RE (real estate) question

[wabmester]

Think about the Math.....
if sales price is $100,000 and commission is 6%, seller pays $6000, and nets 94,000
if seller agrees to give you 3%, sales price is $97,000, seller STILL pays 6% (of 97K) which is $5820,  and nets (97,000-5820=) 91180.  Unless realtor agrees to pay out of the listing commission (unlikely), it wont work.

Huh? Doesn't the listing make the commission split clear? It's generally 3% to the listing agent and 3% to the "selling" agent (usually a buyer's agent). Listing agents don't like it when there's no buyer's agent since it means a little more work for the listing agent, but I don't think they expect to get a full 6%! In any case, the seller can negotiate the commission fees when they list, and agents will often be flexible about fees to close a deal.

 

[jazz4cash]

Huh?  Doesn't the listing make the commission split clear?   It's generally 3% to the listing agent and 3% to the "selling" agent (usually a buyer's agent).    Listing agents don't like it when there's no buyer's agent since it means a little more work for the listing agent, but I don't think they expect to get a full 6%!   In any case, the seller can negotiate the commission fees when they list, and agents will often be flexible about fees to close a deal.

Yes, the listing agreement does make it clear, but think about it, the only real tool the listing agent has is the MLS. Thier goal is to sell through another realtor. The split is actually between the two brokers involved. The broker with the listing wants to hang on to both sides if possible, sometimes called a "me and me" arrangement. You COULD, theoretically negotiate the commission up front, but this home is already listed and I'll bet it's a traditional broker split. Not sure where this listing is located, but wife and sister-in-law are realtors and thier brokers generally would not let them discount commisions unless asking price was way up in the upper reaches. Not sure what area of the country we are talking about, but here in DC area asking prices are being routinely reduced by 10% or more once they are on the market for 60 days or so. This is typical sort of data that a buyer's agent has ready access to.

 

[yelnad]

Huh? Doesn't the listing make the commission split clear? It's generally 3% to the listing agent and 3% to the "selling" agent (usually a buyer's agent). Listing agents don't like it when there's no buyer's agent since it means a little more work for the listing agent, but I don't think they expect to get a full 6%! In any case, the seller can negotiate the commission fees when they list, and agents will often be flexible about fees to close a deal.

DH is a part time agent. Around here, the seller's agent pays the buyer's agent out of the 6%. If there is no buyer's agent, then the seller's agent keeps it all. DH splits his typical 3% with his broker, so he really gets 1.5%.

 

[wabmester]

DH is a part time agent. Around here, the seller's agent pays the buyer's agent out of the 6%. If there is no buyer's agent, then the seller's agent keeps it all.  DH splits his typical 3% with his broker, so he really gets 1.5%.

The strategy for the buyer here appears to be "if I don't have a buyer's agent, then I can get the seller to knock another 3% off, and he can negotiate the 6% fee with his listing agent down to 3%."

So, does that work in practice?

 

[yelnad]

Depending on the market, I think it would work if the buyer knows to ask.

 

[perinova]

By going wihtout an agent you can knock off 2% of ASP.

Imagine an offer without a buyers agent at 98% ASP and an offer at 100% of ASP with a buyers agent. Who will get the home?
Answer the seller agent will knock off his commission by 2%, and the 98% ASP offer will get the house.

 

[tryan]

Are you serious? I the past 30 days, I have indirectly made two offers at 5% below asking price for two separate lots in different areas, both were declined!

Absolutely! ... "declined!" ... so what ! move on!

I'll guess those lots where not on the market "months". All the money is made on the buy. My crystal ball is too foggy to predict where prices will go in the future.

 

[biophase]

I think you are worrying too much about how much the realtor may or may not get paid.

Bottom line is what price is the house worth and what price are you willing to pay for it.

Come up with a number, put an offer in that will allow you to negotiate up to the price you want to pay for it.

If it doesn't happen, move on to the next house.

 

[al_bundy]

Are you serious? I the past 30 days, I have indirectly made two offers at 5% below asking price for two separate lots in different areas, both were declined!

which means absolutely nothing

on one of the NJ housing bubble blogs they post MLS info and lately a bunch of houses have been selling for 20% under original listing price

 

[honobob]

I think you are worrying too much about how much the realtor may or may not get paid.

Ain't it the truth!  But then when the title and the mortgage company reams them for thousands in junk fees they'll happily sign the checks.  It seems the human nature is to tear our peers down.  I wish as much energy was spent getting the Hollywood mogul to take $4 for your movie ticket or negotiating a better price at the ballpark...oh wait,  we're paying to see professionals.  Maybe if we made teaching/nursing/sales a profession then we would feel more comfortable paying a "fair" wage.

 

[astromeria]

I wish as much energy was spent getting the Hollywood mogul to take $4 for your movie ticket

FYI, lots of actors, directors, producers, and agents make about as much as some studio execs--and there are many more of them. These so-called "moguls" are not as overpaid as many other corporate executives--do you also complain about the compensation of high tech CEOs when you buy a computer or software, pharma when you buy drugs, big oil at the pump, big auto? I remember the year my software company CEO made news for raking in $77 million one year just after my company's heyday (and they tried to get us worker bees to be priud of that fact :). My software startup CEO made a magazine cover (Forbes? Fortune?) for being worth a paper billion near our peak--but I think he realized only a few hundred million, what with our stock price going from $80 to ~$1/share, poor baby. Anyhoo, these days I'm more concerned with executives stealing from me as a shareholder. How much more would my XOM dividends be without fantastical CEO compensation (and golden parachutes)? We retired folks can pay $4 or less for movie tic at weekday matinees--and hardly anyone else in the theatre to disturb us

 

[honobob]

We retired folks can pay $4 or less for movie tic at weekday matinees--and hardly anyone else in the theatre to disturb us 

I totally agree.  Unless YOU started the business or invented the product  YOU should not be making more than, say 15% more than the person one step below you and they should not be making more than 15%...on and on.

Matinees are at least $6.75 30  miles from San Fran unless you're at a bargain theater.

 

[wabmester]

I think you are worrying too much about how much the realtor may or may not get paid.

Yeah, people here are acting like a home purchase might be the biggest purchase of their lifetime or something!

Why would you want to save 3% on a $500K purchase (that's $15000, folks) when you could just reuse dryer sheets instead!? 

Let's face it.   As home prices went up, real estate agents jobs became *easier* because of the mania.   Does it make sense for agents to get an increasing fee (based on a percentage) as their job gets easier?    The real estate agent percentage-based fee is absurd.   It's time to kill it.

Of course, in a competitive market, a lot of discount agents have emerged.   And, of course, in a monopoly controlled by the National Association of Realtors and the MLS, agents are doing whatever they can to make life hard for the discount agents.

Article

DOJ lawsuit against NAR

 

[honobob]

Yeah, people here are acting like a home purchase might be the biggest purchase of their lifetime or something!

Why would you want to save 3% on a $500K purchase (that's $15000, folks) when you could just reuse dryer sheets instead!? 

Let's face it.   As home prices went up, real estate agents jobs became *easier* because of the mania.   Does it make sense for agents to get an increasing fee (based on a percentage) as their job gets easier?    The real estate agent percentage-based fee is absurd.   It's time to kill it.

Article

Huh? Doesn't the listing make the commission split clear? It's generally 3% to the listing agent and 3% to the "selling" agent (usually a buyer's agent). Listing agents don't like it when there's no buyer's agent since it means a little more work for the listing agent, but I don't think they expect to get a full 6%!

Wab, It was you that said the average person only holds property 6-8 years as your argument against buying and riding the ups and downs of the market.  So really you're only paying a few dollars more a month for a few years and when you sell the $15K will be dwarfed by the appreciation and the inflation factor.

And how did the boom make the realtors job easier?  From my understanding in the Bay area buyers were writing 20-30 offers to get an accepted one.  Sounds like alot of paperwork and back and forth and house showing to hopefully get a commission.

Speaking of which I can't imagine how someone can buy and sell several houses and not understand how they were paying for the service but maybe you never used a realtor.

I'm still not convinced you've actually  bought or sold.  IMHO real estate is not your forte.

 

[wabmester]

Wab, It was you that said the average person only holds property 6-8 years as your argument against buying and riding the ups and downs of the market.  So really you're only paying a few dollars more a month for a few years and when you sell the $15K will be dwarfed by the appreciation and the inflation factor.

I see.   So, I should bend over for the Realtor(TM) monopoly because I can amortize the screwing over a 7 year period.   Brilliant.   I guess I should start paying double for my cars too, since it's only a few hundred extra per month, right?

And how did the boom make the realtors job easier?  From my understanding in the Bay area buyers were writing 20-30 offers to get an accepted one.  Sounds like alot of paperwork and back and forth and house showing to hopefully get a commission.

Oh, gawd forbid that a Realtor(TM) should have to do some paper work!   Honobob, houses were selling in a couple days during the mania.   If the median house in CA is $600K, that's $36000 for, say, a week's work.   Not bad.   Using your "annualization logic", that is like a salary of $1.8M a year!

Speaking of which I can't imagine how someone can buy and sell several houses and not understand how they were paying for the service but maybe you never used a realtor.

I'm still not convinced you've actually  bought or sold.  IMHO real estate is not your forte.

Heh.   That's OK.   I am convinced you're a shill cheerleader for the Realtor(TM) monopoly.    What do you guys have against honest competition at a lower price?

 

[neo]

Oh, gawd forbid that a Realtor(TM) should have to do some paper work! Honobob, houses were selling in a couple days during the mania. If the median house in CA is $600K, that's $36000 for, say, a week's work. Not bad. Using your "annualization logic", that is like a salary of $1.8M a year!

Having recently sold our house in western WA, I'd have to disagree with you - I don't think "realtors" on average do anywhere close to an actual week's work per sale of the houses they list, more like maybe a couple of hours total (over a 4 month period, in our case). The whole MLS/commission/price-fixing setup is one of the biggest and longest running scams of the modern economic era. I told my wife several times during the process that we'd get a better deal if real estate was controlled by the mafia. To add insult to injury, there's title insurance (I could check county records on the internet for our title in 5 minutes, why is there a $1000 charge for this ludicrous "insurance" every time the property changes hands?), and $1600 for the escrow "service" that I believe probably involved less than hour's "work" by the escrow company.

And of course the real estate "agent" that listed the house argued vociferously when I would not agree to more than a 5% commission, even though prices (and hence the commission $$) had gone way up in just a couple of years, with the same amount of "work" on their part.

 

[Brat]

timo, I'm with you. I had just such a discussion with DD a few months back but she said that in her area realtors in her area coordinated insepctions (evidently quite a list) as well as preparing and showing the home, and advising the seller. Didn't make much sense to me, but then her time is worth REAL money to her employer, and her 'spare' time she want to spend with her family. SO.. whatever floats your boat, so to speak. She is in the S. Bay and spent a couple M on a fixer recently.

When we market our home I forsee my DH pinching everyone and their fees at least three times (not Bay area residents).

 

[jazz4cash]

The whole MLS/commission/price-fixing setup is one of the biggest and longest running scams of the modern economic era.
And of course the real estate "agent" that listed the house argued vociferously when I would not agree to more than a 5% commission, even though prices (and hence the commission $$) had gone way up in just a couple of years, with the same amount of "work" on their part.

Let me chime in here since I was defensive of the realtor profession in an earlier post. My wife got here license and worked a short while before going back to a 9 to 5. Her broker was the "top dog" in the area and negotiating a reduced commision was out of the question. When we took a company relo package and sold our home thru thier office, we did get top notch service from a husband and wife team, albeit employer paid thier commission. Having been treated so well we were shocked when we got to the DC area and the realtors here have this mindset that after showing 5 homes, they wanna know "which one do you want to make an offer on?" Pathetic. It makes no sense whatsoever that these agents get the same per cent commision when the avg price is more than 2x where we moved from, in a seller's market, no less. So my conclusion is to go with a FULL TIME agent working for a top notch broker, and yes negotiate the commission. There were actually a few smaller brokers around here that began lowering thier fees, but that was before the bubble "burst"

 

[lets-retire]

My most recent purchase went something like this. We went to Realtor.com and found several properties we we interested in. The weekend we were moving to the area our realtor said one of the houses is supposed to be receiving an offer, so we needed to make a full price offer now, without looking at the house, if we wanted to buy the house. We told her that wouldn't do. She set up a showing for the day we arrived in town. It turns out the rooms were too small for our furniture. Her answer was downsize the furniture. Uh, that's not going to happen. So we go to a second unoccupied house, which was also on our list of interesting prospects. We looked at it and were interested. The agent while we were at this house told us that she was our agent now and anybody we talked to we had to let them know she represented us. The best I could remember I never told her, she was our agent and even if she was she worked for me not the other way around. I can fire her just as easily as she hired herself. The agent told us the next day that the house was closing that afternoon. If she had done even a little work we would not have seen the second house.

We go back to realtor.com and decide to look at some houses being built. We drive to the houses and walk through them without telling anybody, because the realtor irritated us. We found two that were interesting. We sent the agent the listing information on the two houses and requested more detailed information about the houses. Apparently she couldn't read the e-mail, because she set up an appointment with the listing agent and only told them about one of the houses were were interested in. By the time we had the meeting with the listing agent and the builder we decided against the only one our agent told the builder about. We're sitting in the meeting and the builder started to pull out the information sheets for the house we did not want. We told them we were not interested in that house and were interested in the second one. Both the builder and the listing agent had a look of surprise. The builder was going to pull the listing for the house we were interested in because they were going to buy it. We did buy the one house our agent didn't tell the sellers we were interested in.

Prior to the meeting with the sellers, our agent was about to be fired. I called the listing agent and if he would have returned my call first our agent was fired. What exactly did she do for her commission? Set up a meeting, show us two houses, tell the mortgage company which title cowman and appraiser she likes, and write a contract. Total time invested about 10 hours assuming there's more going on behind the scenes than I know. So I definitely think the agents are being overpaid. We did most of the work finding our house.

Back in the old days, before Al Gore invented the internet, the agents actually had to work. They had to figure out what the buyer wanted and research what was listed in the buyer's price range, style and size, in addition to everything the agents do now. All of their research was done by flipping through a book or paper files, not the computer generated databases used now. That drastically cuts their work time down, the computer search can be done in a matter of minutes, whereas before it took a matter of minutes to get the books out of the drawers.

 

[SecondCor521]

Wow! I thought this thread would have died...

Anyway, I would just comment on two things:

1. The listing agent is one of the newer fixed-fee RE agents. When we looked at selling through them, they basically said it was $2,995 to them and 3% to the buyers agent if one existed.

2. perinova's post is spot on.

2Cor521