BiggerPockets

I ahve recently had several debates with several agents and others regarding how much agents should be paid for contracted price.

The scenarios that come up with me are this: If you list a property for $300k and an offer comes in at $290k with seller to credit buyer $8k towards closing costs, then their actual offer (in my book) is $282k. s such, I believe it is only fair that agents should be paid based on the $282k (assuming that was agreed upon as final contract) and not based on $290k.

I have had several issues with buyers needing money for closing lately so they often increase their offer price, then reduce it with teh seller paid costs. As such, I feel that the agents should be paid based on the net of the offer price less the seller credit (of course I dod not expect them to get reduced by all other closing costs, only seller credits requested by buyer.

What are your thoughts?

- Will Barnard

Maybe I'm just programmed to think a particular way, I think its always been a case where the agents want to be paid on the full $290k because that would net them more than the $282k.

I agree with you from a seller point of view that the realtor taking of cut of 282k would be better but then if that was the case they'd probably end up with less buyers.

The Realtors main goal would change from selling your house and bringing buyers to only wanting to work with the buyers who will ask for less incentive or zero incentive since it would affect thier paycheck.

I think the main thought has always been seller can afford to take the hit so lets see just how much money we can get out of the sellers hands. They can afford it but the buyer cannot. I'd prefer to pay based on price after concessions all day long if I could get away with it. Its my money why can't I keep it.

If you look at the secret comments in the listing for REOs it always says "commissions based on net sales price". Add that to your listing and it removes all question.

In sounds good in theory but most agents get 2.5% - 3%. $8,000 in closing costs is $240 in extra commission. On $3,000 it is $90. I usually don't complain.

It depends on how you view it.I agree with J Scott and I am sure others will disagree with me and him as well.

I also believe these costs wouldn't be an issue if the are accounted for before the purchase.In other words run the worst case scenario and if that doesn't happen then you are better off than you thought.

It also depends on the potential "book of business" you will be getting from the relationship.

If this is a big seller who has a large portfolio of properties selling in the millions of dollars than that is different from an investor selling an occasional 50,000 flip.

If I am a broker/agent playing in that range I need to make every little cent and as a broker/agent someone cutting me on every deal will be a turn off to do future business with them.

I just think you will burn more bridges than you build.For everyone's information the REO companies are some of the nastiest unethical companies out there and treat brokers/agents like slaves.

Everything from a 2% co-op to paying off the net to belonging to 10 organizations charging hundreds of dollars each a year to paying for computer platforms,etc.

I could go on forever but many seasoned REO brokers have left that side of the business.For the investor the investment makes sense based on the return but not for the broker/agent.

I think the bigger issue is whether paying $8000 (when the agents have come to expect $8480) will *HURT* your business.

I can't speak for others, but given the relationship we have with many of the agents we work, with, I'm pretty sure it would hurt our business (we're successful because we have the reputation of NOT being frugal when it comes to our business)...

That's very much a big part of it. Since I work in a relatively small area (about 100,000 people in my investing area), I see the same buyer's agents over and over again (and many of them are also REO listing agents or work in the same office as REO listing agents).

If my market was a couple million people -- like Will probably sees in SoCal -- it probably wouldn't matter nearly as much, as it would be unlikely I'd see the same agents over and over again...

Ummm...I know agents who spend more than $1-2K on marketing for high-end properties...if they did this, they'd lose money...

Generally speaking, agents who are successful selling high-end properties get that way because they are better than agents who sell low-end properties. And why shouldn't a better agent make more money than a worse agent?

It's a business decision plain and simple.It all depends on how you want to run your business.

I get plenty of business with no discounting of my commission.People that want to wheel and deal or feel brokers and agents are "overpaid" I wish them the best and tell them to find someone else.

Nothing personal it's just business.I would say to the discussion we are having here to TEST and TRACK the idea and IMPLEMENT it on a small scale in your local market.If you do 15 flips a year then if you have 2 flips in a month try it on one and not the other.

If you get a ton of push back and negative results then you have your answer for your local market.I do the same thing in my marketing and ideas and test and track the results.

Again, thanks to all for your comments.

I have not had to deal with this issue a lot, only a few times and two most recent ones. In one case, it was on a property in TX so the amount of the difference was only $200 so it was not a large enough amount to make me go after it. In one my recent CA flips, I had a buyer and their agent who had to work very creatibvely to get the buyer into this house of minbe that they loved so much. In doing so, they raised their offer price above what I was asking and then reduced it via seller concessions. In such a case, I informed the agent that I had no problem giving money back with the increased sales price, my only issue was that the commission should be based on the net between the two and that I was also concerend about appraisal issues. They did not argue regarding the commission and agreed to sign off on it so it did not ever become a negative issue in the transaction.

In such cases, I think that is more than fair. In other cases, perhaps when the offer price is below the ask price and they also include seller concessions, at such a point, perhaps the seller should be on the hook for the contarct price as the mark to calculate the commissions as the seller would have the option to counter at a higher price or reduce concessions if the final net to seller was not what they were looking for.