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The person buying the sandwich is not being "charged" for anything but the sandwich. That's what his receipt will say.
I did not say "being charged," as clearly the sign dude does not charge the sandwich buyer, he charges the sandwich shop. Nor did I claim that the cost of the sign dude or the building rent was tax deductible for the sandwich buyer. I said that the sandwich shop cannot ethically make the claim that the person buying the sandwich is not "bearing any part of the cost of the sign dude or the building rent."
I did not say "being charged," as clearly the sign dude does not charge the sandwich buyer, he charges the sandwich shop. Nor did I claim that the cost of the sign dude or the building rent was tax deductible for the sandwich buyer. I said that the sandwich shop cannot ethically make the claim that the person buying the sandwich is not "bearing any part of the cost of the sign dude or the building rent."
You keep rephrasing thing to suit your position. I'm starting to wonder if those of us hanging in with you aren't just being "punked" of something. Is this a joke?
Rephrasing? I quoted myself to keep the exact same phrasing. You were the one making a straw-man argument by rephrasing what I said to use the word "charged" and bringing in tax deductibility. Here is my quote in context:
Quote:
Originally Posted by perfectlyGoodInk
Note, when a business pays something to attract buyers, they consider this a cost of doing business. For example, a sandwich shop paying some dude to walk around on the sidewalk with sandwich-board signs. The buyers of the sandwiches do not pay that sign dude, and they do not write that dude a check. Is that sign dude's services free to them? No, the sandwich shop considers that sign dude's cost part of the cost of doing business, just like the rent they are paying on the building, and thus builds that cost into the price of the sandwich (it is "factored in" as marksmu put it or "business overhead" as Silverfall said).
Same thing for a buyer's agent. The seller builds in the projected cost of the buyer's agent into the price of the house, anticipating it as part of the cost of the transaction (and is thus more willing to lower the price if they find out that this cost will be lower). Who pays the price of the house? The buyer.
If the above sandwich shop claims that buyers of their sandwiches aren't bearing any part of the cost of the sign dude or the building rent, they would be misrepresenting how they do business, which is unethical. Any buyer's agent similarly misrepresenting their business to their clients clearly do not have their clients' best interests at heart -- which also means they are not the target audience for this compensation proposal.
Do you have a more substantive counterargument than just calling it "BS"?
Where maxPrice and minPrice define the buyer's range, and x% is whatever is the standard rate in the state (e.g. 2.5% or 3%). ...
To illustrate with some numbers, for 3% and a buyer with a range of $150k to $200k:
- Closing a $200k house would pay $4,500 (less than 3%)
- Closing a $175k house would pay $5,250 (equal to 3%)
- Closing a $150k house would pay $6,000 (more than 3%)
A close lower than the midpoint of the range pays higher than 3%. Even a close at the very top of the price range earns $4,500. While this is less than 3% of $200k, it is 3% of $150k. Likewise, $6,000 is more than 3% of $150k, but it is 3% of $200k. Any change in the compensation plan will result in some cases being paid more and some being paid less, but in this plan, the overall level of commissions throughout the range stays the same.
As I've said, the price range is negotiated between the agent and the buyer, and the agent can always present the minPrice as a non-negotiable term if they want (take-it-or-leave-it pricing, much like flat-rate). An agent who believes they are worth more is welcome to increase x% or always insist on working with buyers who agree to a very high minPrice, and buyers are welcome to either agree to it or shop around.
If I really wanted to "screw realtors," I'd be better off just not using an agent and pocketing the cost savings, or presenting a formula without the minPrice term. This formula would be simpler:
x% (maxPrice - salesPrice)
However, it results in much lower commissions ($0 for the $200k house, $750 for the $175k one, and $1,500 for the $150k one).
Last edited by perfectlyGoodInk; 09-08-2012 at 01:08 PM..
You keep rephrasing thing to suit your position. I'm starting to wonder if those of us hanging in with you aren't just being "punked" of something. Is this a joke?
Sadly, it doesn't sound like it. Wish I had an icon for beating a dead horse.
If I really wanted to "screw realtors," I'd be better off just not using an agent and pocketing the cost savings, or presenting a formula without the minPrice term. This formula would be simpler:
x% (maxPrice - salesPrice)
However, it results in much lower commissions ($0 for the $200k house, $750 for the $175k one, and $1,500 for the $150k one).
Not using a Realtor is a choice. One is not screwing a Realtor by not using them. In some cases it's doing them a favor.
The sellers agent pays the buyers agent's commission, and the only purpose for someone to dream up a scheme like yours is to screw the buyers agent out of part of his earnings.
There is no logical reason for anyone to want to pay the buyers agent more than the sellers agent is paying him.
If you've found an agent hungry and dumb enough to fall for this scheme, good for you. But as you've seen, no one here is buying it because everyone sees it as a scam.
The simple formula has worked well for many years and still works: (x% * purchase price)
This thread wouldn't be so painfully long if people stuck to criticizing features of my proposal that are not also present in x% * sales price. There were pages of complaints about how the buyer was able to lower the agent's commission by picking a house at a certain price, even though this is true of all compensation plans where the sales price is in the formula.
Quote:
Originally Posted by Captain Bill
The sellers agent pays the buyers agent's commission
But the buyer bears a portion of the cost, just like someone who buys a sandwich bears the cost of the sandwich shop's overhead expenses, such as advertising, salaries, and rent. When the buyer's agent charges the seller who charges the buyer, it's like the sign dude charging the sandwich shop charging the buyer. The buyer isn't charged by the sign dude, but if the sign dude asks for a doubling in pay, the sandwich shop's operating costs would go up and the sandwich price would also go up (and vice versa).
At the risk of complicating things, I want to note that the buyer doesn't bear the entire cost. Sellers and buyers split third-party costs, and it depends upon how much a price increase turns away buyers (demand elasticity) compared to how much a cost increase dissuades sellers (supply elasticity). The sandwich shop has to balance eating the cost against losing business from a higher price. I tried to explain it here, but probably simpler to just think of it as negotiating strength. The person with more negotiating power bears less of third-party costs (whether it be a tax or a fee or a commission), regardless of who actually writes the check.
Quote:
Originally Posted by Captain Bill
the only purpose for someone to dream up a scheme like yours is to screw the buyers agent out of part of his earnings.
My purpose is similar to someone who wants exclusive representation instead of dual-representation: to make sure I have somebody with a strong incentive to look out for my interests. x% * sales price works best when you want to maximize the sales price, like for a store hiring a salesperson to negotiate with buyers. A buyer hiring someone to negotiate with the store wouldn't want to use that formula because they have an interest in minimizing the price.
Quote:
Originally Posted by Captain Bill
The simple formula has worked well for many years and still works: (x% * purchase price)
Works to achieve what? What advantage to the buyer does this formula have over flat rate?
Last edited by perfectlyGoodInk; 09-08-2012 at 01:48 PM..
OK, I'm checking out and unsubscribing to this thread before my head explodes.
When something increases your costs, it isn't free to you. Getting e-mails you don't want is a cost just like a higher home price for a buyer is a cost.
OK, I'm checking out and unsubscribing to this thread before my head explodes.
Farewell, and Adios muchachos.
I'm outta here too. Have fun y'all
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