HUD Commissions - No Buyer's Agent

P Patel · 2012-03-31T16:23:36-07:00

I am looking to buy my first home and am bidding on HUD properties as an owner occupant and paying cash. On hudhomestore.com, I found a listing with an as-is price of 29K and that states 'The listing and selling brokers are eligible to receive a commission of $1,250'. Yesterday, I contacted the listing agent and placed a bid for 26K. I foolishly assumed that the total commission deducted from my offer price would be 1250 instead of 2500. So after receiving an email of the bid submission and seeing that the net proceeds to HUD would be 23500 (26000-1250x2), I contacted the listing agent and inquired about the double commission. I was sort of fearful of offending the broker and somehow losing out on this house, so I didn't question her further when she told me that the amounts are automatically filled in and that she can't change them. After spending some time on biggerpockets today, and reading this http://www.biggerpockets.com/forums/311/topics/67250-hud-offer-question-increasing-chances-of-winning-bid, it seems clear that this is not true. Now I feel like a chump. I understand that the listing agent should be compensated for submitting my bid and completing the paperwork that will ensue should my bid get accepted, but $1250 seems excessive. Is it possible to cancel the bid and ask her to reduce the selling broker commission (line 6a) to something more reasonable considering how little work she has done on my behalf, say like $500? Or is it common for listing agents to get double commission on these low value properties when the buyer is unrepresented? This is my first time bidding on a home and I need all the advice I can get. Thank you.

Jon Holdman

Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes

14y

When you buy a house directly through the listing agent, they get both halves of the commission. In any case, commissions are paid by the seller, so they have no effect on your offer or what the seller net's from the sale.

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P Patel

OP

Homeowner · Wichita, KS · Member since 2012 · 5 posts · 1 vote

14y

Thanks for the reply Jon.

I understand what you are saying, that usually the seller of a home has a contract with the listing agent for a set commission and that I as a buyer can't do squat to reduce that percentage, but I believe the situation is different when you are dealing with HUD foreclosures.

In my case, the listing offers $1,250 each to the selling agent and listing agent. When the listing agent submitted the bid on my behalf, she was presented with two lines on the bid submission form:
"6(a) Upon sales closing, Seller agrees to pay to the broker a commission (including selling bonus, if offered by seller) of:
6(b) Upon sales closing, Seller agrees to pay to the broad listing broker (If broker identifided is not the broad listing broker):"

My understanding is that these two fields are automatically filled in with the number 1250, but that she could have reduced 6b to something more reasonable like 500 - I feel that is a reasonable compensation for submitting the bid on my behalf and filling out the hud contract. She will still get the other $1250 for being a listing agent.

Now what I'm wondering is, is it unheard of to ask a listing agent to reduce the number on line 6b? If I wanted to reduce that amount, should I have instead found a buyer's agent that would work for a reduced fee? Should I ask the listing agent to cancel the bid and insist that line 6b should be $500? Is it even possible to cancel the bid at this point?

HUD Commissions - No Buyer's Agent

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