Sticky Situation. Pay realtor commission n or not?

Sticky Situation. Pay realtor commission n or not?

Rental Property Investor · Burnet, TX · Member since 2016 · 9 posts · 4 votes

I’d like some feedback on how the bp community feels about my situation. I looked at a home w/ realtor but know the owner very well and had discussed it previously.

I plan to put in an offer on Monday for a rental property I really like. I know the owner and listing agent of the home very well but there’s some gray area as to the selling agent and the commission. I was looking at a different property with a selling agent and decided while I was near the neighborhood, I wanted to take a look at this property in question. I went by the property with the agent and made a run through.

This is my first home purchase ever so I’m an absolute newbie. Basically after I spoke further with the owner of the property about the home, he suggested I just put in my offer with the listing agent.

My question here is how should I handle putting in this offer? At some point I would like to expand and gain more rentals in the area so I don’t want to upset this selling agent but at the same time I’m very comfortable putting in a offer by myself plus I honestly had known and visited with the owner about the property previous to looking at it with the selling agent.

there’s a 3% commission in question on a 150k property.

Hope this makes some sense. Does anyone have any advice? Thanks in advance.

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Investor · Schenectady, NY · Member since 2015 · 107 posts · 111 votes
7y
I’m not an agent so I’m not going to give an opinion as to what is legal or ethical to agents. It’s very simple. The selling agent took time to show you the property. It’s absolutely the right thing to do to have them make the offer on your behalf. Trying to cut out an agent’s commission is very short sighted. Furthermore, if the listing agent knew that the selling agent showed you the property and is on board with cutting them out of the commission, what kind of person are they? Are they really someone you want to even do business with?
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  • Investor · Schenectady, NY · Member since 2015 · 107 posts · 111 votes
    7y
    I’m not an agent so I’m not going to give an opinion as to what is legal or ethical to agents. It’s very simple. The selling agent took time to show you the property. It’s absolutely the right thing to do to have them make the offer on your behalf. Trying to cut out an agent’s commission is very short sighted. Furthermore, if the listing agent knew that the selling agent showed you the property and is on board with cutting them out of the commission, what kind of person are they? Are they really someone you want to even do business with?
  • Rental Property Investor · Burnet, TX · Member since 2016 · 9 posts · 4 votes
    7y

    @Ted L.

    That makes sense. Not trying to be cheap here or unethical. It just seemed like a steep price to pay for such a short time spent.

    As soon as I left it hit me. Looking back I should have waited and just gone to look at the home with the owner at a later time.

    Like I said this is my first purchase ever so I’m just trying to figure out how best to handle it.

  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    7y

    You say "I am absolute newbie and this is my first purchase ever". You also say "I am completely comfortable putting an offer myself". 

    I am not familiar with Texas contracts and if I was buying there I would have an agent who is on my side and knows the contracts (and I am not new to buying and selling). Every deal is good until it isn't and sometimes one word in the contract boilerplate changes who gets the EMD or who can be sued. I would never go to the listing agent (and yes I am a listing agent and I refer out calls that come in to other agents in the office). The lister works for the seller and should have no problem writing a contract that heavily favors them over you (I've done it when people insist). So IMO you should have someone on your side not walk into the lions den and say "Write me a contract". Plus local customs and regulations play a big part in a transaction.

    As far as the agent that showed you the house, you asked him to go look at it and he took you. If you knew the owner and the listing agent, why did you ask this guy to get you in that property? He would most likely have a case for procuring cause and would be able to go after the listing agent after it closes for his piece because he took you in. So my call would be to have that agent represent you.

  • Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    7y

    @Heston McBride, there is no difference in price. The same commission will be paid either way.

    If you cut your buyer's agent out, it will all go to the listing agent who will either represent the seller ONLY or if your state allows they will represent both sides, but only in a limited fashion.

    Since the commission cost will be the same, you might as well have an agent who represents your interests. You still have a price to negotiate, inspections to deal with and potentially negotiate about, etc. You are a LONG LONG way from closing, an agent does more than unlock a door for your to look at a house.

  • Rental Property Investor · Burnet, TX · Member since 2016 · 9 posts · 4 votes
    7y

    @Kevin Sobilo

    Sound like I’m getting my answer pretty quick and I really appreciate this advice. I sounds pretty clear that I need to have an agent representing me.

    This does bring up a new question for me though. The selling agent and listing agent work at the same brokerage company (which is quite small I might add).

    Would using an agent at the same listing company be a good idea or would they have reason to not represent me as well as an outside agent would?

    Once again thanks for the info and Bear with me as I learn here.

  • Flipper/Rehabber · Boynton Beach, FL · Member since 2018 · 81 posts · 129 votes
    7y

    Since this is your first transaction - I recommend you do it with an agent who represents ONLY YOU!!!  Also, you don’t want to burn bridges this early in your career. 

    Secondly, having your own representation doesn’t cost you anything more, this one is a no-brainer: go with the agent who showed you the property.

    Lastly: the agent who showed you the property may have a claim for the commission still since they could claim “procuring cause” ... do you want your first transaction to involve a lawsuit? 

    Answer - go with the agent who showed you the property

  • Rental Property Investor · Burnet, TX · Member since 2016 · 9 posts · 4 votes
    7y

    @Cassie Montalvo

    Help me with my confusion please.

    You mention using an agent that represents only me. The house is listed with the same company my selling agent works for. Is this not a conflict of interest?

    Will I still get good representation?

  • Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    7y

    @Heston McBride, in most cases an agent will act as your designated agent and is working strictly on your behalf. It should not matter if a good honest agent works for the same brokerage as the opposing agent because by law as your designated agent they there to represent your fiduciary interests first. 

  • Specialist · Baltimore, MD · Member since 2018 · 130 posts · 100 votes
    7y

    @Heston McBride That 3% is more than just opening a door. It’s scheduling the home inspector to protect you from defects in the home. It’s negotiating on your behalf to protect your interests if they found defects. There’s a lot of ins and outs that an agent is going to do for you to protect you. Just remember, if you cut him out because you wanna save 4,500 bucks on that deal. The next time a deal comes his way, it’s not going to you and word of mouth will get around quickly about the situation.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    You don't actually pay the commission, the seller does.  The only person who 'looses' money is the selling's agent as they have to split the commission with your agent.  Even if the agents work for the same company, your agent has to act in your best interests.

  • Flipper/Rehabber · Boynton Beach, FL · Member since 2018 · 81 posts · 129 votes
    7y

    An agent in the same office is not a conflict of interest. The listing agent has a duty to their customer (the seller) your agent’s duty is to you (the buyer) - their office location makes no difference.  Most agents are bound by ethics.

  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    What no one here has mentioned, is if you buy the property, that agent who showed you the property will be due a commission from the listing agent regardless of whether you choose to use him or not. This is called Procuring Cause. He showed you the property, you buy it, he gets the commission. If the listing agent does not pay out the commission to that agent (their brokerage technically) knowing that that agent showed you the property, he will be in violation of the NAR code of ethics, and if the buying agent files an ethics complaint, they will not only get their commission, but the listing agent will likely get a license suspension.

  • Rental Property Investor · Burnet, TX · Member since 2016 · 9 posts · 4 votes
    7y

    Understood. Wow the support here is jaw dropping. Definitely feel better about how to approach this deal.

    Big thank you to all of you who responded. BP’s does it again.

  • Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
    7y

    @Heston McBride. Texas Broker Here. 

    I know a little about Burnet - It's not a large town so entirely possible the Agents both work at the same Brokerage.

    The mechanics of what happens is the Property Listing actually BELONGS to the Broker of the Agency. The Agents work for and on behalf of the Broker. They are not allowed under Texas Law to work independently. 

    What the Broker will do is Appoint an Agent to represent the Seller - obviously, that's the Seller's Agent whose name is on the Sign. Additionally, the Broker will appoint an Agent to represent you - most logically, the Agent who showed you the property. 

    The agents (Seller's Agent & Buyer's Agent) are ethically bound to act as a Fiduciary for their Clients. The reality is writing the Offer is just a small part of the process. There are inspections, negotiations, title concerns, Loan issues, PLUS many more items that make having an Agent represent you exclusively of great benefit. 

    Hope this helps. 

  • Real Estate Agent · Calgary, Alberta · Member since 2015 · 18 posts · 9 votes
    7y

    @Heston McBride

    Focus on the property not the commission - make sure a Realtor represents your best interests first - not the sellers.

    A buyers Realtor acting in your best interests will in most cases save you from yourself.

    As a Realtor I have seen many people nickel and dime commissions and then get stuck with property problems that cost 10 times that amount to fix.

    Don’t step over hundred dollar bills picking up pennies.

    A buyer with a buyers Realtor will out perform a buyer that buys from sellers realtor in the long run.

  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    @Heston McBride

    I was in your exact position two years ago on my first SFR. My buddy had his house listed on the MLS. My offers on a couple other properties got rejected. So my buddy told me to come over and check out his house that was for sale. I liked it and we came to an agreement on price. His realtor and my realtor did nothing for me. However, I feel like I owed my realtor something for showing me four other homes and writing up a couple offers on two of them over the past two weeks prior. So I went with my guy to get his 3% on the house even though he did nothing on.

    I found another property three months later on my own. I negotiated with the seller/listing agent and viewed the property all on my own. My realtor didn’t even know I was looking at that property. However my realtor showed me two homes in that time period and spent some time with me. So I negotiated in the deal with this house to have my realtor get $1,500 which was only 1.5% commission. The seller (who was an agent himself) wanted more for the house or zero commission for my realtor who didn’t do anything on this deal. Worried of losing this deal, I said my realtor gets $1,500 or I walk. He took the deal and I called my realtor and explained what just happened. He seemed happy enough for that and wrote up a contract for me. He didn’t really do anything on this, but I feel they need to be compensated for showing you homes and pulling comps with their time.

  • Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    When in doubt, always put your relationships first (especially in a small town).  

  • Shelton, CT · Member since 2017 · 2 posts · 0 votes
    7y

    @Heston McBride

  • Shelton, CT · Member since 2017 · 2 posts · 0 votes
    7y

    @Heston McBride I think the one who showed you the house should be the one taking you through the purchase.

    It’s not ethical to ask someone to walk you through the house and then not use them.

    I speak as a Realtor in the State

    Of CT.

    In your defense it why I don’t show properties without getting a signed

    Agreement from the buyer because of situations just like this.

  • Real Estate Agent · Fort Pierce, FL · Member since 2019 · 257 posts · 105 votes
    7y

    @Heston McBride Dance with the one who brung ya!

  • Investor · Quilcene, WA · Member since 2017 · 235 posts · 169 votes
    7y

    1. You are inexperienced, you need someone to help you through this.

    2. Ethics are important, even in a big town.

    3. Dealing fairly with all involved is critical in a small town.

    4. Legally, the agent who showed you a house is due commission, you might as well make use of their knowledge.

    5. Relationships are very important. I believe in taking care of those who take care of me. A good agent will bring you a wealth of information

  • Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Heston McBride first off, the seller pays the commission, assuming you aren't a licensed agent/broker you can't receive a commission on the sale.  The listed price is $150k, that is your price unless you can negotiate lower.

    Second - If this would be your first purchase you should have someone draft your offer for you.  It isn't as simple as writing it on a sheet of paper and disclosure requirement vary by state.  I know many experienced investors who wouldn't feel comfortable drafting their own PA.  

    This may seem costly but you aren't directly paying the fee and the seller agreed to the fee when listing it with the agent.  I think you should have the person who opened the door represent you in this contract.  They did spend time working for your benefit.  It may be an "easy commission" but most of them aren't.

  • Real Estate Broker · Durham, NC · Member since 2018 · 43 posts · 61 votes
    7y

    @Heston McBride

    A lot of good contents here. Disclaimer: I’m a realtor. A good realtor does more than opening a house (I wish it was that easy!)

    Use the realtor who showed it to you. Ask them questions about the contract. Ask for good referrals for lenders, inspectors, contractors. Go get ‘em and best of luck!

  • Real Estate Agent · Lebanon, PA · Member since 2016 · 21 posts · 6 votes
    7y

    @Heston McBride

    Why does it matter? The seller typically pays the list agent and buyer agent commissions unless you’re trying to save the seller some dough or get a better price from him privately? As for agents the seller and you benefit by having them represent each of you in case in anything goes “south”. However, there is NO obligation to work w agents if you know what you’re doing.

    But again I defer to my first point, you’re not paying the commission (unless I missed that) the seller typically does. Hope this helps.

  • Real Estate Agent · Lebanon, PA · Member since 2016 · 21 posts · 6 votes
    7y

    @Heston McBride when a list agent represents the seller

    And buyer it’s called dual agency and they must make sure all parties understand that relationship but where I am licensed - PA - the fiduciary responsibility is still with the listing client NOT the buyer. It’s in your best interest to find an agent who is experienced and will ensure your rights and fiduciary interests are protected.

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