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And people wonder why some distrust RA's..... I could be reading this totally wrong and if so I apologize in advance, but it sounds very self serving and not in the best interest of the one who contracted the service to begin with. Can anyone say duty to the client or, is it just to self?
Jim, unless you've got signed a buyer agreement that guarantees your agent will receive X, no matter whether it comes out of the seller's pocket or your own, the offer of compensation is between the seller's broker and the broker of the buyer's agent.
It is not between the two agents themselves and it's not between you and the seller and it's not between you and your agent.
Any monies that the seller is paying the listing broker were determined at the time of the listing of the property. What you offer for the property is based on one thing and one thing only:
---What you are willing to pay.
Now, what you are willing to pay is probably comprised of many things...your assessment of the home's value, how much you think you'll enjoy the home, proximity to work, etc., etc.
But if the seller has decided to pay X amount to his broker and that broker has decided to pay Y amount to a co-operating broker, that money has nothing to do with you or the price you are willing to pay.
Is it coming out of the seller's pocket? Yes, of course it is. Does that mean it belongs in your pocket? Of course not. Just as the money that the seller must pay back to the bank doesn't belong in your pocket.
Do you think that the bank is going to accept less than the seller contracted to pay it so you can have the home for less? Why should anyone else than the seller contracted to pay them so you can have the home for less.
If you can't get the house for the amount you're willing to pay, you're agent will show you more houses, some of which will yield X commission some of which will yield Y commission. Either way, what you pay will remain:
---What you are willing to pay.
If you are bothered by this set-up, there is a simple way to put your mind at ease: sign a guyer's agent agreement.
In a typical buyer's agent agreement, you are guaranteeing that you're agent's broker will receive X percent on your purchase. If the house you like is offering more, you pocket the excess. If the house you like is offering less, you pay the difference.
I don't know of any agent that has a problem with this arrangement...we are happy to trade away the possibility of a high commission for the protection against a low commission.
If that kind of arrangement puts your mind at ease, it is available to you.
The reason most people don't use buyer agreements is because of the risk that they might have to come up with an extra $3000 or $5000 to cover the broker - when they're already strapped coming up with the down payment, closing costs, moving expenses and all the other things.
Of course, there are buyers that tell their agent not to show them homes that pay less than X but, for me, they end up the worst of all. As soon as they realize how many homes that seem like good prospects they won't be seeing they start to get really stressed ("what if that was the perfect one, honey?") and it doesn't take long before they're downright ticked off - not at themselves, of course - at me.
That people distrust agents - when they don't really know what we do in the first place - is the least of my concerns.
And people wonder why some distrust RA's..... I could be reading this totally wrong and if so I apologize in advance, but it sounds very self serving and not in the best interest of the one who contracted the service to begin with. Can anyone say duty to the client or, is it just to self?
You are reading it wrong.
The buyer is there to buy a home. I am going to help them get the best home for the best price regardless of the commission be it 2% or 3% or 4%.
Sometimes I work with a buyer for weeks and they end up not buying for one reason or another. I am not complaining about losing money on that one and I am not going to feel guilty about taking my 3% and bonus when I do sell a house.
I'm with the mikes and eric. I don't disclose it either. Actually, where I am, since I'm a transaction broker, I could be putting one of the parties involved in the transaction at a disadvantage in negotiations, so, it wouldn't be proper for me to disclose it.
I have to give my two cents here. When I bought my home, there was an extra bonus that the agents got if the house sold by the end of that month - which I was unaware of. My agent, for whatever reason, was a horrible negotiator for us and we realized, based on feedback from other agents and homebuyers that we should have negotiated down the price after the inspection. Surprisingly, she got us a crappy inspector that did not really quantify the cost (and minimized the severity) of some things we needed to do and we paid about $10-15k for the work. What it came down to is our realtor wanted to get the sale done and was NOT working in our best interests. The extra bonus definitely influenced her. When I spoke with our original agent who referred the new agent to us because we were looking in different area/with a different branch of the realty company, the original agent was extremely disappointed in how our agent handled the entire transaction. Bottom line, make sure that if anything comes up from now to when you close, you do some serious negotiations. A seller does not want to put their house back on the market when they are that close to closing the deal and getting their money. Don't let your agent gloss over anything. Have them work to save you money.
Lisa, thanks that's a good point. There WILL be things that come up in the inspection, and therefore will work that angle to make us feel vindicated a little. I sincerely believe that our agent did not know there was a bonus until after we signed. I have to believe that people are good and honest until they prove me wrong.
Sorry that this is a tandem thread. I originally posted this in the NC forum, but it got moved here.
... When I bought my home, there was an extra bonus that the agents got if the house sold by the end of that month - which I was unaware of ... The extra bonus definitely influenced her.
Those are the ones with which I do have a problem, Lisa.
I've written elsewhere that a high commission can be a smart strategy for sellers because it can result in a few extra buyers seeing the home, but I personally dislike any incentive that the agent might receive that is contingent on either the price or the terms that the buyer offers.
I have to give my two cents here. When I bought my home, there was an extra bonus that the agents got if the house sold by the end of that month - which I was unaware of. My agent, for . . .
What state did you buy your house in? Did you have a Buyer Agency Agreement, signed, spelling out commissions, bonuses, and such?
Jim, unless you've got signed a buyer agreement that guarantees your agent will receive X, no matter whether it comes out of the seller's pocket or your own, the offer of compensation is between the seller's broker and the broker of the buyer's agent.
It is not between the two agents themselves and it's not between you and the seller and it's not between you and your agent.
Eric,
I have a question about this concept. First, let me note that I understand what you're saying. A listing and the offered commission is a contract between the homeowner and the listing agent. Buyers are not parties to that contract and therefor have no say-so into the ultimate compensation arrangment.
The question comes into play with posts I readabout short sales. I've never been involved in one of them, but other agents have written that commissions can get adjusted in short sale situations. They've written that, once an agreement is reached between a buyer and seller, the offer then goes to the involved bank(s) for their approval, since it's for an amount lower than the mortgage. Once there, they sometime come back to the parties with a demand for a commission adjustment. Isn't that an issue where they're not a party to the listing contract but they're demanding a change in it?
I certainly understand their motivation in adjusting the commissions because they want to minimize their losses. However, I don't see where it differs from a buyer who would have a similar motivation. He wants to minimize the amount they pay.
In the end what's the difference? From what I can see, the only difference is that the banks are the big dogs on the block so their demands carry more weight while a buyer is nothing in comparison.
I see that neither entity is a party to the listing contract but both can stop the sale, the bank by refusing to take less for their mortgage and the buyer by refusing to pay more for the property. I really don't see the difference that would allow the bank to inject itelf into the middle of a listing contract while a buyer is disallowed from doing so.
So, can you or someone educate me, please. Thanks.
Last edited by garth; 12-03-2007 at 12:48 PM..
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