Am I a jerk for proposing this deal?

41 Replies

I want to consider proposing this deal to our realtor. (short back story to follow):

We are selling our townhome that we bought with a 0% down VA loan in January of 2014.

We used our realestate agent to buy and want to use again her to sell.

Since she made a little over $10k on the purchase and are selling so soon, would it be inapropriate/jerkish to ask for her cut to be a little smaller on this sale?

What I was thinking is that if we sell the house for $330K, minus $6K for renovations to the home, $5K for closing costs, and $23,100, I can break even.

The largest cost there is the realtor fee. Would it be jerkish to ask for a flat 2% which would bring realtor fees to 17K? Or could I structure a deal where she gets a garunteed 2% and 3.5% if she can get $330k or higher?

Any other ideas?

Back story: we were planning on holding the property for 2 more years, but I have a miltary deployement this summer, and want to sell. We used the same real estate agent and she was really great and is kind of a friend. So, can I ask for a lower rate since we have brought her so much business?

Thanks guys,

Greg

Where are you getting $17,000 commission for 2% of a $330,000 transaction? 2% of $330,000 is $6600.

And she has to split that with the agent who brings the buyer, so her commission will be $3300. And then she has to split that with her broker (usually 75/25), so her actual paycheck from this transaction would only be a little over $2400.

And the bigger issue is the buyer's agent. I can't imagine that too many buyer's agents are going to be very enthusiastic about a 1% commission.

Thanks for replying, I was only speaking of adressing MY realtor's comission. I would have no aspiration for affecting the buyer's agent's comission.

So to reiterate, at $330,000, the buying agent would get 3.5% ($11,550) and the selling agent would get 2% ($6600). the total would be $18,150 This is a chagne from the standard rates of 3.5% and 3.5% which totals $23,000.

Is that unfair given that she will have bought an sold this relativley expensive home 2 times in 1.5 years?

Define the value of this property relative to your time you need to sell.

Is the market going up, flat, going down and by what percent a month. If your property needs 6,000 worth of repairs then you might consider doing the repairs. You can't say full market value is XX and then reduce 6,000 for what the repairs would cost. A buyer is going to want at least double off that or more for figuring in labor and aggravation for sweat equity.

Anytime you make buyers do work they want compensation generally. The property also needing work doesn't show in it's best light which leads to lower offers from the get go.

I would get concrete value FIRST before even talking about a reduced commission etc. The broker/agent really has nothing to do with your life situation and it is not their fault. I think your closing concession relative to sales price might be low as well.   

We bought the home for just under $300k which was a very fair deal for both parties.

The market is appreciating (we are in San Diego) at about 5% probably slowing to 4.5% per year. We already did the renovations to a tune of $6000 out of pocket, but it did them all myslef to include a new 200 sqft patio, 2 1/2 bathrooms and a kitchen. No renovations will be needed.

I don't think that our live circumstances are going to be her fault, rather they are a massive benfit to her in that she can sell this home 2 times in under 2 years. So is a small discount on comission in order. I don't even know if 2% is the right number at all.

Thanks for the dialogue Joel and Fred!

You can always ask.  But the fact that she is selling the home twice in a short time period is really not relevant at all.  She has to do work and invest money in making the sale, even if she sells it every year for the rest of her career. 

You are not a jerk to ask.  I don't expect her to agree to such a massive discount.  Imagine if your commanding officer told you they were redeploying you to a locale you had  previously been deployed to a year ago, but he said they were going to pay you less money because you'd done that job just nine months ago?  You wouldn't agree to those terms.  Unless the realtor is much more a friend than an agent, I don't expect she will agree either.

Not a jerk to ask.  Possibly naive to expect her to agree.  Definitely a jerk if you don't quickly and gracefully accept and understand her refusal.

Cheers,

@Greg Downey it's not wrong to ask her to cut the overall commission. It's done all the time and a total of 5% commission split between both agents can still be a fair amount for both agents. Most buyer's agents only get 3% not 3.5% so asking her to take 2% when you offer to pay the buyer's agent 3.5% will probably come across as an insult, plus your agent is the one who's going to be spending all the money to market your property.

When you approach your agent with this proposal just ask her "what can she do to help out with lowering the commissions on the resale," then shut your mouth and wait for her to answer. You might be surprised at what she says and may end up with a better deal than you expected.

It's pretty common to see a 5% total commission in our area due to higher home prices.  I would think asking her to take 2.5% for the repeat business and offering 2.5% to the buyer's agent would be acceptable to her.  If not, there are plenty of other agents that would probably take this deal.

@Greg Downey

She didn't make anywhere near $10K on your purchase. $300K @3% = $9000, minus broker fee 25% minus 25% tax.. she made a little over $5,000. 

Is that the first house you walked into, and signed a cash offer and closed in 14 days? If so, that's pretty easy money. But I'm guessing you looked at a bunch of homes, used financing, etc. 

Now to list it will be a whole new scenario. Photos, marketing, etc. Do you want her to answer when someone calls at 9 PM or blow them off? Do you want her to show someone a home on short notice when she'd rather be at home with her family? If you're skimping on the commission, she's going to skimp on the service. 

Personally, yes - I think it's a jerk move.  Even if she were a personal friend or family member, I wouldn't ask her to take a cut in pay.  If she's a great agent, she's worth every penny.  If she's not a great agent, then find one who is.

I've had renters asking me to come down on the rent when it's a fair price and there's plenty of interest at that level.  I had an employer many years ask me to take a pay cut "just for a little while".  Nope.

It's really not her fault that you have so little equity in your home.  Asking her to bear the cost of your financial issues is completely unfair.  You're wanting to pay her based on what you can afford, not based on what she's worth.  And that's completely wrong.

Does she have the ability to reduce the commission? Is she a broker? The broker may have a final say in commissions. If she wants to rebate part of her commission back to the seller that may be legal in your state. So, as an example, her broker says list it for commission x. Commission x is split in half if a different agent brings a buyer. So, half commission x goes to your agent's broker. Part of that is then paid to your agent as the listing broker. Then, your agent may be able to rebate part of her split to you, the seller. This is a generalization but I am not familiar with your state and how things work. Ask the agent. Are you a jerk asking for a better deal? Depends ...on what you expect of the agent. If you expect 100% top notch service, open houses, the agent to spend marketing the property, etc...they may not want to accept less. Sometimes you really do get what you pay for and if you pay less you actually get less.

I'm not a broker, but I've seen a lot of agents in California offer a commission split, so I would assume it's legal.  My personal residence was purchased using Redfin which at the time offered a 50% commission rebate.

because of the competitive market in  San Diego there are many agents that reduce there commission and advertise it. 

I agree with @brucemay

I wouldn't speculate about reduced commissions just yet.  Have you contacted your agent and let her know you are interested in selling?  Given you her idea of days on the market? Has she done a net sheet for you yet?  Let her work the numbers and tell you what she can do first.  I"m guessing there are a lot of variables and costs that you are really not aware of, as well as not knowing the real comparable sales.  That's what agents do.  Let her present to you what she can do and then negotiate the commission if necessary.

I have really enjoyed sitting back and taking in all of yall comments. Thanks.

Here is what I have gathered:

It is not completley inapropriate to ask for a commission split reducing down to say 3% instead of 2%. (I thought 2% was low, but i just needed to throw something out there.) Especially given the circumstances the the California guys and galls have indicated: properties are selling fast and apparently it is not uncommon to have combined commissions at 5%.

I have contacted her, and I gave her a list of the comps in the very near area. We are flexible as to the sell date, and are open to "rent-back". I do know the area/comps pretty well (but she knows it better) and I am well aware that I do not know all of the costs involved (but I am learning from yall so that I won't be a jerk, but also want to milk this deal for what little value that there might be).

What I am having trouble grasping is why some of yall are so against giving a frequent use discount. I am not trying to argue, just trying to understand. I just don't see why this is considered my "fault" rather than this is an opportunity to gain commission 2x in less than 2 years on a $300K home. We don't have to sell, we are seeing this as an opportunity to get out, and invest in other markets, which is a benefit to my agent, even at a slight discount. Right?

I have used two different realtor's multiple times.  I bring them the houses I want to buy, they don't have to show me multiples,  drive me all over the place. advertise or cater to me. All I ask is when I bring the offer . get it done . nail it.  I am more than happy to pay them for their time. they got it done right. Others have chased us trying to get our "easy pickings business". They don't have a chance at it. the only reason we ever changed was ours retired because of health reasons.  

Now the rest of the story. My wife is a licensed realtor.

She is now inactive. but retains her license. she could have all of our deals. full commission. As she says it's not worth it. on a 6% commission she would get a split of 3%. of the 3% after MLS dues, Brokerage splits and expenses she would actually realize

1 1/2 %.  People have you drive them all over , look at dozens of houses, all out of your pocket. Then they stab you in the back and go buy builder direct. It doesn't cost the buyer anymore to use their realtor.  It just changes the split. 

If you want them to work for less. expect less. Realtors will sell the houses that pay more first. If you hold the house longer, you will pay it in holding cost anyway. Are you sure of your Appraisal? and Comps?  the work you have done might have brought more value than you expected.  

Just my personal Opinion!

I just sold my second home using a flat rate MLS service online. I paid 200 bucks for MLS listing, with Trulia, Realtor.com, and zillow to boot. I put a link up on craigslist. Paid a photographer 50 bucks for some pictures, wrote a better description than most of what I see realtors write, and boom, sold. Saved thousands of dollars. First one sold on the first day. This one sold in under 60 days. I get plenty of calls. Just go to lowes and buy a lockbox for 20 bucks to go on the front door. You don't need yard signs. The homeade ones get the wrong kind of calls anyway. It's a sellers market. If the house shows decently well and is priced right, it will sell. This BS about realtors doing marketing is usually hot air. The dozen or so I've talked with blather on about marketing. When it gets down to specifics, their marketing is to you, the seller, to try to get the listing. Glossy brochures don't sell houses.

Thanks Rod for that story, it paints a pretty good picture.

John, the sounds really tempting. to do a FSBO. Did it make it harder to do all of the closing stuff and paperwork? honestly, I think that was the best part about having an agent was having someone else to take care of the paperwork. I was able to find the best homes. I just HATE paperwork.

Originally posted by @Greg Downey :

I have really enjoyed sitting back and taking in all of yall comments. Thanks.

Here is what I have gathered:

It is not completley inapropriate to ask for a commission split reducing down to say 3% instead of 2%. (I thought 2% was low, but i just needed to throw something out there.) Especially given the circumstances the the California guys and galls have indicated: properties are selling fast and apparently it is not uncommon to have combined commissions at 5%.

I have contacted her, and I gave her a list of the comps in the very near area. We are flexible as to the sell date, and are open to "rent-back". I do know the area/comps pretty well (but she knows it better) and I am well aware that I do not know all of the costs involved (but I am learning from yall so that I won't be a jerk, but also want to milk this deal for what little value that there might be).

What I am having trouble grasping is why some of yall are so against giving a frequent use discount. I am not trying to argue, just trying to understand. I just don't see why this is considered my "fault" rather than this is an opportunity to gain commission 2x in less than 2 years on a $300K home. We don't have to sell, we are seeing this as an opportunity to get out, and invest in other markets, which is a benefit to my agent, even at a slight discount. Right?

It's kind of well known thing that when homeowners lose money, that agents and escrow/title companies are sometimes the only ones to make money.  A sale is a sale, regardless of the circumstances.  There are circumstances where an agent will agree to discount their commission in order to soften the blow to seller.....but actually it's often to get the sale to go through.  Especially if the seller doesn't have cash to bring to closing.  Many banks are allowing only a 5% commission (total) on short sales.  So both buying and selling agents agree to that because they want the listing or sale to their buyer. But there is no "frequent use" discount of any significance.  

The other thing that agents do is pay for things when the deal is close, but there is a gap that will prevent closing. Last year I had an investor buyer for a $165K property. Two days before close, the buyer's hard money lender required a stove. I said no. HMLs are not HUD and a stove was a stupid request on this fully rehabbed property. My agent wanted to counter where he would agree to pay for it because he was afraid the buyers or lender would get mad and bail. I had no such fear. There was $5K EM in escrow and we were past any time when the sellers could bail with no consequences. Agents offer to pay for things all the time when they are days away from their commission. In this case, the agent got lucky. The HML pulled the requirement and the deal went through as scheduled.

The other thing to remember is that agents have set costs and overhead that make it so they can't work for a seriously reduced commission without losing money. 

This just varies really.

If an agent is giving credit for a stove for 500 and the commission is 10,000 then that is different from a 75,000 house and a 2,250 commission.

The agent isn't getting all of that as you have the broker split and any reduction the agent agrees to without the brokers consent will be taken out of their portion.

On the residential side what most sellers need help with is the contracts.

Greg you can choose whatever decisions you want. Just REMEMBER to OWN and take 100% ownership of that whether the result is  good or bad. Sellers that want to be cheap but yet then complain when they do not get the results they desire have no basis or standing.

I do commercial real estate as an investor and a principal broker. I outline how the relationship is going to be for who I choose to work with. These transactions are much more complex in nature and I have a specific skillset which adds a lot of value.

There are potential clients that believe they know it all and everyone else has limited value. I send those people on their merry way. Luckily over a decade I can pick and choose who I want to work with.

A broker/agent needs to learn everyday so they are highly sought after as being the best and not just a number.   

    

Originally posted by @Greg Downey :

Thanks Rod for that story, it paints a pretty good picture.

John, the sounds really tempting. to do a FSBO. Did it make it harder to do all of the closing stuff and paperwork? honestly, I think that was the best part about having an agent was having someone else to take care of the paperwork. I was able to find the best homes. I just HATE paperwork.

I love flat fee listings. I'm in the business, but even so the paperwork when selling to an owner occupant buyer getting a loan is not for everyone. If you're selling a townhouse in an HOA in the $300K range in CA, I recommend you list and not try to do a flat fee listing. Your buyer will likely be just like you: owner occupy, getting an FHA or VA loan. You're looking at lots of viewings, written offers, counter offers, detailed inspections, appraisals, plus HOA paperwork (if applicable). You still have to pay the buyer's agent. Who will become frustrated with you fast if you do not know what you are doing.

No, you're not a jerk for asking. If your market is anything like Portland, all listing agents have to do these days is put it up on the MLS with a few pictures and there are multiple offers in the first day. No expensive marketing needed.

The most important thing a Realtor is going to help you with is pricing - if you think your home is worth 330k but it's really worth 300k, then it's going to sit on the market.  So if you want help with the paperwork & want help pricing, then there is no reason not to have a conversation with her about a "give & take" relationship.  If she doesn't have to work at keeping the house clean, doesn't have to show the property for months, etc then she should be flexible.  

FSBO can work great - but make sure you get in the MLS with whatever package you choose. If you wanted to offer a buyer's agent a higher commission to make up for your lack of experience with paperwork, they'll be happy.

And remember - there is no "industry standard commission" for real estate agents, but she does have to answer to her broker before she can commit to a discount.  

I can't believe the 'standard' commission is still 7% in San Diego! With prices as high as they are there that's highway robbery. Toronto has similar prices and most agents will jump at 3%.

Why not start by asking if she has a potential buyer?  You could sell at 317K - pay her 4% and assist 5K and basically break-even.  If you think it would still be a good deal pricing in the work you have done, you can add that.

If she doesn't have a buyer - I would propose a 4.5% commission with 2.5% going to the buyer agent and 2% to your agent.

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