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First, let me say that I am not in any way trying to say that Realtors don't work hard, or to insult any agents in any way. So please take this post in that spirit.
As some of you may remember from my previous posts, I have found a house that I may want to put an offer on. Today I went to see it for the 3rd time (over about a 5-week period) with a contractor friend/colleague of mine. While there are a few "issues" that would require some money to fix (which I realized), he felt that the house is basically pretty solid. To be clear, the house is in completely livable condition now, but there are things like painting the exterior that would cost decent $ and should probably be done in the next few years. (Of course if I put in an offer I will also have an inspection done by a certified inspector -- today's visit was more for my info, since this contractor/colleague has done a lot of work on my current house.)
I will be taking the next week to think about it some more, run some numbers, and decide if I want to put in an offer. The house has, as of tomorrow, been on the market for 4 months (which is typical right now -- very, very few houses are selling, especially in this price range). Today the seller mentioned "other people who are interested," but honestly, I take those statements with a grain of salt. (I seriously hate those types of games, but I do understand they are part of the selling process. Ugh. And if others really ARE interested, more power to them -- I don't want to be rushed.)
In my second visit to the house a couple of weeks ago, I was with a woman whom I was going to hire as my buyer's agent. A few things annoyed me, including her slowness in answering emails/phone calls, but also the fact that she was basically coming in near the end of the process and the only work left would be (a) to negotiate the offer (and there's actually not too much to do there -- she just agreed with what I came up with) and (b) to represent me at closing. I found the house, did some research about comps (not too many in this market), arranged for visits, and contacted an inspector who is waiting to hear back from me. I can't imagine that the agent would have to put in more than 10 hours, 20 at the most (and I can't imagine how it could possibly be that much), so I am very grumpy at the idea of her making something like $8,000 for at most 20 hours of actual work, especially because I know that, even though the seller technically pays, he is of course going to consider her fee when deciding whether to accept my offer/counteroffer, so really *I* am paying.
The alternative is, I go to a real estate lawyer and probably pay $1,000 at the most (from estimates I've received) to have him/her look over paperwork and come with me to the closing. In this case, my purchase price would likely be quite a bit lower than if the seller has to pay 3% to a buyer's agent.
OK, sorry, long-winded post. My question is, is it ever reasonable to ask an agent who is coming into the process at this late a stage to take, say, 1.5% instead of 3%? Or does that seem crass and unfair to the agent?
The listing agreement probably has a commission fee for the transaction (say, 6% split between the listing agent and the selling agent). If you don't use an agent, the listing agent gets it all. If you choose to use the listing agent as your agent, there is a possibility the listing agent will drop the fee just a bit to help with the price. No guarantee. But their fiduciary duty is the the seller and you need to be represented, especially if there are issues to be negotiated.
FYI - finding the perfect house is not the majority of the transaction. Most of what happens after that is behind the scenes so you don't see it, but it does take time and effort. Creating, presenting, negotiating the contract. Processing the tons of documents and disclosures, tracking the mortgage process, reviewing the preliminary title, organizing inspections, etc., etc., etc. do take a lot of time.
I know others will disagree with this but really you are not paying your agent's commission, assuming this house has been listed by an agent on the MLS. The seller signed a listing contract to pay a commission to their listing broker and also agreed to allow the listing broker to pay some of that money to a cooperating broker if there is one. In other words, the seller will pay x% commission no matter what. You could ask them to change the terms of that agreement but the listing broker certainly doesn't have to do it. I'd talk with an attorney about representing you AND to confirm that the agent you worked with won't have a procuring cause problem (although technically that is not your problem.)
Sorry all (especially BBronson), I should have clarified. The seller is the owner of his own brokerage firm, so he has no commissions to pay unless I get an agent (unless you consider him paying a commission to himself!). It's the house he grew up in.
I have no contract with the woman I was going to use as a buyer's agent. So far she has put in 2 hours with me (at the most). After she was bad about getting back to me, I decided not to sign the paperwork she had given me (and I let her know). So BBronson, I am not sure what you mean by needing "to confirm that the agent you worked with" -- the one I didn't sign anything with? -- "won't have a procuring cause problem" -- could you please clarify? (I'm assuming you thought I had signed something with her? Nope. And she didn't "procure" anything for me, I found the house myself.)
And I know I can't assume that he would accept a lower price, but I could TALK TO HIM about using/not using an agent and the financial ramifications of that. Of course he is aware that I know he is saving money if I don't have an agent.
I have the sales contract (standard one) and of course I know what my contingencies are. So yes, I do understand that there is a lot of paperwork, but seriously, is there more than 20 hours' worth of work left at this stage?
I'm confused. If the seller is also the RE Broker and is paying no commissions, then why are you hoping to get the RE fee lowered? -- Sorry, I must have missed something, but, it seems like an interesting thread and question.
On the topic of RE fees in general, they can seem high on a transaction where not many hours are involved, but, RE agents don't work by the hour ... and many transactions involve many hours --- with no sales results. (We recently bought after several months of looking, during which our RE agent spent an enormous amount of time with us .... but, at the same time, he was also 'learning' about the market and places that might appeal to someone else.
When the market was 'hot' a few years ago, I used to think that some RE agents were making high, undeserved fees. In today's difficult market, I think the ones who are still in the business deserve every cent of their fee. It's somewhat like a service fee in almost any repair business. The actual repair, etc. may only take a very short time, but, you are really paying for the knowledge of "how to" repair the item, not just the time it takes.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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As the owner of a brokerage firm, I certainly wouldn't be paying the listing side of a transaction on my house, but I'd be darned sure not to cut the compensation to the selling agent, no matter how "late" that agent came to the transaction. I enjoy a good reputation in my community and in the real estate community, I'm not going to jeopardize that by shaving some dollars from another agent.
jghorton, he would have to pay a commission (normally 3%) to a buyer's agent if I have one. If I don't get a buyer's agent, i.e. if I use a lawyer, he has no commission to pay to anyone since it's his house, his brokerage, his listing.
And I do understand about commissions and how many listings result in no sales so in a way others are "subsidizing" those sales that don't go through. But I am seriously trying to figure out the number of hours of work for *this particular transaction*, and I can't see someone earning almost $8,000 for what I THINK would be 20 hours of work absolute maximum. That's why I asked about what is involved here ... because I found the house, I have the sales contract and know the contingencies I will ask for, I know what I am willing to pay and what comps are like so the negotiations should not be involved, I have already found/contacted the inspector so there's nothing for the agent to do there, I will follow my own mortgage process so I don't know what else the agent would be doing that I can't, etc. Again, I'm not trying to downplay what an agent does -- I would bet that many transactions (especially foreclosures, short sales, etc.) are a LOT more complicated than this one would be. (And the service workers analogy doesn't work because they are normally paid hourly, which is kind of what I am suggesting for this transaction -- a very high hourly wage.)
Is offering 1.5% insulting for 20 hours of work? That's still around $4,000 ...
Again, not trying to insult anyone. DMenscha, I do appreciate your point of view, but $400 an hour seems like an awful lot to pay for 20 hours of work. If I were an agent in this market, I think I would be happy to get $4,000 for that ($200 an hour).
Still, it is not you who would be offering the buyer's agent anything so I'm not sure what you are thinking here. And, as DMenscha mentioned, it would be kinda uncool for the broker to short an agent, especially if he wants the agent to ever sell one of his listings in the future!
Based on your determination of the amount of work involved to be done, I'd still say get an attorney and have the attorney either watch your back as you handle it all or negotiate for you but, either way, make it clear that your offer is taking into account the 3% that the seller/broker won't have to pay. Under no circumstance would I go it alone. The seller has a world of knowledge and experience and you need help to protect your side.
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