Buyers agent commission

14 Replies

I am submitting a hud offer on a home as an investor. What is the lowest acceptable commission for a realtor as the buyers agent? This agent has showed me 2 houses, and done 2 cmas for me. I found all the properties I am interested in. The hud agent gets 3%. Can I offer 1.6%. The net to hud on this transaction is around 140,000, so the agent at 1.6% would get around 2300 commission for his brokerage. 

What is the lowest you have ever negotiated to (commission wise)?. If the agent brought me the deal or had more time involved, I would feel the realtor was due a larger commission. 

I don't think HUD will adjust their net via a reduced buyer agent commission, if it's even doable.

@Brian Phillips

@Wayne Brooks

The buyer's agent commission is a fillable field on a HUD offer and can be anywhere from $0 to 3%

Since I am a Broker, I always put $0 , so I can buy the property for 3% less than the next guy.  For example:

Your Bid                                                              My Bid

$100,000 Bid                                                       $97000

-$3000 Listing agent commission                       -$2910 Listing agent comm

-$3000 Buyers agent comm                                -$0 Buyers agent comm

$94000 Net to Hud                                              $94090 Net to Hud

My bid wins

Saying that, unless you are an agent you are going to have to find someone to reduce their commission.   I would look for an independent Broker in your state who would have the ability to reduce their commission as most regular agents working for a brokerage may or may not have that ability

@Greg H. Thanks for the correction. Haven't offered on a HUD in a long time.

Ok I have switched realtors due to inflexibility with commission negotiation (he demanded 3% and would take no less). I am going to be 100% crystal clear so nobody misinterprets me.

This is the deal I am looking at. 

House worth 215K, im looking to offer at 65% net to hud of original list around 214k

This is how the deal works:

5,000$ needs put into the house via work and the closing costs

offer: 144,500$

sellers agency commission (3%) 4335$

buyers agency commission (offered 1500$) 1500$ (which includes junk fees charged by brokerage)

asking cost for closing assistance: 0$

net to hud: 144,500 -4335 -1500 = 138665 (~65% or original list price net to hud). I'm not posting the house specifics, but the house is 50-60 days on market consecutively and 1 price drop so far.

I offered originally 2,000$ to a buyers agent to do this deal, and he has since then ditched communication. What is the lowest you guys have negotiated a buyers agent commission to? I thought anything over 1.4% was considered negotiable, especially if the deal is a higher value house. Is offer 1500-2000$ to this new agent really that bad? I am expecting 20 hours of work from the realtor (as oppose to 40 as the norms), and I provided the house and know exactly what I want to bid. The realtor is mainly a paper pusher for me, submitting the offer, getting utlities activated, dealing with the closing company, and the final walkthrough. This new realtor has spent 0 time with me. What do you think is a fair low negotiated commission?

Perhaps you should obtain your license and set your commission as you see fit.

I just did a HUD offer for a client. It wasn't showing the home that took my time, it was the time submitting the paperwork several times, adjusting the offer several times. I'm not surprised that a buyers agent would object to a reduction of commission.

Interesting and good question. As an investor, we often look past realtors - especially when we find the deal. At that point, yeah, they are doing the paperwork for you. Couple points:

1. Is it required that you use a realtor? Could you ask the seller to maintain his percentage and lower the purchase to adjust for it? In that case, you could do the paperwork.

2. I have gotten some to work for less. However, it didn't involve just one deal. I worked with them plenty of times. Perhaps you need to start developing that relationship. If your realtor believes he/she will be able to sell in the future or do more deals with you, they might be willing to. Regardless, I think you could get somebody to do it for 2-2.5%.

3. If you really feel having a realtor is not worth your money, you should get your license. I'm sure you could find a broker to let you hang it for a reasonable price. 

4. Estimating their workload is just an estimate. If anything comes up during closing, that estimate could be off. If the deal for some reason fell through, they just lost their time. They value their time as we value ours.

I definitely understand your point, and, as an investor, I am not a fan of watching money just paid out left and right, but it is also part of the game.  However, looks like you have a good deal; don't trip over a dime to get the nickel. 

@Steven Segal

The OP is wanting to make an offer on a HUD home which cannot be done without an agent

That being said, I have done several deals for investors for a flat fee of $1500 in most cases. I buy 2+ a month personally and have knowledge of the system and my guess is I have spent less than 5 hours of my time of these deals

Depending on your agreement you may have issues buying a property that you saw with your original agent. It seems the process for HUD is more involved

Does Redfin or another discounter operate in your area? I think the other alternative would be to establish volume and get discounts after building a track record. Depend on whether listing rentals in the MLS makes sense - maybe you can get credit for your rentals towards commissions for your buying/selling.

Hiring an agent to fill out your paperwork is a lot like hiring a lawyer to help you set up an LLC. You are hiring a professional who (hopefully) undergoes continuing education to ensure that they are up to date on current regulations in their industry.

When your agent helps you with the paperwork, their errors and ommissions insurance can protect you (indirectly) from serious legal liabilities if things get litigious. If you fill out the paperwork yourself, and you mess up, you are liable. If your agent helps you and he messes up, both you and the agent are liable and can be sued. But the agent becomes liable to you for messing up as well, and you can go after them for the money you lost from the suit.

Their errors and ommissions insurance will pay out what the agent owes you and the other party, as long as the error is covered. If the agent is covered, they will only have to pay a deductable. If the agent isn't covered you can still sue them too, and probably ruin them! What a wonderful world we live in. So sure, your agent might not be the one who found you the property. But that is no longer the hardest part of the game. 

I understand that sometimes it looks like agents are getting easy money. But it is often just a stroke of good luck following a string of misfortune. For every 20 hour deal, you could be facing countless 50-100 hour flops. Buyer's agents have it the worst. At least listing agents have their client under contract for a time. Buyer's agents rarely convince their clients to sign a buyer broker agreement. And yet it is the buyer's agent who is considered the "selling agent" because they helped draft the offer that brought about the sale.

So I can see how your agent may have been unhappy, if not offended, at the idea of taking away less than 2% when the listing agent gets 3%. Usually the split is 50/50. When it isn't 50/50 it is almost always the buyer's agent who gets more commission. Lot's of savy listing agents will give some of their split to the selling office if the sale happens in the property's first month on the market.

Now sure there are plenty of discount brokers you could go to that would take less than 2%, maybe even less than 1%. But why should you expect your agent to protect your interests and make you money, if you aren't willing to make them money? And if the profitability of the deal hinges on 1.5% of the purchase price, I wouldn't touch it with a ten foot pole.

I found someone to do it for 2000$ (1.4%). Thanks for your input everyone.

Originally posted by @Brian Phillips :

I found someone to do it for 2000$ (1.4%). Thanks for your input everyone.

Are you getting the other 1.6% as a discount, or did you just make the listing agent more money?

I would suggest if this is a concern for you to go directly to the HUD listing agent and have them write the offer...

I got 1.6% as a discount. The listing agent gets a flat 3% and I negotiated the buyers agent to a flat 2,000 fee. Those come off the net to hud. 

I can't use the listing agent originally because 1. the listing agent wouldn't show me the house 2. I'm willing to pay 500$ more for my own representation 3. the listing agent always just refers you to someone in his/her office to try to get another 3% from you.

Using the listing agent might work if he/she was local. But he/she is not local. :)

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