Buying without a Realtor---Saving Money?
Real Estate Investor · Omaha, NE · Member since 2015 · 31 posts · 4 votes
Buying without a Realtor---Saving Money?
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Investor · NW Indiana · Member since 2012 · 833 posts · 197 votes
10yThe seller has an agreement with his realtor on what commission is paid, the agent would get the whole commission. Usually, sellers with agents have anyone that contacts them go through their agent.
41 Replies
- Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes6y
Originally posted by @Zee Anon:
Originally posted by @Account Closed:
Originally posted by @Zee Anon:
Originally posted by @Tchaka Owen:
@Zee Anon - Keep in mind that the agent can say "no" to giving you 2%. An agent is not required to submit such an offer either.
Of course they can say no, but why would they?
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether).
As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer?
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer.If my offer wasn't submitted, I'd be talking to the agent's broker and I could always go online or to the clerk's office to find out who gets the tax bill on the property and simply send a letter to the owner with my offer and letting them know what their agent is up to.
What you've proposed makes perfect sense and isn't stealing from the agent in any way. They'd lose a percentage to your agent if you had one. So, what's the difference? The deal got made.
All you need is a title company - or a RE attorney in an attorney state, as far as completing the deal as a buyer.
Thanks for the reply Sue. That's my thoughts exactly -- I'd simply pay for the attorney myself and handle the paperwork. It's not for everybody, but for many intelligent people I think it's very much worth the extra effort.
I think responses like Tchaka is why it's not a known strategy. As a realtor, he's clearly very biased against what I'm suggesting, and has even gone as far as to say he would implement unethical practices to stop me.Not biased against you, rather you're not thinking through....despite a few hints I'm dropping. That's ok though, you may or may not get the best deal - but you won't know, so it doesn't matter.
A buyer or seller wants the best net price. What you and other people who look to get better deals by going after an agent's commission seem to forget is that a commission is only part of the transaction. You're dealing with humans in a sales environment so treat the agent (ie, human) with respect and you'll likely do better. Many agents are in it for more than money, there's a level of satisfaction in helping people. It's fair to say that most agents I know go the extra mile for nice clients. It's not unusual to make (or save) them several percentage points by going above and beyond in a transaction. Try a bigger picture approach.
PS- your experience with leases aren't relevant.
- Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes6y
@Mike Cumbie - dual is allowed and welcome in Florida, though as transaction brokers - so limited fiduciary. The rest of what you wrote is on point. No problem sharing commission here either.
- Syndicator and Fund Manager · Victor, NY · Member since 2012 · 760 posts · 345 votes6y
@Nate Rohlf
I’m a broker and I only list my own deals. I also get commission when I buy. When I sell the houses that I flip, I almost never sell to someone who doesn’t have a buyers broker, even though it would save me commission. I don’t have time to show houses to every person who wants to call and see them nor do I want to hand hold a buyer through the process (even experiences buyers need an agents help to write the contract, ect).
I know that many brokers who only do listings and don’t represent buyers also feel the same way. Or, the listing broker would be expecting to get both sides of the commission due to the extra work.
That said, many brokers or sellers might negotiate a discount so if I were in your shoes I’d absolutely ask.
- Member since 2020 · 11 posts · 9 votes6y
@Mike Cumbie Thanks for the reply. You have some valid points, but I'd argue some of them are not quite relevant to this conversation.
Let me start this by saying I'm a high stakes professional poker player, so I'm quite aware when somebody "doesn't get it". That's not at all what I'm referring to. I'm talking specifically about buyers/renters who DO get it, such as myself. Literally all I need help with is the legal side of things, which I can hire a RE attorney for. Other than that, what value does a realtor on my end bring, when I'm the one doing all the work?
The above point seems to be getting lost in the discussion, so I'm going to clarify this:
I think a realtor on buyers side makes sense for 80%+ of transactions.
For me, and for many others, it does not (even though we're in the minority). I simply want to educate that minority, such as the OP of this thread, that it's a very viable option.
As to your other points,
I agree that dual representation is often murky water and can be unethical. That's why I frame my deals this way. I'm making it crystal clear that I know they represent the seller, and I am representing myself. That's why I don't really like your court analogy -- I'm fully aware that the real estate agent does not represent me, I would say it's much more similar to representing yourself in court on a traffic ticket where you've already looked up the relevant laws. You're right though, the person going in unrepresented needs to be fully aware that the sellers agent is not looking out for them.
When you say "other agents tell you to get your own", well yes of course they do -- if I was an agent, I'd also probably want to deal mainly with agents, because dealing with another professional makes the deal go quicker and smoother with less headache for you. I totally get that. But it's not about what the sellers agent wants, it's about what the buyer wants, which is to save money.
@Derek Carroll
Fair enough, that's your right to only do business with those who have brokers, and I completely understand your reasoning. That being said, I would just consider this to be one of the minor risks of attempting to purchase with no broker (running into somebody who won't do business with you), and I'd also argue that this is likely the stance of the minority, with most being content doing deals directly. And yes, agree with your last point, can normally negotiate so always ask! - Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes6y
@Nate Rohlf
I don’t know about your state, but I’m 2019 I bought two off market properties, no realtors. It took me about 10 mins to draw up my own purchase agreement. Once both parties sign, it’s then off to the title/settlement company. Done deal..
both closed in about 3 weeks with no glitches whatsoever. And we don’t use attorneys here.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes6y
Originally posted by @Matt M.:
@Nate Rohlf
I don’t know about your state, but I’m 2019 I bought two off market properties, no realtors. It took me about 10 mins to draw up my own purchase agreement. Once both parties sign, it’s then off to the title/settlement company. Done deal..
both closed in about 3 weeks with no glitches whatsoever. And we don’t use attorneys here.
That's cool, Matt. 9 out of 10 of mine are off-market as well, no middlemen at all. Usually a seller I know or was referred to me. My last one saved me $22k working directly with the seller. He was about to list it and was happy to reduce the price 100% of the 6%.
I would just add a quality inspection to your purchase agreement and title co list. Also to know about any lead paint and condition disclosures your state/area may require.
- Member since 2020 · 11 posts · 9 votes6y
Originally posted by @Steve Vaughan:
Originally posted by @Matt M.:
@Nate Rohlf
I don’t know about your state, but I’m 2019 I bought two off market properties, no realtors. It took me about 10 mins to draw up my own purchase agreement. Once both parties sign, it’s then off to the title/settlement company. Done deal..
both closed in about 3 weeks with no glitches whatsoever. And we don’t use attorneys here.
That's cool, Matt. 9 out of 10 of mine are off-market as well, no middlemen at all. Usually a seller I know or was referred to me. My last one saved me $22k working directly with the seller. He was about to list it and was happy to reduce the price 100% of the 6%.
I would just add a quality inspection to your purchase agreement and title co list. Also to know about any lead paint and condition disclosures your state/area may require.
That's awesome! Saving the 3-6% can be massive when dealing with small margins.
Glad to hear from the investor perspective, as it seems the only people disagreeing with me are realtors. - 6yRyan MoyerBusiness MemberProperty Manager · Orlando Kissimmee Davenport Salt Lake City, Park City · Member since 2019 · 990 posts · 1k+ votes
@Nick Patterson
If you had a license would you get the 3% back on your own purchase?
Cosmic Vacations4.9174 Reviews - Real Estate Broker · Jacksonville, OR · Member since 2009 · 199 posts · 155 votes6y
Great topic! As an agent, I am happy to present offers to my Sellers. I have had some wacky ones over the years. :)
If a Buyer wanted a 2%-3% rebate from my commission because they claimed to require nothing from me, I would decline. You would be surprised to hear how difficult some buyers who require “nothing” morph into. Taking twice the liability for half the pay is a silly practice, but i see many agents learning these lessons. If I am not representing a buyer, I am still neck deep in their transaction to make sure my Seller can expect a smooth closing. It is my responsibility to make sure my client has a comfortable-ish transaction. I do the same when working with a Buyer’s Agent, BTW.
Many of my clients are very savvy and use me on deals they have procured. Why? We have a reciprocal business relationship. I make them money, they make me money.
If the Buyer indicates they will hire a Buyers Agent, I would prefer they be represented, I would not view it as a threat at all. If they are reducing the net to my seller by the same amount of the “saved” commission, it does not financially benefit my Seller to accept with a non-represented party.
If two offers, resulting in the same net are offered, one by Buyers Agent, one by a Buyer seeking a rebate, the choice is clear.
On foreclosures, I can say that Banks are not attracted to non-represented Buyers, they view it as an additional liability. To me, this appears true in all transaction types. I have had the pleasure of working with a few self-represented buyers that were exceptional.I have been “offered” these types of opportunities from Buyers many times. In my State, we are not allowed to offer rebates, but that is not why I don’t work that way, so I hesitate to mention it, but thought it was useful enough to make a note of it.
- Member since 2020 · 11 posts · 9 votes6y
Good post @Kim Knox
My main argument against you is that you aren't doing double the work, maybe 5-25% more work on average, assuming it's a savvy buyer. If they're an ignorant buyer, then yes I agree it's not a great deal for you as the sellers agent. Either way, my point is about whats best for the buyer, not the sellers agent, so I do admit that sometimes you'll take a small hit in this scenario. I would note that if this reduces the average time on the market for houses you represent, you'd make a lot more money in the long run though. For me, it often speeds up the deal by being able to have a more direct line of communication, but I understand this isn't always the case.
I also agree with you, if the net amount on two offers is the same and one is using an agent, it makes sense for both you and the seller to chose the one with the agent.
If that were the case, I could pocket 1.5% of it, and put 1.5% towards the purchase amount so the net is still higher for both me and the seller.
The point is that if this is being offered, it likely means it's still on the market or has been for a while, and is an opportunity to make a sale happen quicker by being presented with an offer that otherwise wouldn't exist. You can always "wait it out" in hopes of the same offer with an agent, but I'd guess plenty of sellers would prefer to just go through with the deal if its the only one on the table that's giving them their asking price.
As to your last point, I think this might be an issue of semantics? I would never phrase it as a "rebate" from the sellers agent, I would want it "credited" back to me, and the way to do that is by having the seller modify the commission and lower sale price by the same amount that's being credited. Correct me if I'm wrong on this one though - Rental Property Investor · Lehi, UT (Lehi) · Member since 2018 · 91 posts · 99 votes6y
@David Faulkner Hey David I usually never do this but if I did this I hope someone would correct me. Assuming FISBO isn't a typo by you the correct abbreviation is FSBO (For sale by owner). It's pronounced the way you spelled it but FISBO is incorrect.
- Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes6y
As the other poster said about quick sales with no agents, I agree that if both sides are in agreement, usually cash sale, quick close, as-is, then the deal can go through smoothly, but I believe those deals are best saved for homes with some distressed condition (home or family situation) where it must go quickly no matter what. And inherently, the side with little experience is likely losing out but ok with it for convenience of getting rid of a problem. And those deals are usually the most fragile -- a relative steps in, a higher offer comes in, etc. Most standard transactions, I believe that the client benefits most from having an experienced, licensed agent guide them versus DIY, unless they've had plenty of experience, themselves.
As far as the commission discussion, there are plenty of agents who know commissions are negotiable right up until the purchase contract is ratified -- the brokerage fee adjustment form is a standard form in our local MLS, so it's not a rare occurrence. Even the Realtor standards of practice state: "listing broker may not unilaterally modify offered compensation ... (but) does not preclude the listing broker and cooperative broker from entering an agreement to change cooperative compensation." (see Standard of Practice 3-3 and 3-4 for full quote)
I think when agents state it's not negotiable, what they really mean is that many brokers won't allow a reduction, or if they do, it's taken from the agent's split, so it is unlikely they could agree. But there are also many quality agents that do negotiate, and I like that the market is changing this way. I hope real estate commissions will continue to reduce as more sellers realize there are quality agents who know 6% is just too much. When average home prices were much lower and you had to do much more work to get signatures without e-sign, deliver contracts, etc., it made sense. Not any more.
- Member since 2020 · 11 posts · 9 votes6y
Really good information @Lynn McGeein thank you very much for giving us the exact protocol. A few question I have for you.
You say that the broker wouldn't allow the reduction, so based on that, why would they not allow it if both the agent and broker are getting the same amount with an unrepresented buyer as they would with a represented buyer?
Here's my best guess:
Allowing this would create precedent to allow it more often, so even if they don't care about this specific transaction, it could greatly reduce their margins by getting less transactions where they collect the full 6%
*on a similar note, do are unrepresented buyers/renters actually make up a large portion of transactions (20%+?)
My last question is relating to @Tchaka Owen's comment that he would not present my offer to the buyer and said he had no obligation to. Is it true that he's allowed to not show my offer to his client because of the stipulation on commission? Either way it seems highly unethical to deny your client a legitimate offer because its not what the agent personally wants. - Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes6y
@Lynn McGeein - let me add more so you have a clearer picture. The question isn't about negotiating commission with an agent; there are those who do and those who don't (to each their own). It's about a buyer mandating the commission change and not as non-represented. A listing contract involves a negotiation between seller and listing agent. If a buyer presents a sale & purchase contract that interferes with the listing contract (and not pre-negotiated or agreed upon), I will kick it back to the buyer. Anyone trying that and crying "ethics" probably could use a little more RE education.
- Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes6y
@Tchaka Owen Yes, our standard contract does state that brokerage fee is paid at closing by a separate agreement, so buyer should always be made aware before signing an offer that they cannot "demand" that broker receive less, that commission is a negotiation between seller and broker, not them, but if I feel it's worth it (like reduced buyer pool due to poor location or defects and offer is solid), I'll request consideration from my broker to help my seller sell. I also point out that there are buyer's agents willing to reduce their commission to make their client's offer stronger (this actually does happen more often than you'd think), and may be a better path finding a buyer's agent willing to work for less than going unrepresented. @Zee Anon while broker may be getting same commission either way, I think for many brokers, it's less about setting commission rates (although maybe it is for some) and more about other issues: there's more risk and exposure, many ways to trip up state-required customer boundaries that risk your license that won't happen if buyer is represented; additional time involved to handle all access & both sides of transaction; and with no problem-solving or negotiating for unrepresented party, things can fall apart more easily. I'd rather see a buyer find a buyer's agent willing to negotiate their commission than a buyer without representation asking me to negotiate mine, unless they convince me they absolutely know what they're doing on their own and that it will be a fast and easy transaction, which is rare.
- Member since 2020 · 11 posts · 9 votes6y
@Lynn McGeein Very well put, thanks so much for the information.
Agree on all points -- I only make these offers on properties that have been on the market for longer than average, so it would be good for all parties involved to at-least consider it.
One last question, relating to trying to get a buyers agent for a reduced commission: how would I phrase that? Do I ask them to represent me and rebate me X% of the commission, or is it an informal agreement where they'll ask sellers agent to put X% of buyers side commissions towards the purchase price? (due to some states having different laws regarding who can receive the commission)
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