Scaling commission to expensive homes

12 Replies

I'm looking at buying my first home that I plan to live in.  I've bought 8 homes so far that were purchased with the purpose of renting out to other tenants.  So, I have some experience.

The rental properties cost around $100k each. I ended up negotiating to 2% buyers agent commission since I was buying a bunch of properties and wasn't using much of the agent's time.

For my home purchase, I'm looking at homes that are 2-3 million dollars.  Paying $90,000 (3%) to a buy-side broker seems insane.  Especially since I'm not even using a lot of their time.  I look for the homes I like myself on zillow and redfin.

What's a reasonable rate to pay a buy-side broker on a home this expensive?

2-3% but why would care when the seller is paying the commission.

Greg, you're wrong. The only person who is paying money in this transaction is me, the buyer.  Where do you think the seller's commission comes from?

You would negotiate your best price for the property hammer the seller on price hammer them again and then only then after your contract is signed ask for  a 1% or so rebate from each agent or you are cancelling escrow 

1. Zillow, Redfin and Trulia have extremely dated information at times. It's not runcommon to see a house that closed 30-60 days ago still on Zillow. Realtor.com is the most accurate.

2. The seller and listing agent decide how much your agent gets paid.

3. If you don't feel that a buyers agent provides much value (and 80% of them don't) then find one that does or try to approach the listing agent or builder directly and see dwhow that works out in a sellers market. A good luxury buyers agent will be worth every penny of their commission... that you are not paying. Their connections and leverage can get your offer accepted over others or they can get you in before a project is completed and hits the market.

I understand your thought process that you are the buyer and you are paying the money so you are indirectly paying him... but you don't understand the implications of what you are asking from the builder/agent/neighborhood.

I'll give you their point of view. They give you a 2-3% discount on record ($60-90k), lowering their per sq foot asking price on other projects in the area and their reward is getting to baby sit a stubborn buyer with no buffer. You view this as "your money"... so the seller nets the same amount of money but you make the transaction more difficult for them and/or open them up to more liability (for a discounted double end deal).

Hi @Jason M.,


What's a reasonable rate to pay a buy-side broker on a home this expensive?

In general, the commissions paid to salespersons are negotiated by the seller and the listing agent, and you are not a party to these negotiations as a buyer. No different than when you walk into Best Buy -- Best Buy determines what the salespersons get paid, the only thing that is your business is the price of the things you are buying. You actually aren't entitled to know if your agent is getting 2%, 2.5%, or 3%, until closing, though a generous agent may elect to share that with you if they wish (often they will not be willing to share that information in writing). What the buyer's agent gets is on the section of the MLS that only agents, appraisers, etc, can see. The seller paying your agent 2% is not abnormal in that price range.

Everyone looks for homes they like on zillow and redfin, that's not unique or new. That is normal. 

I have never read or heard an appraiser explain a low comp by saying that the buyer's agent wasn't getting paid as much, or that the buyer negotiated something regarding the agent compensation. It's a theory that the price is higher because of the buyer's agent, but there's zero factual market data to back it up that I've ever seen. 

Redfin has discount agents if that is what you want. The special deal on the commission rebate, and the special deal on the level of service, is built in.

There is really nothing special about buying a $3m house in the Bay Area. It's a big deal because it's going to be the home where you raise your family in and live in, yes, but the price tag is not special. 

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

Ok, so it looks like what I need to do is find a buyer's agent who is willing to rebate me any percent they make above a percentage that we agree upon.

And that is why I don't shop at best buy. I can buy the same exact thing on amazon without having to pay for the sales person's salary + commission, plus the space they had to rent out for displaying their inventory.

You're likely to get more focusing on price, seller concessions, negotiating price, and the like, and obviously a discount agent isn't really going to go to bat for you (I'm sometimes conference called into the agent-to-agent conversations to ensure they don't negotiate something that will run awry of mortgage guidelines...), but if agent commission is the victory that you need to have to sleep at night, there's nothing stopping you.

Don't chop off your nose to spite your face. 

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

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I still do not see the problem. Assuming you are making offers based only on what the property is worth to you whether the sales commission is 0% or 10% it has no bearing on what you value the property at or what you should be willing to pay.  

What it sounds like is you are agreeing to over pay on a property and want the sales agent to give you a refund. You may want to rethink your approach to making offers and hone your negotiating skills.

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Yep commission comes off of the sellers side as an expense to their net proceeds.

If a buyer wants a rebate and it's allowed in your state then by all means go for it if that is what you want. If it's an agent they  are splitting with a brokerage so do not get the whole buyers side fee.

The seller agreed to pay XX percent of the sales price in commission. What the buyer offers the seller can either accept,counter, or tell the buyer to go pound sand. 

If a buyer doesn't want an agent just pay an attorney for your side and write the offer through the listing broker.

Buyers just need to call a spade a spade instead of saying brokers and agents get paid to much,blah,blah,blah. I think it's hysterically funny when some buyers say brokers and agents are not worth anything, they are overpaid, they do not do anything but they still want a broker/agent! lol 

If a broker/agent competes on price only then they generally are a weak negotiator and will work for less as the only way to generate business. 

  

I find it pretty hilarious that the only person that posted something that wasn't completely "hi I'm a broker and brokers deserve massive commissions" had their posts removed.  Biggerpockets is just a bunch of brokers patting each other on the back.

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