Agent Commission

24 Replies

I'm trying to sell a house I own. The price I've listed it at reflects no agent commissions (-6%). If an agent approaches me with an interested buyer, can I agree to work with them if I tell them the buyer would need to pay their commission out of pocket or we could work their commission into financing by negotiating the price up by 3%? Right now the house is listed for $95k. So, tell them I will work with them if they can get a buyer to agree to $98k?

We have had 2 dealings selling FSBO where the buyer wanted to use an agent. Neither time did we pay any commission. The first time, we'd advertised a 3% agent commission, and the buyers actually ditched their agent, saying their agent got the commission from the sale of their house so they didn't mind telling him they didn't need him for ours if we'd agree to drop our price by the 3% instead. The next one, we learned, so didn't advertise any agent fee and just said we weren't paying any commission, although we had decided if anyone pushed us on it (like presented an offer with a commission included), we'd tell the agent we'd pay a 1% fee and they'd have to work out an agreement with the buyer if they wanted more than that. Even though those buyers had an agent, they also just got rid of their agent as soon as we said we weren't paying any fee, and we went from there.

@Donny Trana  there are no rules when it comes to commissions so yes you can negotiate for the buyers to pay their own agent. However, a lot of that depends on how competitive your market is and whether it's worth it to the buyers.  Bear in mind that selling a house yourself still comes with cost - ie longer time on market may have an impact on your holding costs or personal situation, and the longer your house sits, the more likely you'll take a price reduction on the sale.  A good listing agent should be worth their commission by getting you the best market exposure, best price, and negotiating in your interests while still getting the deal closed.

Medium team zen logo vMicki M., 33 Zen Lane | [email protected] | http://www.33zenlane.com | CO Agent # 100037721, NM Agent # 19441

Why dont you do an open listing? This way agents bring you offers and you can still market it yourself You would probably only pay a selling brokers commission which could be 3% or less

@Steven Picker   I would be willing to pay 3% commission to an agent but not at the price I currently have it listed at. And in order to make room for commission, I would have to raise my listing price by 3% which I don't really want to do since I've been marketing it on postlets, craigslist, local classifieds, etc for the $95k.

@Micki M.  I might just respond with what you're suggesting. Tell agents or buyers with agents that I'm open to working with them but they need to handle commissions. Now, whether that's worked into the sales price so they don't have to come out of pocket or now, really doesn't matter to me.

doesnt it get annoying that agents just keep trying to get an exclusive though, rather than bother bringing open offers to the table? most won't bring offers without an exclusive. (too bad for them)

anyways, based on ur statements, its simple enuf to remind agents 96k is your FSBO and that they'd have to bring slightly higher offers than you are getting and the difference would be their commission.

realistically though if i were you and i got a 90k offer from an agent it could rather easily be worked up to or near your asking and then the actual commission can be negotiated, which is easier with a broker than with an agent as some brokers wont bother splitting a few thousand with their agent but thats the agents problem not urs.

Yes, I'm an agent so I hope you'll not discount what I have to share :)

First, the buyers that "dumped" their agent are the reason agents who represent buyers must have exclusive contracts.  It was the agent who brought the buyer to the home in that they made the buyer aware of the home being available for sale.  It was the agent who educated the buyer, showing them however many homes, and discussing pricing, terms etc. It was the agent who was "dumped" and not paid for their services and if they were working without a contract it's their own fault.

I hope investors can see why an agent might require a contract from this thread...

Now back to the main point.  Each state has their own requirements so be careful with anything you hear here.

My take is that a buyer and seller come to the table and there is a basket on the table. Into that basket goes the deed for the house, the debt on the house, the cost of the sale and the money for the sale.

So the question is, does the bill from the Real Estate Agent get included in the cost of the sale.  Yes, it does.

However you negotiate the wording in the purchase & sale contract, the fact is the agent has earned a commission on the sale. 

When negotiating with a buyer to sign a contract, I offer to show all houses available on the market AND all houses NOT on the market if I can convince the owner to the possibility of a sale.  That never happens but it makes for interesting discussion with the buyer who never thought of simply choosing a house and saying.. "can you ask the owner to sell that to me!"  In any case, the buyer has to agree that whatever the circumstances, I will be paid my commission. Alternatively, they can agree to only look at homes where the homeowner, through their listing agent, has offered to compensate me.

I'm sorry to hear that you had an agent who did not get the job done for you. The fact is that homeowners who use a qualified agent, NET more money for the seller than those who do not.

Having said all that, I have never been faced with the actual situation so maybe someone who has can chime in...

[email protected] | 617‑969‑0453 | http://www.REinMass.com | MA Agent # 111679

In my area buyers can enter into a buyer broker contract with a Realtor. Having been in said contract as a buyer it was made quite clear to me that I was responsible for the 3% should the seller not pay it. So I would say yes you can tell any buyer who is using a realtor that you will not pay any commissions. Eeluding to what  @Donny Trana said everything is negotiable just stay transparent and make sure it is in the contract.

What was the home listed for when you had it on the market?

If I were you I would do this.

List it on the MLS for a flat fee.

List it at 97k or 98k & offer 2-3% to buyer agents. Doing this will get you more exposure than what you are currently doing.

I am pretty sure any buyer who is willing to go look at a 95k house will go look at a 98k house.

Medium holton wise property group logo jpegJames Wise, The Holton Wise Property Group | [email protected] | 216‑661‑6633 | http://www.HoltonWisePropertyGroup.com | OH Agent # 2015001161 | Podcast Guest on Show #127

I may have a different take as an agent, but I think the problem I see here is you are trying to sell a house for more than it is worth and creative marketing does not make up for over priced homes. If it was listed for 6 months with two showings it was way over priced or you are in a horrible market. 

Mark Ferguson, http://Investfourmore.com | [email protected] | http://investfourmore.com | CO Agent # IA40029358 | Podcast Guest on Show #68

Originally posted by @RJ Reynolds :

First, the buyers that "dumped" their agent are the reason agents who represent buyers must have exclusive contracts. It was the agent who brought the buyer to the home in that they made the buyer aware of the home being available for sale. It was the agent who educated the buyer, showing them however many homes, and discussing pricing, terms etc. It was the agent who was "dumped" and not paid for their services and if they were working without a contract it's their own fault.


are u talking about getting exclusives from your buyers?  

Yes, we utilize Exclusive Buyer Agency Contracts.  Don't be scared, we have solutions for those who are resistant to the notion of committing to working with us.

Besides, why would you want to work with anyone else when you are already working with the best :)

[email protected] | 617‑969‑0453 | http://www.REinMass.com | MA Agent # 111679

now thats consistent. i mean yea why show a buyer 100 homes only for them to decide to walk away then sneak back a bit later and buy one of them directly to 'save' on the sale price's depletion whether by seller and/or buyer commission?

all too often, i've actually heard agents (and even some brokers) use the excuse of the 'unfaithful buyer' potential used in order to serve as an argument for getting an exclusive sellers agreement. (imo, can't blame sellers for buyers possible indiscretions.)

@Mark Ferguson has a great point. If you only had 2 showings and no offers, you are either in a horrible market - and no amount of commission is going to help that, or your house is way overpriced. Remember, what you have into it has almost no bearing on what it is worth or what people are willing to pay for it. And even more important than that, if your buyer is getting a mortgage, the lender will require an appraisal, so if it doesn't appraise out, it doesn't matter what you list it at. 

I have used flat fee listings before I became an agent, and they are a much better way to go than straight FSBO, in my experience. But, if you aren't offering a commission, which is divulged in the MLS, no agent is going to show your home. They are required by law to show any house their client wants to see, but there is no law that states in what order they have to show those houses. You can bet they will show your house dead last, and only if the buyer still hasn't found a house.

Medium fbprofileMindy Jensen, BiggerPockets | [email protected] | https://www.biggerpockets.com | CO Agent # FA100049656 | Podcast Guest on Show #129

indeed as an agent i too would look on the MLS and invest time in showing the homes with the highest split to me. if its just 1% to selling agent (as opposed to listing agent) i would just likely not bother driving out to show that one.

not that that would be the only factor, though, of course.

Originally posted by @Mark Ferguson:

I may have a different take as an agent, but I think the problem I see here is you are trying to sell a house for more than it is worth and creative marketing does not make up for over priced homes. If it was listed for 6 months with two showings it was way over priced or you are in a horrible market. 

 When we originally bought the house in 2006, it was listed for $114k. Based on the fact that similar houses in the area were selling for around that, and even more, it seemed reasonable. However, the appraisal came back at $109k and that's all the bank was willing to finance so that's what we ended up paying. 

Now it's been 8 years later and we had it listed with an agent starting at $114k... then reduced to $112k... then finally to $109k. After 6 months with very little interest and no offers, we decided to consider doing FSBO at a lower price of $95k to try to get some attention. In less then a week, we've had several inquiries and 1 showing (although person never came). However, I'm hopeful a deal will happen, just trying to be patient.

Also, we actually wanted to list for lower than $114k because we are fairly motivated to sell (moving out of state), but our listing agent said she felt we shouldn't list for lower than $114k at that time. Said we might be leaving money on the table. I guess after getting hardly any interest, she started to change her mind, haha.

@Donny Trana List it with a flat fee RE company for exactly $100,000. Offer the typical 3% to a buyer's agent through the MLS. Make sure you get professional pictures done of the house. That will probably run you less than $150. That's the best marketing strategy I can offer you in your situation. If it still does not sell, and you are not willing to reduce the price, consider renting the home until the market catches back up to the price you need.

Medium buysellinvest.2Dawn Brenengen, Trailwood Realty, LLC | 919‑840‑8692 | http://www.trailwoodrealty.com | Podcast Guest on Show #101

I didn't read all of this.

I did read the part about maybe you listed the property to high and had little activity.

The agent really has nothing to do with that. I always find it amusing that the broker/agent is blamed for a seller overpaying when they bought or listed it to high.

"Why don't you do an open listing? This way agents bring you offers and you can still market it yourself. You would probably only pay a selling brokers commission which could be 3% or less."

Open listings breeds no broker/agent loyalty. Often times the waters get muddied on who brought the buyer with what marketing efforts and the seller tries to screw the broker/agent and claim it was them so no commission is owed.

So brokers/agents want to know if they put forth the effort that they will be compensated and will be protected with a commitment for time invested. That is why in listing agreements there is holdover agreements to keep the seller from trying to back door a deal.

I would skip all this agent stuff and be honest about your price and see if you just simply overpaid for the property plain and simple when you bought originally. A broker/agents job isn't to sell an overpriced property. No amount of marketing in the world will sell an overpriced listing. Rolling the commission and upping the price won't work if the property doesn't appraise.

Have you gotten an appraisal just to see what they think the value is or a BPO?? 

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

@Dawn Brenengen We way do what you're suggesting or parts of it. Since it's only been listed FSBO for a little over a week, we're thinking something still might happen with the way it's currently listed.

@Joel Owens  I have no problem with an agent getting whatever commission, it's more about the realization that there just may not be room for it in this deal. Unless we brought money to the table to sell. Although we're somewhat motivated, we're not quite to that point. We did have an appraisal done for a refinance a couple years ago. The appraisal came back at $88k. We asked to look at the report and the appraiser has used comps that seemed to be totally unrelated geographically and otherwise to our property. We were told it was pointless to try and contest it. We did get our taxes lowered because of it though. At the time, the only house in our area that were similar that had sold that low were foreclosures.

I'm not sure if I'm supposed to do this but here's a link to the house if anyone is interested. Might had a little insight to the discussion. u.zillow.com/p3NE3C

Originally posted by @RJ Reynolds :

Yes, we utilize Exclusive Buyer Agency Contracts.  Don't be scared, we have solutions for those who are resistant to the notion of committing to working with us.

Besides, why would you want to work with anyone else when you are already working with the best :)

 Exactly.  If you're already working with the best, you stick with them, WITHOUT needing an exclusive agreement.   Once you sign an exclusive agreement, you're stuck until the contract runs out.  When we started investing, the first 3 agents we tried using were practically useless, knowing less than we did about purchasing investment property and good rental markets in their areas as we researched it heavily before looking to buy.  Had we signed an exclusive buyer broker with any one of them (they all tried to make us sign it before showing us a house), we would likely have trapped ourselves for months.  The agent we finally did use to buy several homes there never asked for an exclusive agreement, knew the area extremely well, could even answer questions about builders and problems in certain subdivisions and knew how to solve issues when the banks were being difficult.  We would never have found him had we been stuck with one of the bad ones.  Off topic, so sorry, but I really don't like this exclusive buyer contract as I think it locks buyers in instead of giving them options, and it's usually one of the biggest decisions they will make in their lives, so definitely should not be stuck using one agent if that agent isn't bringing them the best deals.   

Regarding the low appraisal:  When you say you got your taxes lowered, did that mean they adjusted the assessment down to the 88K?  That could affect what people think your house is worth.  While I know it's not accurate for retail market value, I still look up the assessment value and compare it to sales price on any home I'm thinking of buying.  A higher assessment can actually help sell a house, making a buyer think it's worth more.  So in the future, if you may be selling, hold off on challenging the assessed value as the money you save in real estate taxes may not be worth the drop in presumed value when a buyer sees the lower assessment.  It's kind of like zillow values -- they don't mean much, but if it's higher than you're asking, it can help the buyer think he's getting a discount.  If it's a lot lower, they think you're asking too much.  

Zillow ( which I do not count as highly accurate ) is showing from a rental standpoint that rent is about 1% of purchase price.

For Centerville this is not an amazing and highly affluent area for rentals. 1% rent ratio is usually reserved for amazing areas like properties in Kennesaw GA next to the mall on Cobb County. You are out next to the Warner Robbins area. Some areas are decent there but nothing amazing for 1% rents.

So it seems a homebuyer would be the purchaser of this property or a local investor wanting to add to his portfolio but already owns other properties at higher percentage rents.  The pricing from Zillow is usually taking into consideration hat most properties are listed for sale with a commission paid. If you do that you are talking about 6,000 coming off the top plus whatever seller concessions average for that product type in the area. So it seems like you just overpaid some but I have seen worse before.

You need to know if that market is flat, declining, going up and by what percentage a month. Getting a BPO from a local broker/agent might be helpful. 

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

Originally posted by @Lynn M. :
Originally posted by @RJ Reynolds:

Yes, we utilize Exclusive Buyer Agency Contracts.  Don't be scared, we have solutions for those who are resistant to the notion of committing to working with us.

Besides, why would you want to work with anyone else when you are already working with the best :)

 Exactly.  If you're already working with the best, you stick with them, WITHOUT needing an exclusive agreement.   Once you sign an exclusive agreement, you're stuck until the contract runs out.  When we started investing, the first 3 agents we tried using were practically useless, knowing less than we did about purchasing investment property and good rental markets in their areas as we researched it heavily before looking to buy.  Had we signed an exclusive buyer broker with any one of them (they all tried to make us sign it before showing us a house), we would likely have trapped ourselves for months.  The agent we finally did use to buy several homes there never asked for an exclusive agreement, knew the area extremely well, could even answer questions about builders and problems in certain subdivisions and knew how to solve issues when the banks were being difficult.  We would never have found him had we been stuck with one of the bad ones.  Off topic, so sorry, but I really don't like this exclusive buyer contract as I think it locks buyers in instead of giving them options, and it's usually one of the biggest decisions they will make in their lives, so definitely should not be stuck using one agent if that agent isn't bringing them the best deals.   

That's my point exactly. You are NOT stuck even with an exclusive agreement. I didn't want to range too far off topic so I did not go into detail however I have to wonder why you didn't properly vet the first three agents you worked with before working with them?  

Let us pretend for a moment that you call me and ask to see a property. You explain that you are an investor and do not want to sign an exclusive agreement.  Great, I"d love to meet up with you and show you the house of interest. We set up time & place and viola, we get to meet and get to know one another and you see the house. THEN, after showing you the specific house of interest, I explain that while I understand your position regarding exclusive contracts, if we are going to continue working together I'd like a contract. then I tell you that a contract CAN easily stipulate that I am your agent with regards to the property at 123 Main St Nowhereville, MA or if there are multiple properties and we are feeling each other out as to suitability for working together then we can go with a 24 hour exclusive contract.  What I'm looking for is a meeting of the minds that demonstrate to me that you are not going to go around me to "save" the commission.  It also helps if you do go around me, that I have documentation indicating your agreement to work with me in some fashion.

Finally, I have an escape clause.  You can fire me at any time with 24 hours notice.

You see there are contracts, then there are real contracts.  I'd love to work with a handshake however, I have obligation to my broker and to myself to do my best to provide documentation against those that abuse our good work.

[email protected] | 617‑969‑0453 | http://www.REinMass.com | MA Agent # 111679

@Joel Owens  After the listing expired the first time, I met with two agents who both independently agreed the appropriate price they thought it should be listed at was $105k. We had previously looked into doing a refinance and trying to rent it. You are right that we would not be able to get the 1% which doesn't make it a great investment. On top of that, after figuring for maintenance, vacancy, etc, it would leave us cashflowing about $90 a month. Which, if we're wanting to move out of state, would coincidentally be equal to what we would have to pay a property management company. That would leave us exactly breaking even. Obviously, we're not going to do that. 

Reduce price every 10 days by $2000 ,offer concessions closing costs,warranty ,etc you have about $ 15000 to play with, tough situation Good luck