Contract that Pays Nothing to Buyers Agent
Glen Cove, NY · Member since 2015 · 110 posts · 18 votes
Contract that Pays Nothing to Buyers Agent
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Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
5yOriginally posted by @James Ritter:
I am sure this post is going to get a lot of pissed off real estate agents responding.... BUT I want to know what type of agreement you would use that would restrict a buyers agent from earning a commission.
Exclusive listing? Dual Agency?
I simply do not want to work with a buyers agent (as a seller). I mean the buyer can work with an agent all they want but without them earning a commission.
I know this isn't the answer you want, but:
I have sold by FSBO and always included a 3% payment to the buyer's agent, and I have been able to go into contract within days of advertising. The buyer's agent was a good insulator between me and the buyers, once actually talking them down when they got upset over seeing the profit I'd made in the deal at the closing table. They also handled all the sellers-end stuff like wrangling a home inspector, negotiating repairs with me, etc.
Its annoying that the seller pays the buyer's agent in the US, but that's just how the game is played. If you want to play by different rules, then you may not win the game everyone else is playing. It will be extremely hard to sell to a retail buyer if you are trying to cut their agent out.
33 Replies
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes5y
@James Ritter, are you not using an Agent yourself - to sell?
ie. Agents for Sellers will have your answer for you. Cheers...
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes5y
@James Ritter Former Realtor here. The way listing contracts typically (I think universally) work is that you agree to a commission amount and the seller's agent splits that amount with the buyer's agent. Usually 50/50, but not always.
The relationship between the two agents and commission splits is guided by NAR and MLS rules. You simply don't have the authority to change those rules.
I'm not sure what your thinking is behind not wanting to have a buyer's agent compensated for the work they do. I can't come up with a rational explanation for that position, but maybe you can clarify.
It should be self evident that a buyer's agent will decide which properties that he or she recommends to a buyer. If you offer a low commission, expect to be last on the list.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
@Charlie MacPherson I simply do not want to work with a buyers agent. I don't believe there are MLS rules that state you have to pay a buyers agent commission.
I find it funny that people making a huge decision, like buying a house, will be stopped because an agent didn't recommend a specific house to them. This isn't 1950.
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes5y
"I simply do not want to work with a buyers agent (as a seller). I mean the buyer can work with an agent all they want but without them earning a commission."
Am not pissed off at all and you sound like you'd be a great client. Just sign a standard listing paying your listing agent and let him hash it out with the buyer's agent. You'll owe the same amount anyways. You can also tell him you'll pay a co-op fee (approx double) or a non co-op fee.
However, don't be surprised if your listing guy hides it so he can avoid buyer's agents. - China, ME · Member since 2014 · 3k+ posts · 4k+ votes5y
@James Ritter You can choose to believe whatever you want. However, I can tell you from direct, personal experience (again, former Realtor speaking here) in the two states where I was licensed, that MLS rules state that you as a real estate agent (NAR member or not) are required to offer a specific compensation to a buyer's agent, and I believe that's a uniform rule nationwide.
NAR rules also state that a listing agent must get the property on MLS within 24 hours of signing the listing contract.
You also fail to understand the agent/buyer relationship. If the agent has done his/her job properly, he/she has demonstrated meaningful value to the buyer and has built up a level of trust.
For example, I spent a lot of time talking buyer clients OUT of properties. I would point out every bad thing I could see. I put my client's interest before my own and they knew it. They knew it because I proved it. Want proof? Look at my references here on BP. A buyer client, Bobby, stated exactly that on his review of my work for him.
When I recommended for or against a property, they knew that they could trust me. You seem to want to discount that, but if you do, you're dead wrong and that's going to be to your detriment.
When the agent is building a list of properties to show their clients, you would have to be spectacularly ignorant of human nature to think that offering little or nothing to a buyer's agent is going to result in your property getting equal exposure.
Believe whatever you want, but you don't get to write your own rules.
Good luck to you and the Red Sox.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
so what if I listed on Zillow and not the MLS as the listing agent? Would I not be required to offer a buyers agent compensation?
It’s not very useful to hear about how important a buyers agent is from somebody who was a buyers agent. I believe the industry is moving towards not having a buyers agent for home purchases anymore which is why I’m asking the question.
A buyers agent not wanting to show a home that a purchaser wants to see is exactly what I want so the purchaser calls me directly. Any time I have EVER looked at homes for sale and then contacted an agent all they did was send me listings for things I already saw online. As I said, it’s not 1950 anymore. - China, ME · Member since 2014 · 3k+ posts · 4k+ votes5y
@James Ritter You mentioned listing on Zillow as the listing agent. If you're not licensed, you are not the listing agent. You're a seller going the FSBO route. If you have a listing agent (person with a real estate license), they will probably laugh at that idea because they know that approach is severely handicapping them - and you.
If they're a NAR member, they are required to list on MLS within 24 hours. You can sign a waiver to avoid that, but again, why? That's like getting up to bat with one arm tied behind your back.
By the way, the fact that I was a buyer's agent has no bearing on the truth of what I've said. Not to mention that I was also a seller's agent.
Why so much of a hate-on for buyer's agents?
- 5yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Do YOU have a seller's agent? If so, then they should be splitting that commission with the buyer's agent. If it is a private sale with no agent representing you, then just put in the listing that you don't want to work with realtors.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes5y
@James Ritter As an agent representing a buyer I LOVED a property with a reduced commission to the buyer’s agent....since my buyers had already agreed to pay me the difference up to 3%, I got paid the same and.....since most agents don’t have the balls to do this, the property got Very few buyers looking at it (90% of buyers are using agents) so there was No competition for the house and my buyers Always got a Much better price.
This sounds like a Great strategy as a seller, don’t you think? Have fun.
- Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes5y
Originally posted by @James Ritter:
I am sure this post is going to get a lot of pissed off real estate agents responding.... BUT I want to know what type of agreement you would use that would restrict a buyers agent from earning a commission.
Exclusive listing? Dual Agency?
I simply do not want to work with a buyers agent (as a seller). I mean the buyer can work with an agent all they want but without them earning a commission.I know this isn't the answer you want, but:
I have sold by FSBO and always included a 3% payment to the buyer's agent, and I have been able to go into contract within days of advertising. The buyer's agent was a good insulator between me and the buyers, once actually talking them down when they got upset over seeing the profit I'd made in the deal at the closing table. They also handled all the sellers-end stuff like wrangling a home inspector, negotiating repairs with me, etc.
Its annoying that the seller pays the buyer's agent in the US, but that's just how the game is played. If you want to play by different rules, then you may not win the game everyone else is playing. It will be extremely hard to sell to a retail buyer if you are trying to cut their agent out.
- Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes5y
"I not be required to offer a buyers agent compensation?"
I don't think so, but you should disclose that BAC = 0% upfront. May affect the response you get.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
I dont "hate" the buyers agent or even have hate for them. Lets say I build a home for $1,400,000 and sell for $1,800,000Between the listing agent and selling agent I am paying $90,000 or roughly 25% of the profit after risking my 1.2MM and a TON of work. That is just unacceptable. I have an investor that is also an agent that is willing to list the property for 2% and I don't want to pay a buyers agent. I am trying to figure out how to avoid them.
Are agents required to be members of the NAR or is it optional?
I understand that you, and a few others on here feel that I will be handicapping myself and limiting the buyer pool and I am saying I do not agree with that generalization. Almost everybody uses Zillow when home shopping and just tells their buyers agent what they are interested in looking at. I dont believe that an Agent has the clout to stop somebody from looking at a home in the 2MM range just because they wont make their dollars. The buyers agent's main job seems to be asserting their value in a business that has changed drastically over the past 10 years so that they can avoid becoming obsolete.
- Etna Green, IN · Member since 2015 · 207 posts · 157 votes5y
@James Ritter
Knowing what i know now i would not allow my listing agent to represent both sides....think of it this way "would you use the same divorce attorney as your wife"?
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
I dont think that is a very apt comparison. They are completely different industries. I dont think that a buyer NEEDS a buyers agent. I think that a buyer would much rather have the $45,000.
I think that the buyer does not realize how much they are actually paying the buyers agent because of the age old "you aren't paying anything" claim which is simply not true. A divorce attorney isnt going to cost you 45K unless you have a TON of assets.
- Rental Property Investor · Columbia, SC · Member since 2020 · 302 posts · 186 votes5y
Not Upset at all. I am confused, I would just list the property at a price that the 3% does not bother me.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
Originally posted by @Cole Simpson:
Not Upset at all. I am confused, I would just list the property at a price that the 3% does not bother me.
$45,000 that could either be in the sellers or buyers pocket at market price of the home.
- 5yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
@James Ritter, what did your agent say about offering a commission to the buyer's agent? He should have advice for you.
I know @Charlie MacPherson has been licensed longer than I have, but I didn't think you HAD to offer any specific commission to the buyer's agent. In fact, I thought it was a violation of anti-trust to specify a minimum commission.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes5y
@James RitterThen You are better off using a flat fee ($,1000) listing broker and offering 2% to the buyer agent. Do you really think a buyer agent is going to help a client buy a property where they make $0? They’ll just warn them off of your property and tell them they are on their own if they want to pursue it.
BTW, if your agent buddy says he will list it for 2% on his side and offer 0 to the buyer agent, I have to say he is a moron....or he just thinks he’ll get some buyers coming directly to him, so he can sell them other houses when they don’t buy yours.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
I dont want a buyers agent helping somebody buy it. Thats the entire point dude
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes5y
@Mindy Jensen It's illegal to collude on commissions. Things like agent A, B and maybe more get together and say "we should all agree to charge X%". That's price fixing and is illegal. See: https://www.ftc.gov/tips-advic...
The MLS rules I'm familiar with (Mass and Maine) and I suspect all others state that the seller's agent has to offer some defined compensation to a buyer's agent. They don't (and legally cannot) give any guidance about the amount that is to be offered.
Of course, for those who are Realtors, the "Clear Co-operation" rule states that the listing agent must enter the listing into MLS within 24 hours of taking it. Then that listing is subject to MLS rules.
Make sense?
- 5yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
Originally posted by @Charlie MacPherson:
@Mindy Jensen It's illegal to collude on commissions. Things like agent A, B and maybe more get together and say "we should all agree to charge X%". That's price fixing and is illegal. See: https://www.ftc.gov/tips-advic...
The MLS rules I'm familiar with (Mass and Maine) and I suspect all others state that the seller's agent has to offer some defined compensation to a buyer's agent. They don't (and legally cannot) give any guidance about the amount that is to be offered.
Of course, for those who are Realtors, the "Clear Co-operation" rule states that the listing agent must enter the listing into MLS within 24 hours of taking it. Then that listing is subject to MLS rules.
Make sense?
Ah, yes makes sense. Thanks for the clarification.
- Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes5y
Originally posted by @James Ritter:
I dont want a buyers agent helping somebody buy it. Thats the entire point dude
I thought the point was to save that much money, which using the flat fee broker does.....or is that you just don’t want the buyer to have informed help?
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes5y
@James Ritter If you are objecting to paying commissions to both sides, you are simply not accounting for a cost of doing business.
Just like when I sell a business, let's say it's an insurance company, the seller is going to have to pay their accountant to clean up their books, their attorney to draft and review contracts and me as a business broker for our services. Those commissions are simply a cost of doing business - just like lumber, paint, appliances, etc for your build.
You might just need to make better deals so you have room to pay for marketing and closing expenses, which is how Realtor fees should be classified.
As to whether real estate agents are required to be Realtors (members of NAR), it depends on local rules.
In Mass, no. You can be a non-NAR member and practice legally. In fact I did exactly that for a few years when I was running my own startup brokerage. However, MLS Property Information Network (the dominant MLS in central and eastern Mass) gives NAR members a significant discount on MLS dues - to the point that it offsets a good chunk of NAR dues.
In Maine, FlexMLS (the only MLS in Maine) requires NAR membership to have MLS access. In Mass, most brokerages require NAR membership to hang your license. In Maine, all of them do.
To be clear, I've never been a fan of NAR. They cost me over $500/year for a fee that was shoved down my throat. Yes, they did some good things, but I don't like to be forced to join an organization against my will. Besides, that $500+ was better spent on marketing than NAR dues.
On to the next point. If you think that buyers are only looking at Zillow, you're simply mistaken. Yes, Zillow is one of the many marketing channels, but it's certainly not the only one. There's Trulia, Realtor.com, Homes.com. Move.com, Yahoo, AOL, every brokerage's own website, the real estate section of every newspaper's print and online sections and that list goes on and on.
MLS syndicates to dozens of online portals like those and Zillow is only one of the many.
You may not like the way the system is set up and I get that. But it is the way it is and even looking back as a former Realtor (having turned my licenses in favor of business brokering), I don't see it changing any time soon.
Real estate is not a commodity that lends itself to online sales like a bucket of 1/4-20 bolts or a clock radio that you can buy from Amazon. There are way too many variables and local knowledge that a good buyer's agent can bring to the table for them to be ruled out of the equation.
- Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes5y
Originally posted by @James Ritter:
I dont think that is a very apt comparison. They are completely different industries. I dont think that a buyer NEEDS a buyers agent. I think that a buyer would much rather have the $45,000.
I think that the buyer does not realize how much they are actually paying the buyers agent because of the age old "you aren't paying anything" claim which is simply not true. A divorce attorney isnt going to cost you 45K unless you have a TON of assets.
You think on a $2M home they are going to happy with $45K? No, any discount broker or FSBO situation is viewed like a garage sale. Even a really, really high end garage sale you are expecting a deal. If there was a gold Cartier Tank watch in the box with papers... would you pay $10,200 for it at a garage sale... nope, you want AT least 25% off. Obviously with a house its less but it will be 8-10% easy. You mentioned how you buy houses and go strait to the listing agent... do you offer the asking price or do you negotiate pretty hard?
That being said, I know I am not going to change your mind. You might a well just FSBO and use a closing attorney to handle the paperwork. Your discount broker buddy is not going to move the needle in terms of marketing so you will need that 2% to make it work with whatever direct buyer comes to you. If your location and product are both A++ then you might sell it for the same value but its really rare. About 50% of my listings start as FSBO's.
- Glen Cove, NY · Member since 2015 · 110 posts · 18 votes5y
@Joe Bertolino
8-10%? I find it funny you can just throw out generalizations like that knowing absolutely nothing about the hypothetical property we are talking about that is for sale. You prove my point perfectly.
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