Question on agent commission for buyers side

[Andy Sabisch]

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

[Andy Sabisch]

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.

I agree wholeheartedly that the listing agent earns her commission in dealing with teh sellers, preparing the property for sale, arranging for photos, etc. and have no problem with that 3%.  For the general home buyer that needs to be taken to a dozen houses sometimes more than once to make a decision, the buyer's agent can spend even more time and earns their 3%.  However, when an investor finds the property, runs the numbers and the only factor is seeing inside, the buyer's agent has very little invested past the 30 minute walk through and the time to draft an offer in Docusign.  Once the contract is accepted and the package goes to the title company who does all the rest of the work to get it to closing (at least in the areas we invest).  So with that, the minimum of $3,000 for opening the door and drafting an offer seems a bit high.  For the agents that find a deal and bring it to us, we woudl gladly pay them the 3% rather than it coming out of the sellers side but in this case she was getting 3% + the difference to reach $3,000.  

[Andy Sabisch]

Just to close the loop with this post . . . the agent said that was her office's policy.  We talked and she understood that it was something she should have said before and she suggested we go through the listing agent which we did.  Did the walk through and submitted the offer as a dual agent . . . offer accepted - done deal.

Going forward we understand that for sub-$100K properties that using the one agent will require that cost to be factored in.  Knowing that going in is one thing but finding out at the end was the issue.  We are good with her for future properties.

[Russell Brazil]

Quote from @Andy Sabisch:

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.

I agree wholeheartedly that the listing agent earns her commission in dealing with teh sellers, preparing the property for sale, arranging for photos, etc. and have no problem with that 3%.  For the general home buyer that needs to be taken to a dozen houses sometimes more than once to make a decision, the buyer's agent can spend even more time and earns their 3%.  However, when an investor finds the property, runs the numbers and the only factor is seeing inside, the buyer's agent has very little invested past the 30 minute walk through and the time to draft an offer in Docusign.  Once the contract is accepted and the package goes to the title company who does all the rest of the work to get it to closing (at least in the areas we invest).  So with that, the minimum of $3,000 for opening the door and drafting an offer seems a bit high.  For the agents that find a deal and bring it to us, we woudl gladly pay them the 3% rather than it coming out of the sellers side but in this case she was getting 3% + the difference to reach $3,000.  

 Average contract to close for an agent takes 16 hours of time.

[Tyler Triplett]

Quote from @Andy Sabisch:

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

Since you didn't sign any exclusive I would, just explain your position to them and if they want to continue to work with you I would ask to waive the fee since you found the property and they just have to write the contract and make some phone calls. I am a real estate agent with eXp Realty and no matter what market you are in there is nothing called NORMAL it's called negotiation. Also I know you said family friend and "NEW AGENT" I would ask if she works with a team to find out if she has direct support in the local market. This makes a huge difference as well. I have a team located in Lehigh Acres, FL and I take on new agents to train them and offer support to them. The reason you want to know this is because giving a investment deal to a new agent they may not understand certain things to negotiate in your favor.   

[Randy Gutierrez]

I have a similar BAC (Buyers Agent Contract) with my agent. Properties priced below 100k are $3,000 as commission. If it's more than 100k than the commission is 3%. Most of the time though only 2.5% is covered from the seller so I would have to pay the .5% difference. Not all agents are built the same, so I would only pay that if I didn't think he was worth it. 

[Rick Albert]

This is likely to be the future for buyer's agents. I'm seeing commission percentages continue to decline and becoming harder to find properties. I have clients in escrow where it took six months.

I'm working through how I'm going to have the discussion with future buyers if a seller provides less than 2% commission. Technically, the buyer's agent has a fiduciary responsibility to present any and all listings to their buyers, regardless of compensation.