[magellan]

Originally Posted by London Girl

Hi Magellan - thanks for your input!

If there were "millions" of homes for sale by owner in the small town that I am going to be living in then believe me I would be looking at them before any listed with a realtor!!!! Unfortunately there are not "millions" on the market here.

I think the buyer's agent commission structure is so entrenched in the minds of so many people (even though everyone I've spoken to grumbles about paying them) that it will be difficult to negotiate around it. I have found some discount brokerages who operate in MI who will refund 1.5% of the buyer's agent commission (rebate must appear in the closing statement) so at least I'll recoup around $3,750 which is better than nothing!

The concept of discount brokerages seems less familiar here than those states where it is already well established (like CA) but I'm sure it will soon start to catch on.

Thanks for all the comments!

There are discount brokerages everywhere, including many in Michigan. There are also brokerage services where you can choose a menu of services and not pay a percentage. But it's mostly on the selling side, not the buying side. They are popular now in California because their housing market is the worst in the country (yes, worse than Michigan).

I meant "millions" not in any particular town (there are not even a million homes total in most cities). It was a figure of speech.

[TaxBait]

Originally Posted by London Girl

...If there were "millions" of homes for sale by owner in the small town that I am going to be living in then believe me I would be looking at them ...

If you've narrowed it down to one small town, you might consider advertising for homes wanted in the local papers, billboards (supermarkets, restaurants, etc) and craigslist. You'll still probably get responses from realtors but the bottom line is getting the best house and deal for you. They might even be able to lead you to something that isn't listed. Listing your house is no fun at all. Many have given up and let listings expire but are still wanting to sell.

[London Girl]

Thanks for your responses Taxbait & Magellan

I have considered putting an ad in the local paper - I've no doubt at all that Taxbait is correct in saying that there are probably lots of people who would like to sell (even if they don't have an immediate need to sell) but have simply got fed up with the whole process in such a depressed market.

Magellan, sorry if I sounded a little facetious in my response - I have toured around the area but there are relatively few FSBO homes listed and the ones that are are not really in the right locations.

I also understand Steve Volkers' comment - if I negotiate a hard bargain then yes, it could potentially be a case of weighing up the overall price saving versus any commission issue. I'm fortunate to be buying at a time when solid (ie: fully financed and not waiting to sell my own property) buyers are "as rare as rocking horse ****" - so am in a strong negotiating position.

I'm just conscious of the fact that there seem to be no indications of any improvement in the state's economy so will be buying on the expectation that prices may yet keep sinking - hence my wish to keep ALL costs to a minimum.

None of the people I have spoken with (I'm talking friends, friend's parents, colleagues etc NOT realtors!) were even aware that discount brokerages could potentially rebate half of their buyer's agent commission - most assumed that you "had" to have a buyer's agent and that the "seller paid the cost". This is what I mean by saying that the whole buyer's agent deal seems entrenched in people's mindsets.

Thank you all for your input - outside opinions and perspectives are really useful

[Jswee]

London girl -
Just out of curiosity, as it seems that you are unfamiliar with Buyer's Agents, what exactly is the service that you think they provide? If you think that it's essentially the same service provided by the listing (Sellers) agent, then you would be mistaken. Essentially the job of the buyers agent is to put you in an informed capacity, prior to purchasing a specific property. They have access to relevant information concerning the property in question, that you are unlikely to gain access to from another source, especially if you do not reside in the town where the property is located. When making such a substantial purchase as real property, it's imperative to know everything that you can about the property before you start to negotiate on it. You need to know the good, the bad and the ugly, to paraphrase a somewhat archaic American movie title. The listing agents job is to put the best face on the property as possible. His fiduciary duty is to the seller and he is not going to provide you with any information which could potentially have a negative impact on your decision to purchase the property.

There is an old adage coined by attorneys, the lawyer who represents himself has a fool for a client. While it refers to court proceedings, there is some merit in applying it to other endeavors where professional advice can be beneficial. Purchasing real estate without the benefit of a Buyers agent is the equivalent of representing yourself in a courtroom, without the benefit of counsel.

Yes, you may be able to find a sellers agent or even a discount broker that will rebate you 1 or 2% of their commission. It may end up being the most expensive rebate that you ever receive.

[London Girl]

Hi Jswee - thank you for your response.

I know the town I am buying in well and have so far checked the following:

1) Viewed numerous properties with listing agents and made notes on each property.

2) Compared pricing, location, condition. Also compared same to other properties in areas I'm less keen on.

3) Narrowed down to 3 or four that I'm interested in. Looked at length of time property has been on market.

4) Had a friend who is a well established building contractor and native to the town walk through the properties that I'm interested in and noted his comments.

5) Ascertained the price paid by the present owner for each property when they bought it. Also asked listing agent what seller's position is in terms of timeframe they wish to move in - ie: could they move quickly if necessary? Are they moving locally? Relocating for work etc?

6) I have decided what I am going to offer on the property I'm most interested in (and have allowed some room for negotiation). I'm also confident in the negotiating process.

7) I have also spoken to a couple of sets of married friends that bought here last year and discussed the process, plus their "offer versus listing price" ratios.

Title Search will be performed by escrow company to ensure clean title, no plans to stick a new highway through backyard etc.

I will also have a home inspection prior to closure (with a satisfactory inspection being a condition of closure)

I do not need financing so will not be dealing with mortgage companies.

I am not encumbered with a property that I need to sell before I can move so am able to move quickly on the process if necessary.

If I were buying in a town I didn't know or had never visited (through employment relocation for example), then I can see why it might be worth having the input of a buyer's agent.

I'm really not sure what a buyers agent would add to the above - if there is something obvious that I'm missing please let me know!!!

[Dr.Jim]

London girl.
I still am curious how you think you will save money by not having your own agent?
The seller is going to have to pay their agent the money whether you get an agent or not.
If you have no agent then the sellers agent gets the full commision, if you have an agent then the sellers agent only gets partial commision and your agent gets the rest.

Do you feel you can (without an agent) negotiate the price on the grounds that the seller doesnt have to pay 'your' agents fee's since you dont have an agent?
That isnt going to happen.
You can 'try' and make a lower offer on a house by a few thousand dollars explaining to the sellers agent that you feel you should get money off the house since you have no agent. But, you will be hard-pressed to see that in practicality. You are not privy to what amount the sellers will actually accept.
You make an offer, say what you want about how you should get a price reduction due to not having an agent....but in the end it is still an offer. The sellers can accept or not. And they will still have to pay their selling agent whatever is contracted.
So in reality you can offer with whatever you feel is fair and deserved to you (buyers agent or not)....and in practicality...it is still just you making an offer. And the sellers will most likely not take any of that into consideration.

Still,...best of luck! Keep us posted,....I would love for you to strike a deal and make me eat my words :-)

edit - you just posted. You do seem to have all the bases covered, and I see no need for you to have a buyers agent! Good job!......My point though I still support with regard to price. Not having a buyers agent will most likely not get you a 'reduced' price on the home. I do hope you strike a deal though! And make me eat my words :-)

[Siberia]

assist2sell has three locations in Michigan. They offer FSBO and half fee commissions. It seems to be catching on in West Michigan...as paying $9,000 (half of 6%/$18,000) on a $300,000 home to a non-college degree buying agent for holding the buyers hand for 1 hour during the actual sale (and perhaps a couple of hours of back breaking drives around town to show the buyer a couple of homes)...not cool. If agents were not so greedy, they would not have stuck to 6% sell/buy agent percentages...when house prices exploded. There was an explosion in the number of realtor agents (70 year old grandmas and high school D-students included) due to the fact you don't need an education (other than 8th grade reading and writing..and 5th grade math), and the money was so lucrative for many years. This is not the case anymore, as people wise up and the rookie agents go back to doing what they were doing before, at half the salary.

Many agents work hard, but none deserve 6% for any home over $200,000. The fee should never be percentage based, that makes absolutely no sense whatsoever on homes costing more than $200K. Agents , ESPESCIALLY "Buying Agents", should get paid for their expenses and an hourly wage...period....like the rest of the working class. Instead, they are driven to destroy their own futures by remaining in constant, greedy denial...

[London Girl]

Hi there Dr Jim

I completely understand your point with regard to sellers not necessarily being concerned about any additional price reduction due to me not having a buyer's agent.

I also understand that, with the exception of FSBO properties the seller has already signed an agreement with their agent which takes account of 6% commission being paid (of which 3% is allocated to buyer's agent - if no buying agent then selling agent gets 6%) - any other terms or negotiations within this agreement are an issue between the seller and his/her listing agent.

So yes, I agree that it is probably unlikely that I will be able to exert any leverage on the actual sale price because the seller is already tied in to sacrificing up to 6% of their proceeds to the selling/selling & buying agent(s).

Soooo.......having located and contacted several discount brokerages in my area I am now looking at a compromise - whereby I bite the bullet and still pay 1.5% to the brokerage (as my agent) but also get 1.5% rebated - I will still save some money (even if I have to pay 1.5% to the brokerage). On a $250,000 property I would receive back $3,750 which otherwise would be pocketed by a "conventional" - ie: non-discount buyers agent (or the seller's agent if I had NO buyers agent).

No matter what my purchase price (unless FSBO) that buyer's agent commission is still going to be dished out to somebody so I might as well just recoup half of it - better than nothing!

It has been interesting hearing from all the posters, you have all raised some good points

To Siberia - I totally agree with you. In the UK, in the mainstream residential property market there are no such entities as "buyer's agents" - nobody needs them. And selling agents only take 1-2% in general.

I acknowledge also that yes, some agents DO work very hard (and some have taken more advanced exams) but agree that I fail to see the logic in paying 3% to a buyer's agent in ADDITION to 3% for selling the property. Based on my experiences the "70 year old grandmas and high school D-students included" comment is not far off the mark!!!!!

On buying my last property in the UK I paid the equivalent of $1,600 on a $320,000 house to my solicitor (attorney) for title search, holding funds in escrow and drafting contract - he is a college educated professional in my book - a far cry from a "non-college degree buying agent" who is looking to earn themselves $7,500 by comparison (based on a $250K property) for "services" that amount to very little in my opinion.

Thank you all so much for your input

[Jswee]

London girl -

I applaud you for being much more informed than the average buyer.

Regarding your list, when you were comparing pricing, location and condition, were you comparing it to other properties that are currently listed or those that have sold?

A most important comparison would be to compare your target property (or properties) to archival data on similar properties that have sold (essentially what an appraiser would do). Typically the database that you would get this information from is not available to members of the public. A detailed comparison with similar properties that have sold will give you insight as to whether your target property has been on the market shorter or longer than the average time of the comps you are using, the price relative to time on the market and other meaningful information. Good information to have when negotiating price.

You mentioned that you determined how long certain properties have been on the market. You also want to determine whether they have previously been on the market without selling and whether there have been price adjustments, etc.. For example, you may look at a current listing and be told it's been on the market for 30 days. The fact that it may have been listed with other real estate companies 3 other times without selling for a total time on the market of two years would not be readily apparent unless you somehow got access to the archival data of the local MLS, which as I mentioned is not readily available to the public.

You may also, if you have not done so, research the sellers equity position and obtain copies of any current mortgages or lines of credit that have been established against the property. Also search for recorded liens placed against the property This can give you additional insight regarding the sellers potential motivation and you can use it to your advantage when negotiating.

Obtain information concerning what school system services the property and what it's reputation is. Regardless of whether you have children in school, school system is often one of the largest factors that can impact the rate a property appreciates and it's saleability. If there are multiple school options available within that area, make sure that you are purchasing in the area serviced by the schools with the best reputation.

Have you gathered any data concerning the general neighborhood that the target property is located in? Is it improving, declining, how much turnover is there, etc.? All good information to know.

Examine the applicable zoning restrictions and obtain copies of any deed or subdivision restrictions which may limit the use of the target property for some purposes and make sure that any intended uses are compatible with them.

Obtain copies of the original well and septic system permits (if applicable but if it's in a small town, they likely are) and then compare them to the current property to make sure that there have been no additions which may have required increased capacity for the septic system.

Get copies of the current equalization data, determine what the S.E.V. is for the property and make sure that the homestead/non-homestead status matches the description that would have received in any MLS information that you obtained on the property.

It also is a good idea to search the online MSP database and determine whether there are any registered sex offenders living in the neighborhood of the targeted properties. Just nice info to have before you spend big bucks on buying a house and find out that there is a convicted child molester living next door.

Like I said, you have made a good start, though.

[Beena]

Siberia. Great Post!!! Could not agree more.

Comments about how the 3% is built into the sales price are ludicrous. The seller hasn't agreed to anything until the contract is signed. And trust me....any percentage coming out of their pocket is going to make a difference.