Question on agent commission for buyers side

Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes

Quick question . . . . looked at a property listed around $75,000. The agent we contacted that we have used on other properties (which were over $100,000) is saying that we as buyers would need to pay the difference between 3% of the purchase price and $3,000 which is about $800. The agent works for EXP and says this is normal. We have an exclusive with her for any property.

Is this normal? Would you simply contact the listing agent and submit the purchase offer that way?

Thanks

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Dustin Allen

Real Estate Agent · South Lake Tahoe, CA · Member since 2016 · 680 posts · 644 votes

@Andy Sabisch

Refer to your exclusive buyers representation agreement that you signed. You likely signed something saying you would pay 3% on any property purchased and if the listing agent offered a share then that would be deducted from what you have to pay your agent. This is very common and understandable that the agent enforces the difference on such a low priced property. $3k is nothing after splits, taxes and expenses. I will generally waive the difference on larger deals if the other agent offers a decent commission share but I’m not required to if I have that signed agreement with the buyer.

If you go directly to the listing agent and have an exclusive agreement with another agent, you will owe the buyers agent fee anyways. Don’t do that if you’ve signed an exclusive agreement.

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Nicole Heasley Beitenman
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
4y
I have never heard of a buyer paying the agent's commission. I'm sure it happens here and there, but I would not call it normal; at least, not in northeast Ohio. Maybe it's normal in your market? Eager to hear others' perspectives.
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Dustin Allen
Real Estate Agent · South Lake Tahoe, CA · Member since 2016 · 680 posts · 644 votes
4y
@Andy Sabisch
Refer to your exclusive buyers representation agreement that you signed. You likely signed something saying you would pay 3% on any property purchased and if the listing agent offered a share then that would be deducted from what you have to pay your agent. This is very common and understandable that the agent enforces the difference on such a low priced property. $3k is nothing after splits, taxes and expenses. I will generally waive the difference on larger deals if the other agent offers a decent commission share but I’m not required to if I have that signed agreement with the buyer.
If you go directly to the listing agent and have an exclusive agreement with another agent, you will owe the buyers agent fee anyways. Don’t do that if you’ve signed an exclusive agreement.
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Andy SabischPro Member
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Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
4y
Quote from @Dustin Allen:

@Andy Sabisch
Refer to your exclusive buyers representation agreement that you signed. You likely signed something saying you would pay 3% on any property purchased and if the listing agent offered a share then that would be deducted from what you have to pay your agent. This is very common and understandable that the agent enforces the difference on such a low priced property. $3k is nothing after splits, taxes and expenses. I will generally waive the difference on larger deals if the other agent offers a decent commission share but I’m not required to if I have that signed agreement with the buyer.
If you go directly to the listing agent and have an exclusive agreement with another agent, you will owe the buyers agent fee anyways. Don’t do that if you’ve signed an exclusive agreement.
We have not signed anything with the agent . . . we have several agents we use for properties and do not have exclusives with any until we get to the contract point. This agent is quite new and is always picking our brains for how to market her services . . only using her due to a family connection. But the "the buyer needs to pay me what I am short of $3,000" was a new one which she says that is EXP's policy (also new to me)

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Dustin Allen
Real Estate Agent · South Lake Tahoe, CA · Member since 2016 · 680 posts · 644 votes
4y
@Andy Sabisch
If you don’t have an exclusive then you’re free to use whoever you want. Many brokerages have a minimum commission to do a deal. Mine also has a minimum that I am allowed to charge. Any less and it’s not worth the liability exposure for them.
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Marian Huish
Real Estate Broker · DC MD, VA & NV · Member since 2014 · 512 posts · 292 votes
4y
I'm confused @Andy Sabisch as you said "We have an exclusive with her..." in your initial post. If you've had an on-going relationship with this agent who's served you well, $800 to me isn't worth severing that relationship. I would ask her for further explanation- but it appears that she simply has a 'minimum standard' compensation that she is willing to work for, whether it's from her, eXp, or possibly a Team she may work with. Given the low purchase price and low compensation for her time, it seems a reasonable request, however, ask for clarification and decide whether you want to continue working with her.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
4y
@Andy Sabisch This is common on low priced properties, at least for experienced agents. The agent will make less than $1000 at 3% on that sale.
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Andy SabischPro Member
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Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
4y
Quote from @Marian Huish:

I'm confused @Andy Sabisch as you said "We have an exclusive with her..." in your initial post. If you've had an on-going relationship with this agent who's served you well, $800 to me isn't worth severing that relationship. I would ask her for further explanation- but it appears that she simply has a 'minimum standard' compensation that she is willing to work for, whether it's from her, eXp, or possibly a Team she may work with. Given the low purchase price and low compensation for her time, it seems a reasonable request, however, ask for clarification and decide whether you want to continue working with her.

Sorry - just saw that . . . it should have said we do NOT have an exclsuive. We identified the property and her involvement will be to get us into the property so her time investment up to offer point would be minimal. You are right, $800 is not a deal breaker but the question was is this normal as we have bought sub 100K properties without paying our agent
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Chris Herrera
Real Estate Agent · Addison, IL · Member since 2015 · 185 posts · 88 votes
4y
@Andy Sabisch You will see this happen if the buyers agent isn’t being entirely compensated by the sellers so it’s not suspect, I would’ve just had this conversation with you before looking at properties
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Dwayne Poster
Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
4y
The listing agent seems to think it’s fine. Send her over to see how good her skills are at negotiating on your behalf, bringing you top dollar, and all that other crap Realtors spew.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
4y
Most agents running professional operations charge minimum commissions. Servicing below $100k properties at 2.5% or 3% only would lead to losing money on the transaction for an agent. You cant stay in business if you are losing money. It's not a charity organization.
A standard commission on $75k purchase after expenses works out to about minimum wage.
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Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
4y
If this is contained in any contract you have with her, you have to honor your contract - but it sounds like you don't have a contract.
If that's the case and this fee wasn't explained and agreed to in advance (verbally or as part of the offer), you should refuse to pay.
That said, a $75K property @3% is a gross commission of $2,250. Let's say the agent has a 70/30 split with the brokerage. That leaves the agent with $1,575. If the office has a transaction coordinator, they typically charge $400 per transaction. That leaves the agent with $1,175.
If the agent collects the $800 fee that they're requesting (also subject to the 70/30 split), they get $560 for a grand total of $1,735.
Not exactly a fantastic deal for the agent, even with the $800 - but that kind of thing must be disclosed up front, and most likely, your state's consumer laws will require it in writing.
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Patrick DruryBusiness Member
Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
4y
@Andy Sabisch
If the deal is on the market, that is pretty weird. I don't make buyers pay an additional amount if it's on the market. Also, there really aren't a ton of deals anymore under 100k here in Columbus.
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
4y
I don't think this is uncommon on lower priced properties. And if you like the agent, I doubt it would make or break the deal.
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
4y
What Charlie said plus factor in all the expenses the agent has such as gas, vehicle maintenance and insurance, health insurance, E&O insurance, desk fees, MLS fees, Realtor association fees, marketing, cell phone, etc. and they're almost certainly losing money on this transaction even with the $800 added on.
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Dwayne Poster
Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
4y
Quote from @Steve K.:

What Charlie said plus factor in all the expenses the agent has such as gas, vehicle maintenance and insurance, health insurance, E&O insurance, desk fees, MLS fees, Realtor association fees, marketing, cell phone, etc. and they're almost certainly losing money on this transaction even with the $800 added on.

The lister has all those expenses as well. What's their story?
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Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
4y
This is first I’m hearing about this kinda thing in our area. You’ve tagged Allentown, I’m in easton. I’d tell the agent no.
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Adam Martin
Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
4y
Part of me says this is reasonable after expenses and time and I would be fine with a listed minimum. The other part of me says the realtor is willing to work for 3k as a stated minimum but shouldn't it work the other way as well with a maximum. Lets say you buy this one as a rental but the next house you purchase for yourself with a 1M price tag. Did they really do an extra 27k worth of work to deserve a 30k commission today when yesterday they said they wanted 3k minimum. I know this is standard for the industry but it feels like a double standard.
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Garland BestBusiness Member
Realtor · Dallas, TX · Member since 2013 · 9 posts · 12 votes
4y
@Andy Sabisch It is very common to have a minimum commission that an agent will provide services for. It is a fallacy that agents get paid for not doing anything. Currently, the seller generally pays the commission in which the listing broker shares with the selling broker. This general practice has recently come under some scrutiny because the seller is wondering why he/she should pay somebody who is working for the buyer. In the future, the buyer may be responsible for paying the entire buyer agent's commission. Remember, she is working for you.
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Andy SabischPro Member
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Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
4y
Quote from @Garland Best:

@Andy Sabisch It is very common to have a minimum commission that an agent will provide services for. It is a fallacy that agents get paid for not doing anything. Currently, the seller generally pays the commission in which the listing broker shares with the selling broker. This general practice has recently come under some scrutiny because the seller is wondering why he/she should pay somebody who is working for the buyer. In the future, the buyer may be responsible for paying the entire buyer agent's commission. Remember, she is working for you.
I agree that expecting someone to work for nothing is unrealistic. In this case, we found the property and the agent's sole role was to obtain access to it. As far as handling the rest of the transaction, the title company we use takes care of everything once the contract is signed until we sit at the closing table. In this case, the effort on the part of the agent was minimal past putting the offer in Docusign and routing it for signatures. The agents we have in adjoining counties (separate MLS's) that look for and bring us leads are working continually to find deals so there is no question they need to be paid at some point for their efforts.

I understand that the commission structure and which side pays what amount is under review but as times have changed with listings being readily available to anyone with a computer, in many cases buyer's agents (at least for investors) have had their role change to simply opening doors and if that is the case, the 3% is probably not going to stand the test of time . . . but that is another discussion for another thread.
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Andy SabischPro Member
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Investor · Jackson, MS · Member since 2021 · 657 posts · 559 votes
4y
Quote from @Wayne Brooks:

@Andy Sabisch This is common on low priced properties, at least for experienced agents. The agent will make less than $1000 at 3% on that sale.

A suggestion then is on properties under $100K, have the fact that the buyer will need to pay the difference between the commission and $3,000 or at least mention that when you start working with a client. I understand that in many parts the country that $100K won't cover the down payment on a property but for others (like us), there is a large number of properties that do not fit that mold.
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
4y
@Dwayne Poster the listing agent usually has additional expenses: they often pay for photography, staging, cleaning, marketing the property, etc. which is why in many areas the listing agent gets a higher commission (3.2% listing agent, 2.8% buy side is typical in my market). For sub $100k properties, listing agents might have a minimum fee they negotiate into the listing, or pass those extra expenses on to the seller. I don’t know exactly, I haven’t worked in a market with properties in that price range. I’m sure agents in these markets arrange some way to avoid losing money on each transaction though, like this $800 fee. Nobody wants to take on the stressful work of being an agent just to lose money.
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
4y
@Andy Sabisch before becoming licensed and working as an agent, I also thought that "finding" the property meant I was doing the agents job for them and should pay less commission. Now after working behind the scenes I know that is actually a small part of the transaction. Also, if you're "finding" the property on a website like Zillow or Redfin, then the only reason you "found" it there is because an agent entered the listing info for you to find, and the local MLS uploaded the data to wherever you found it through an IDX feed. Those sites get all their data from the local MLS, which is run by agents and paid for by the annual fees we pay to our Realtor's Associations ($900/yr. In my market and some areas pay fees to multiple associations). So you wouldn't be "finding" these properties without agents.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
4y
EXP and all the discount brokerages are notarious for taking on part time agents and low/non producers. Don't listen to anything your agent says unless you signed a sheet saying "I will pay out of pocket so the minimum commision is $3000" otherwise you don't owe them anything.
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Dwayne Poster
Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
4y
Quote from @Steve K.:

@Dwayne Poster the listing agent usually has additional expenses: they often pay for photography, staging, cleaning, marketing the property, etc. which is why in many areas the listing agent gets a higher commission (3.2% listing agent, 2.8% buy side is typical in my market). For sub $100k properties, listing agents might have a minimum fee they negotiate into the listing, or pass those extra expenses on to the seller. I don’t know exactly, I haven’t worked in a market with properties in that price range. I’m sure agents in these markets arrange some way to avoid losing money on each transaction though, like this $800 fee. Nobody wants to take on the stressful work of being an agent just to lose money.

So the lister, with their .4 % spread and larger expenses, should be eclipsed by the buyer. I mean sure, whatever one can get. If I choose to go with a discount broker, and agreed to make up the difference, I've chosen. If they come to me after the fact, I'd tell them to take a hike, and don't ask for my business going forward.
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Cher Gosney
Member since 2019 · 4 posts · 1 vote
4y
In this current market, it is becoming more common to see the listing side offer less compensation, if any at all (yes....some markets are making the Buyer pay their agents commission by declining to offer compensation paid by the Seller). With my long term investor that I work with, for off market properties I charge him a flat fee, usually 2% of the sale price but on listed properties, providing the compensation is at a minimum of 2%, I never charge him an additional 1%. By law, all commissions are negotiable and if you agreed to 3% in the rep agreement, technically the brokerage can force it. That being said, most do not unless the agent makes a stink about it.
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