dry up.
Yes there will be more volatile off the wall pricing in homes, but with sale data and pricing available from counties, savvy buyers can and will decide what they want to pay and things will stabilize.
ARDELL
DellaLoggia
On Seattle Real Estate including Kirkland, Bellevue, Redmond, Green Lake and most areas around Lake Washington North of Downtown Seattle.
Phone: 206-910-1000 - Mailto:Ardell@RainCityGuide.com
You can find many great Seattle real estate agents and loan officers on ActiveRain.com ARDELL DellaLoggia is a proud member of the ActiveRain Real Estate Network, a free online community to help real estate professionals grow their business.
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