Buyers' agents giving commission rebates?

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Buyers' agents giving commission rebates?

Herwin G.
Investor · Phoenix, AZ · Member since 2014 · 22 posts · 10 votes

Hey BP, a friend recently mentioned that there are some buyers' agents that offer commission rebates of 1% or so. And since the commission is already factored into sale price (as the seller pays the commissions) thought this could be a straightforward way to keep more money in my pockets. Anyone have experience with getting commission rebates from buyers agents? or any referrals to agents in the Phoenix area that are open to negotiating rebates?

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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y

You've got a better chance of saving more money by negotiating with the seller than trying to nickle and dime your representation's compensation. 

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    You've got a better chance of saving more money by negotiating with the seller than trying to nickle and dime your representation's compensation. 

    7Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Herwin G. its against the law for agents to give you cash back out of their commission.

    what they are doing is negotiating with the seller to lower their commission in concert with lowering price.. you get the benefit of the discount but not cash

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  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Herwin G. its against the law for agents to give you cash back out of their commission in some states.

    2Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    Any agent who will do this is likely desperate for business, and thus an agent not worth working with

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Russell Brazil  I don't necessarily agree with that thought.. I have a business associate whos whole company is based on commission on a sliding scale as to what they put into the deals he is in a high priced market like you and generally is listing 750 to 2 mil .. properties. He is a recovering lawyer so very bright and has built a very nice boutique business for himself.. but does not work with investors only home owners seller and buyers.

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  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Russell Brazil  I don't necessarily agree with that thought.. I have a business associate whos whole company is based on commission on a sliding scale as to what they put into the deals he is in a high priced market like you and generally is listing 750 to 2 mil .. properties. He is a recovering lawyer so very bright and has built a very nice boutique business for himself.. but does not work with investors only home owners seller and buyers.

     I will sometimes cut my commission, especially for high priced flips, since I'm getting two transactions from the flip. But the rebate to me just reeks of desperation.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Russell Brazil  I hear ya... there is a company in Denver doing RE for a flat fee of 3k or something like that no matter the price of the home.. the local companies are up in arms over it.

    also I just saw a big billboard in PDX   4% total list.. so they list and probably put 2 to 2.5% BAC

    however like many markets listings ARE MONEY IN THE BANK.. and many of these wanna bee wholesalers we see on BP just don't quite get it.. LOL.. NO risk get paid..

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  • Casey Miles
    Investor · Mesa, AZ · Member since 2014 · 176 posts · 54 votes
    10y

    I have always found with service based business it's best to pay what the servicer asks. I always feel if they discount the rate/price they'll discount the actual services provided. 

    Negotiating on the property, a physical item, is what you should focus on.

    2Reply
  • Sean Reilly
    Commercial Real Estate Appraiser · Houston, TX · Member since 2015 · 23 posts · 6 votes
    10y

    There's a bunch of companies who will discount pricing but you honestly get what you pay for. 3k for all re services would get you nothing in return. You may as well do it yourself at that point

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Sean Reilly  I hear ya do you know the company I speak of in Denver I can't remember their name by associate told me about them

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  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Russell Brazil  I don't necessarily agree with that thought.. I have a business associate whos whole company is based on commission on a sliding scale as to what they put into the deals he is in a high priced market like you and generally is listing 750 to 2 mil .. properties. He is a recovering lawyer so very bright and has built a very nice boutique business for himself.. but does not work with investors only home owners seller and buyers.

    It's not uncommon for me to see discounts on the listing side if the home is going to go for enough. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Chris Mason   Real Estate 1O1  commissions are negotiable.. :)

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  • Sean Reilly
    Commercial Real Estate Appraiser · Houston, TX · Member since 2015 · 23 posts · 6 votes
    10y

    @Jay Hinrichs I'm sure there's more than one. These companies always pop up in a hot market and then they go away when it slows down

    1Reply
  • Herwin G.
    OP
    Investor · Phoenix, AZ · Member since 2014 · 22 posts · 10 votes
    10y

    Great advice - It sounds like the old adage of 'you get what you pay for'. Definitely need the guidance and advice this time around (just moved to Phoenix) so will stay the course of a full-service agent. 

    I have nothing against paying for the value I'm getting - but struggle when compensation is price based... if I buy a more expensive property, it doesn't necessarily mean the agents' doing more work. Glad to hear from @Jay Hinrichs that some businesses do work on a sliding scale.

    Definitely will focus on negotiating property price.

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Herwin G.:

    I have nothing against paying for the value I'm getting - but struggle when compensation is price based... if I buy a more expensive property, it doesn't necessarily mean the agents' doing more work. Glad to hear from @Jay Hinrichs that some businesses do work on a sliding scale.

    .

    $10k in sales price is going to net a buyer's agent about $150 at the end of the day. They typically do not focus on their check being $150 this way or that because it is far more rational to do a killer job for you and get future business in the form of referrals and working with you in the future. Would you, assuming you are a rational intelligent person, take $150 less now for an 80% chance of an additional $5,000 net paycheck in the future? 

    Granted there are stupid agents out there (like any profession) that will get more excited about $150 today than $5,000 three months from now. Do yourself a favor and don't hire a stupid agent. 

    Any reasonably intelligent agent thinks more about "deal or no deal" than worrying about exactly what their commission check will be, provided you aren't trying to purchase a $7,000 trailer (in which case 3% isn't going to cut it and you need to talk to a car salesperson that's going to get just a tad more than 3%).

    The dynamics are a little different on the listing side.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Chris Mason  Chris stupid agent syndrome is very much alive and well. I see it often were deals are 500 bucks apart and the agents bow their back up .. and will let it die and lose there 8k commission.. LOL

    Us great agents we take care of it and look at the bigger dollars.. but you know people are people and some just can't get out of their own way. 

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  • Chris MasonPro Member
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    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Chris Mason  Chris stupid agent syndrome is very much alive and well. I see it often were deals are 500 bucks apart and the agents bow their back up .. and will let it die and lose there 8k commission.. LOL

    . 

     I step on all sorts of toes and forcefully interject myself into negotiations when that type of stupidity comes up on my deals. :P They can be pissed temporarily, but it's for their own damn good and they will have a change of attitude once they get that check, and the buyers will also be OK with it when they get those keys in-hand. 

    I can think of exactly zero scenarios where $500 is the make or break on the question of "does this house make sense?" - one month of random home value fluctuations is going to be more than $500, meaning it is within the margin of error where random chance means far more than what is being negotiated over, meaning it is statistically equal to zero dollars.

    Deals cannot be allowed to fall apart over statically zero dollars. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Chris Mason  Chris stupid agent syndrome is very much alive and well. I see it often were deals are 500 bucks apart and the agents bow their back up .. and will let it die and lose there 8k commission.. LOL

    Us great agents we take care of it and look at the bigger dollars.. but you know people are people and some just can't get out of their own way. 

     This is very very true.  This is also a reason here why I would never consider rebating my commission...because often I have a buyer and seller so close together, but both are stubborn and wont budge, and I will just make up that difference out of my commission or out of pocket to get the deal to go through. I bet this happens on 10% of my deals. Just last month I had a buyer and seller disagreeing on a subsidy for repairs...buyer was at 1800 and seller was at 1100...so $700 apart on like a $700k deal, so I ate half that and the buyers agent ate half to get the deal done.

    So many people hate real estate agents and the industry, and think they are useless...but let me tell you home sales would come to a grinding halt without them because buyers and sellers could never sit down and agree on a price. 90% of consumers take the transaction so personally, there is no way anything would ever sell. Liquidity in the market would disappear without agents.

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Russell Brazil:
    Originally posted by @Jay Hinrichs:

    @Chris Mason  Chris stupid agent syndrome is very much alive and well. I see it often were deals are 500 bucks apart and the agents bow their back up .. and will let it die and lose there 8k commission.. LOL

    Us great agents we take care of it and look at the bigger dollars.. but you know people are people and some just can't get out of their own way. 

    So many people hate real estate agents and the industry, and think they are useless...but let me tell you home sales would come to a grinding halt without them because buyers and sellers could never sit down and agree on a price. 90% of consumers take the transaction so personally, there is no way anything would ever sell. Liquidity in the market would disappear without agents.

     God yes. 

    I wouldn't be a good agent because I would just be like "look Fred, the open market places zero value and does not give two sh-ts about your fond memories with your late Aunt Sally in the dining room. I can move the house quickly for this price, and probably hit average DOM at this price, but it's a complete waste of time to entertain this delusional fantasy price you just stated. Sign either here for the quick close or here for the average DOM price, clean out all that garbage in your garage this weekend and stop being a hoarder until this place is sold, and I'll schedule the photographers to come out next week. Any questions?"

    2Reply
  • Jorge Zea
    Boca Raton, FL · Member since 2016 · 145 posts · 67 votes
    10y

    Where do commissions come from? (they don't come from Paris like babies do)

    BP members are mostly able to sell a property on their own, handle contract, consult an attorney, title company - we all have a support team already around us (or should be building one fast). What we need the most is get the property on the MLS without having to offer the entire 6% commission.

    Use a Flat Fee listing service that charge $99 to get it on the MLS and syndicate it through the Internet - Zillow, Trulia, Realtor.com, Redfin, Movoto, HotPads, etc, etc, etc - (no other services provided); they post the max amount of pictures allowed; you have to offer a commission for buyer agent to get on the MLS and DIY from there on.

    BTW, buyers' agents are who do most of the work all the time anyway (deal with mortgage bank, show the property, write the contracts, do the negotiation, deal with inspections, appraisals, surveyors, title company, etc - they deserve their commission) - You save at least half the commission. (traditionally 6%, but as Jay Hinrichs says: commissions are negotiable.

    So now lets understand where commission come from and how they affect your bottom line. They have a HUGE impact on your ROI and particularly on your CASH ON CASH. Commissions come directly out of your equity but are calculated from the entire sale price .... huuuummm. Stp, breath deep (twice) and think about it - (I suggest you glance at the sky while you digest this and breath deep)

    Example: an imaginary one, but will show the impact of commissions on bottom line. - a Flip.

    The Acquisition:

    Acquisition cost $100,000 (purchase price + closing costs)

    Rehab: $25,000

    ARV: $160,000 (assume this is the sale price)

    Assumed you get investor to finance you 75% of project: ($125,000 x .75) = 93,750

    Your equity (cash for "cash on cash" calculation): $31,250 (100000+25000-93750)

    Now the sale:

    Sale price = ARV $160,000

    Sale commission 6% ($9,600) - traditional listing agent.

    Other closing costs: ($2,500) (lets ignore the interest for this exercise)

    Profit: $54,150  (160000-9600-2500-93750) 

    Cash on Cash 73% (54150-31250)/31250 ---- VERY SWEET INDEED.

    ....BUT ASSUME YOU GO WITH A FLAT FEE LISTING SERVICE (FOR $99) AND OFFER 3.0% COMMISSION TO BUYER AGENT

    Sale commission 3%+$99 ($4,899)

    Profit: $58,851 - (160000-4899-2500-93750)

    Cash on Cash 88% (58851-31250)/31250----- MUCH SWEETER

    Your see how a small % change in the commission has an exponential effect on your Cash on Cash due to this simple fact: Commission come directly out of your equity while commissions are calculated on the entire sale price, which a large portions is leveraged by the loan. - a change in less than 3% in the commission impact your Cash on Cash by 15% - WOW! - Magic hat trick,

    NOTE, the larger the leverage, the more exponential impact will the commission have on Cash on Cash.

    Meditate about it ... run numbers and always use flat fee listing services ... it is worth for you to do the listing agents work and save a ton of money and make your CASH ON CASH ridiculously better. Bond with the buyer's agent and he will be a huge support - he wants his commission regardless of how much the other side os getting.

    Need advice on how to use an effective Flat Fee service ... reach out please.

    2Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y
    Originally posted by @Jorge Zea:

    Meditate about it ... run numbers and always use flat fee listing services .

     I just have a quick story about a flipper "client" of mine who did this.  He used me to buy the property, and did not respect the custom of our market place of using the same agent to list as they did to buy. So on the sell side he used a flat fee listing service instead of me. I didnt care, as he was then cut out of a lot of opportunities in the market place....well 2 things happen to him on this deal that he got really screwed by. He accepted the high bid on the property, which was financed at $750,000...while there was an all cash offer at $700,000. BTW, this was a $700,000 property. Well he pass on the all cash no contingencies offer, and took the financed one, then had the property appraise at $650,000. I as an agent had a very good idea what it would appraise for, and if I was listing it would have advised him it wouldnt appraise for that. So he ended up having to lower the price to $650,000.  $50,000 less, and if factored in tyhe commission, he nets $22,000 less than if he just used a knowledgeable agent to list.

    But that wasnt the end of his dismay. Him being a flipper didnt understand that Washington DC has 3 tax rates for property. The normal tax rate at 0.85% of the properties value, a 5% tax rate for vacant properties, and a 10% rate for blighted properties.  So he bought it in blighted condition, they assessed his sales price at the blighted rate, he held it about 150 days I think, so he got hit with a $16,000 off the top real estate tax at closing. I see flippers in DC make this mistake so often,....as well as new agents who dont know to file the proper paper work to change the tax status.

    There are certainly people out there who can sell properties on their own without an agent, but I dont want everyone to think they are that person. There is a reason why the vast majority of FSBOS do not sell.

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  • Richard Recuset
    Residential Real Estate Broker · Miami-Doral, FL · Member since 2015 · 39 posts · 13 votes
    10y

    Commissions are negotiable, and it's not against the law to give cash back/credit to "parties to the contract" as long as there's full disclosure.

    In my opinion, unless an agent is a party to the transaction (meaning buyer or seller), an agent should never give up pay for their services, unless it was never agreed upon from the get go. 

    What other service professional negotiates their fees? One that does not value their work or not very professional. 

    In my 20+ years as a realtor I think I've taken less than agreed upon originally maybe once or twice, and that's because I either was getting commission from both sides and I volunteered to reduce my commission, or I knew one of the parties was at a loss and I offered to help. 

    But behold, to those that want to put their hands in my pockets. I expect to get paid for services rendered. My commission is not negotiable. It's agreed upon before I start working. 

    If I have the listing, my client (seller) knows (in writing) what my compensation is regardless. If I represent the buyer, either the buyer has the money or not. If I'm to contribute money is because I also have some interest in the deal as principle. 

    It's funny, issues like this are more common in lower priced areas. not so much in middle to higher. Probably due to parties involved being more professional themselves.

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  • Jorge Zea
    Boca Raton, FL · Member since 2016 · 145 posts · 67 votes
    10y

    @Richard Recuset some states prohibit cash/back/credit to parties (even if disclosed) and some even prohibit Flat Fee or Limited Service listings - US DOJ has several lawsuits against several states for this. Check out: https://www.justice.gov/atr/competition-and-real-estate - you will see what states prohibit what.

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  • Jorge Zea
    Boca Raton, FL · Member since 2016 · 145 posts · 67 votes
    10y

    @Russell Brazil is TOTALLY correct. These are the type or realtors that we need more of. - more than Realtors, guys like these are real Professionals!.

    Flat Fee listing services with no broker representation are ONLY for experts (like most of BP Pros) - in my many years providing the service I have see horrible tragic stories. It is much better to get a smaller ROI that risk some pitfalls that loom around every corner. Listing agents will never disappear because of their knowledge and outstanding service most provide; nevertheless a very small portion of the population ... specially knowledgeable investors with a support team around them (including an attorney) should be OK with a Flat fee Listing service. In our practice we reject many people that want to use the Flat Fee service because we know they will run into trouble.

    1Reply
  • Chris Isaacson
    Real Estate Agent · Rocklin, CA · Member since 2016 · 79 posts · 50 votes
    10y

    @Jorge Zea I'm assuming you couldn't show value to your sellers so you decided on the alternative route which is to be the cheapest guy.

    On a side note flat fee listings don't appear like traditional listings as they normally say input only and talk directly to seller. A lot of agents I know don't show these and I found out why early on, it is because it is a pain in the rear to work directly with the seller. There is no one to mediate and explain the situation, they get overly emotional(attached) and it seems like they try to kill the deal. You essentially have to work both sides and get paid for one.

    You have a vested interest in flat fee listings and I am biased towards my approach so I don't expect us to agree, I am just sharing my two cents.

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