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I want to buy a home, but I'm not interested in using a realtor as a buyer's agent.

I know that in MLS systems, when a realtor lists a house they specify what commission a buyer's agent will be paid. Since I am the one who is bringing a qualified buyer to the listing agent, I feel that I would should get the commission (even if it is in the form of a discount on the house).

Essentially, the seller would get the same amount of money at closing... the listing agent would get the same commission as they normally would for showing the house to someone with a buyer's agent... but I would pay less for the house.

Is there a tactful way to negotiate this with the listing realtor? For example, should I make a side contract with the realtor to pay me the commission at closing? Or perhaps I can specify in my offer that they should reduce their fees to the seller by the commission amount if the offer is accepted, in order to make my offer more attractive? Are these types of deals ever done, and if so, is there a conventional way to make it happen?

Thanks

  • 14
    Who downvoted? The question is reasonable, useful, and sufficiently explained. The only issue I see is there's no information about where this all is taking place, but that's no reason to downvote a new user's question without a comment. (+1, BTW) – mlh Nov 5 '15 at 3:03
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    +1 from me as well. It's an excellent question. Real Estate agents downvoting??? – Phil Sandler Nov 5 '15 at 14:29
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    I don't see why the answer isn't just that you make an offer 3% off the list price? – user662852 Nov 5 '15 at 14:44
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    @user662852 What you suggest won't be the same. If the OP offers 3% less, then the seller is going to absorb most of that 3%. The OP wants to structure the deal so that the seller's agent gets less but the seller gets the same. – user32479 Nov 5 '15 at 16:30
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    Just buy a house in the UK instead, where estate agents are very much cheaper. Buyer's agents are almost unknown, and selling agents typically get 1.2% to 1.5% of the sale price, which can generally be negotiated down to 1% if you know the business. No one in the UK can believe the 6% commission that seems to be standard in the US. – Mike Scott Nov 6 '15 at 16:39

13 Answers 13

16

I pulled it off. I did my own searching and so took a lot of load off my agent. As a result my agent agreed to work for 1% commission instead of the normal 3%. Got seller's agent to agree to take 4% instead of 6% and pay my agent the 1%. Seller and I pocketed the difference (I forget how exactly the split went).

As it happened, my agent only had to process offers on two houses (one I got outbid on and one I got to buy).

  • 1
    Thank you, this is exactly the type of thing that I want to do. I think that finding an agent like that is a smart move. How did you go about find an agent who would do that? Did you have to find and independent agent, or was it someone who was part of a larger company? – BCG Nov 5 '15 at 18:12
  • The agent happened to live across the street at my old address. – Joshua Nov 5 '15 at 18:37
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    Josh - Your scenario is a bit different. If someone approached me to act on their behalf, to help a transaction as you describe, I'd consider it. But if BGC did this on a house I was listing and had a lot of sunk time, it would be a different story. – JTP - Apologise to Monica Nov 5 '15 at 19:13
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    I'm accepting this answer because it seems to me like my best option... with the caveat that it might not be legal to do everywhere... please see JoeTaxpayer's post for more info. Thanks! – BCG Nov 7 '15 at 20:49
  • This is probably not very easily accomplished because it requires the seller's agent to agree to renegging the contract that they had with the seller. A more plausible arrangement would have the same result except that you'd get a buyer's agent that will rebate to you the 2% that they collect. The other benefit to this approach is that you're not splitting the 2% with the seller but instead keeping it all to yourself. – Dean MacGregor Nov 8 '15 at 6:11
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See if you can find a buyer's agent who will represent you at an hourly rate, and refund the balance of the buying agent's commission. As I noted in a comment, I know of at least two agencies that will do this in Chicago.

Start with a google search of something like "[MyCity] discount real estate brokers".

  • 1
    If the hours billed adds to more than the commission, what does the buyer pay? – JTP - Apologise to Monica Nov 5 '15 at 14:39
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    If you go the hourly route, you assume the risk that the hourly rate will be less than the commission would have been. It's very good for people who are going to do a lot of the legwork themselves (with available online tools). Our buying process took many, many more hours than we expected--we had offers on three properties before the 4th was accepted, and the cost was still half of the commission. – Phil Sandler Nov 5 '15 at 15:01
  • Most of the legwork in bring a deal to closing is on the buyer's agent. I would not recommend this approach. – donjuedo Nov 5 '15 at 23:45
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I am a realtor. When I am approached directly by a buyer, it's their choice to bring their own agent, come unrepresented, or buy through us via disclosed dual agency. With no buyer agent, my office and I get the full commission. The seller has already agreed to a fixed percent of the sale price. How does it benefit me to agree to this?

Update

From all the comments below, I'll add this. The Realtor site (country-wide) states

"A real estate professional can also agree to rebate a portion of his/her commission to a consumer. However, note that some states do have laws prohibiting the payments of rebates to unlicensed individuals, and so this would not be legal in those jurisdictions."

So far, so good. My own state, Massachusetts, says

Inducements or rebates to the seller or buyer are permissible given that the seller or buyer in the transaction is a principal and is not required to be licensed as a broker. Brokers are, by definition, agents for either the seller or buyer. Consequently, using inducements to attract listings or giving incentives such as rebates for those who purchase a listed property do not violate the prohibition on sharing valuable consideration with those who are brokering without the benefit of a license. The sellers and buyers in purchase and sale transactions are not acting for anyone else and, therefore, are not brokering. Indeed, it is their broker who acts on their behalf.

Thus, in my state, what OP asks for is legal, and a matter of whether or not either broker wishes to participate. If another member wishes to research NY laws, that would be great.

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    Because it could be the difference between getting the deal done or not. If it is a $175k house and we are $5000 apart on a contract price, if you give up the 3% commission it could easily close the gap. The alternative is to let me walk and hope that someone else comes along with as good an offer, and there would probably be a buyer's agent involved anyhow so you still wouldn't get the full commission in that case. – BCG Nov 5 '15 at 13:08
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    Let me cut to the chase. I would probably not accept such an offer. Others might. There's nothing stopping you from making such an offer, or any offer for that matter. The selling agent can accept or reject it. – JTP - Apologise to Monica Nov 5 '15 at 13:31
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    @BCG: In Chicago at least, there are many agents who do this. I bought my house using an agent who gets paid by the hour, and refunds the buyer's agent commission. – Phil Sandler Nov 5 '15 at 14:27
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    @JoeTaxpayer Don't you have a legal obligation to your client to represent their interests rather that yours? Turning down an otherwise legitimate offer solely on the grounds that you're making less money sounds fishy. – user32479 Nov 5 '15 at 15:09
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    I guess I also disagree with the premise of your answer: "it's their choice to bring their own agent or buy through us." There's definitely the third choice of buying without an agent. The phrase "buy through us" suggests hiring you in a dual agent role. That's definitely different than buying without an agent, which is what the OP wants to do. The dual agent role is even illegal in many states. realtor.com/advice/dual-agency – user32479 Nov 5 '15 at 16:42
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Well sure you can ask. You can ask for the sun, the moon, and the stars too. Whether they are willing to accommodate you depends on how the local real estate market is doing. In the US from 2007-2010, realtors were signing all sorts of deals like this.

Be realistic about what you are asking for. You want them to sell you the property for less then they are asking for it, and you want to insert yourself into the seller-realtor relationship and tell them how to split up the proceeds, when they already have a contract establishing that. On top of that, while the realtor would get the same amount at closing, they would have had to do all the work normally split between two agents (arranging papers, escrow, and title transfer, etc). Why would that be appealing to them unless you are the only interested buyer?

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    The buyer also has to realize that if they don't have their own agent, then the sellers agent will do some of those tasks; but they will do them only well enough to move the purchase forward and always act in the best interest of the seller. – mhoran_psprep Nov 5 '15 at 11:15
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    I'm not really asking them to sell the property for less than they are asking... mathematically it is exactly the same thing. I'm just trying to cut out one of the middlemen by doing the work myself and so that I capture some savings. Ultimately the other parties involved should get the exact same amount of money. – BCG Nov 5 '15 at 13:12
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    @mhoran_psprep I realize what you're saying... and I'm not really expecting the sellers' agent to do anything extra. I don't actually want them to do anything extra. I take your warning to the extreme actually... that is the very reason that I don't want to use a buyer's agent (because essentially the are getting paid by the seller, and so don't necessarily always have an incentive to act in my best interest) – BCG Nov 5 '15 at 13:18
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    @BCG, you're not expecting the seller's agent to do any extra work, but do you have much experience closing real estate deals? Do you know how to arrange for escrow and title transfer? Do you know what paperwork is needed from the bank and when? Why would the seller's agent have any confidence that you can carry out your tasks in a timely manner? As I wrote, you can certainly ask, but what is their motivation to accomodate you? – Charles E. Grant Nov 5 '15 at 17:10
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    I just sold my house without an agent, and I had a lawyer handle all of the paperwork for me; they did an excellent job. The buyer had an agent, and were dragging their feet on getting things done; the agent claimed "My job is only to bring you a qualified buyer... it is up to the lawyers at this point." So apparently even if I come with an agent, the listing agent shouldn't have the confidence you mentioned. And frankly, they should probably have more confidence in me getting things done myself, since I am actually the one who wants the house bad enough to pay a lot of money for it. – BCG Nov 5 '15 at 18:09
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We initially attempted to do this when we bought our house and found the listing agents "resistant" to say the least. For a variety of reasons (not just the commission), we ultimately decided to hire a buyer's agent, but we focused on buyer's agents that would pass some of their commission back to us. We used Redfin, but I think there may be others now.

One "gotcha" even on this, is that, if you're getting a mortgage, the mortgage company may also have something to say about this situation. We had to apply the agent's rebate to our closing costs, we could not take it away in cash.

  • That's good to know. I figured that the mortgage company would want the discount to be applied to the mortgage.... I'm not opposed to that. – BCG Nov 5 '15 at 17:58
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    +1 to this. If you live in an area where the use of a buyer's agent is taken for granted, the next best thing to not using one is to use one who is receptive to negotiating a fee down. An agent who offers you no more help looking for a house than you could do yourself by searching publicly available listing sites like Zillow is certainly not worth 3%. Unfortunately a lot of buyer's agents fall into this category. – dodgethesteamroller Nov 6 '15 at 18:54
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The real estate agent industry is a cartel. They seek to keep fees high even as their services are becoming less and less necessary. To that end, traditional seller's agents will laugh at your attempt to negotiate their fee. They can do this quite simply because the industry is designed so the vast majority of people think of buyer's agents as "free" even when they are anything but free.

That being said, the only way to do what you're trying to do is to find a buyer's agent who will rebate to you a portion of the commission they receive. It is extremely extremely unlikely you'll get a seller's agent to play ball especially once they know you're interested. You can check out redfin which connects people to RE agents that rebate commissions but the buyer's cut isn't that high. Your best bet, IMO, is to contact agents in your area before you go shopping to see what kind of rebate you can negotiate with them.

A word of caution, if you look at a house without your own agent, instead asking the seller's agent to show the house they will claim procuring clause and you'll be sunk. In other words, once they claim procuring clause, you can't, later, go back and get a discount broker to get the commission to rebate to you.

  • Things are changing. There are seller's agents that charge a fixed fee (in the range from 750 to 1500 dollars, which is very reasonable I think). It makes sense as their workload is typically much less than a buyer's agent. – soakley Nov 5 '15 at 22:53
  • I'm skeptical that that is true. I've heard of agents who will put your house on MLS for something like $300. Additionally, if buyer's agents see they're splitting $750 to $1500 instead of splitting 6% I think they will not show the house to their buyers. – Dean MacGregor Nov 5 '15 at 23:00
  • I said nothing about the buyer's agent. They still get their 3%. You can be skeptical if you want, but we've done it and plan on doing it again. Almost every fee in a contract is negotiable. – soakley Nov 6 '15 at 0:26
  • So then the fee is $750-1500 plus 3% which makes a lot more sense than a fixed fee. – Dean MacGregor Nov 6 '15 at 1:02
  • Just to make it clear for any readers. Our seller's agent charges us a fixed fee to sell a house. I checked and her fee is a thousand dollars. The buyer's agent typically gets 3% where we live, but a buyer is free to negotiate that with the agent and it can be lower. – soakley Nov 6 '15 at 2:02
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The way to do this is to make your best offer and let the seller and his/her agent do the negotiation between them. If you try to build in the discount in your offer, you will come across as cheap.

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    The thing is, I am cheap. At least, if cheap means that I don't like to pay more than I have to for things. The reason that I would like for it to be built into the contract is because I think it more likely that I would actually see a discount if I advocate for myself. I upvoted you though, thank you for the response. – BCG Nov 5 '15 at 1:56
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    An additional reason that suggests this approach is that both the seller and their agent have incentives to make sure they sell to you and not someone else. For the same list price, the overall amount of money they will split between them is larger. – mlh Nov 5 '15 at 2:57
  • The more I consider it, the more I like this option. Especially in consideration of Mike Haskel's point about my offer being more attractive because of the higher amount to split between them. I'm still concerned that I won't actually see a savings from this, but in a seller's market or in a multiple-bid situation i could see this as being very beneficial. If no one else gives me a good option for negotiating what I want I'll probably accept this answer. – BCG Nov 5 '15 at 15:11
  • @BCG The problem with this option is that as soon as the seller's agent realizes you don't have an agent they'll by default become your agent. If the seller then tries to reneg the fee with the agent, the agent will do one or more of the following: point to the contract and say it can't be renegotiated, complain about how much more work they have to do because the buyer doesn't have an agent. – Dean MacGregor Nov 5 '15 at 22:32
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I recently sold some property in which I structured the agreement with my realtor such that I would pay the normal 6% commission, 3% to each agent if the buyer came from another agent. If my selling agent found his own buyer, he would get 4.5% commission. As a seller it's possible to negotiate such deals before the house goes on the market.

If you are selling another property you could similarly structure such a deal where your selling agent picks up the commission from buying the new place and agrees to reduce the commission on the place that you are selling leaving you in a better position than if you bought unrepresented.

As an unrepresented buyer, you only have negotiating power insofar as the market allows. The seller's agent gains nothing from what you propose, so unless they expect trouble moving the house, waiting to see what other offers arise is certainly an option. If they are having trouble moving the house then just reduce your offer and see what happens.

When I pick a selling price the main factor is that I want to attract enough buyers that I can sell it quickly. Interest payments do add up. Selling a house involves more than just listing it for sale. I have a good relationship with my agent and have done multiple deals with him. I am willing to pay him because I believe it benefits me to do so. I wouldn't risk that relationship just to close a deal with an unrepresented buyer. That unrepresented buyer would allow for a reduced commission to 4.5% though in the contract I mentioned above.

3

You said: "should I make a side contract with the realtor to pay me the commission at closing?"

I would imagine that in most (if not all) states, that is illegal. This is because selling real estate is an activity that requires passing an exam on real estate laws and obtaining a state-issued license. You are not "bringing a buyer" because you are not an agent.

If you decide to go directly to the Realtor that has the listing, there is a possibility that the agent might agree to lowering their commission in order to make the sale. However, the agent is entitled to both sides of the commission because they bear all the administrative and marketing costs of the transaction.

The listing agent might choose to enter into a "dual agency" agreement where they would have to fairly represent both sides, but they cannot reveal information that would be helpful to you as a buyer (e.g., why the seller is choosing to sell, other material facts about the property that are not public knowledge, etc.). If there is no written "dual agency" agreement, then the listing agent ONLY represents the seller.

In either scenario, you lose the benefit of a full fiduciary relationship with an agent. So if you choose to deal directly with the listing agent, you are making one of the biggest purchases of your lifetime WITHOUT the benefit of professional representation. Do you really want that?

Put another way: would you use your spouse's attorney in a divorce so that you could save money?

  • It isn't illegal to receive a rebate from a real estate agent in most states. The FTC encourages states to get rid of laws that restrict competition. ftc.gov/news-events/press-releases/2007/05/… – Dean MacGregor Nov 5 '15 at 21:13
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    @DeanMacGregor, I don't think janedoe is saying a rebate is illegal, she's saying that the unlicensed buyer can't be paid a commission. It might amount to the same amount of money in the end, but the label attached to it has a legal meaning. – Charles E. Grant Nov 5 '15 at 21:18
  • @CharlesE.Grant fair enough. I will say with respect to not using an agent, I would assume that OP intends to use a real estate lawyer who will charge an hourly rate, not a commission and that hourly rate will pale in comparison to 3% of the value of most homes. – Dean MacGregor Nov 5 '15 at 21:32
  • Dean - and yet, from what others have said, you are better off with an agent who will 'credit' you a portion of his commission, vs going against the listing agent, unrepresented, and potentially, if not likely, finding someone not willing to cooperate. – JTP - Apologise to Monica Nov 5 '15 at 21:44
  • @Brick You have the incentives backward. If the seller's agent had an agreement to give part of the commission to an unrepresented buyer they would have less incentive to complete a transaction with that person than a person with no such agreement. If anything the absence of that agreement/duty creates a conflict of interest where the seller's agent is incentivized to complete a transaction with an unrepresented buyer rather than a represented buyer because they double their take home pay with unrepresented buyers. – Dean MacGregor Nov 6 '15 at 20:47
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My dad, an attorney, does this all the time. He makes offers for properties with the proviso that all real estate commissions are negotiated, and paid by, the seller. In California, agents must present all offers to the seller. It never seems to be an issue, at least for him. Of course, he presents himself as a substantial and competent buyer.

  • You mean "re-negotiated," right? There was likely an agreement in place between the agent and seller already. – JTP - Apologise to Monica Nov 7 '15 at 19:27
1

I don't see any incentive for the agent to do this. I don't think it's a useful argument.

  • By law, the agent is obligated to present all offers to the seller. The agent then has little say about it, other than offering an opinion. – donjuedo Nov 6 '15 at 13:56
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    Is this true even if it puts an imposition on the seller's agent? For example, can I make an offer on a house with the proviso that the seller's agent come over every fall and help me rake leaves? – PersonX Nov 9 '15 at 0:06
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You should consider using a lawyer as your agent. We once talked to one who was willing to act as our agent for a fixed fee. Not all attorneys can do it where we live, but there are plenty that can. We ended up going another route, but since then we have found a seller's agent that charges us a fixed fee of one thousand dollars (a great deal for us). We are using her again right now.

It's all about the contract. Whatever you can legally negotiate is possible - which is yet another reason to consider finding a real estate attorney.

  • The good news is that in the MLS listing I am not obligated to offer any compensation to a "facilitator" which is what a lawyer would be. The listing does offer to share the commission with another real estate agent. – JTP - Apologise to Monica Nov 6 '15 at 3:10
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    The deal with the lawyer is outside of the sales contract. You would get your typical commission (not double) and BCG gets to pay less (as he wants) while the seller gets the same money because he doesn't have to pay a buyer's agent. It only works if the attorney's fee is less than the usual buyer's agent commission. – soakley Nov 6 '15 at 3:59
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    Commenters keep confusing the word half and double. The commission on my contract is 5%. I am obligated to give up half if another agent brings me a buyer. A lawyer acts as a facilitator. When I list a house, I have a field to enter the other agent split, and another for facilitator. I enter zero. Not interested in someone with a lawyer friend taking a commission for no effort up front. Again, the seller doesn't pay the buyer agent, my office does, from our commission. – JTP - Apologise to Monica Nov 6 '15 at 14:14
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    The key here is, as you say, "on my contract." I have located my contract with my agent, and it says if my agent represents the buyer as an intermediary, then the commission is a flat 1850.00 or 1%, whichever is greater. That is a huge savings for a typical house purchase. I understand your current situation. My point is there are ways to avoid paying a 5% commission when there is no buyer's agent, which is what BCG is after. – soakley Nov 6 '15 at 18:42
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There is no reason to try to build a commission discount into the contract when you are not represented by a buyer's agent.

Make your offer is 3% lower than it would be otherwise. Then the seller's agent becomes your best ally. He knows he'll get the whole commission, so it's in his best interest to make the deal happen. Even if he believes another unrepresented buyer will come along, the difference in his commission will be minuscule and probably not worth his time.

If you get the price you offered, does it matter whose pocket the discount came out of?

On the other hand, if you enter negotiations that stall at an amount less than half of the commission, then mention a discounted commission. At that point the deal is so close that the seller and agent may be able to bridge the gap themselves.

  • Make your offer is 3% lower than it would be otherwise. Then the seller's agent becomes your best ally. He knows he'll get the whole commission, No, he gets a lower commission. Do the math. This is not what OP is suggesting--his plan gives the seller and the seller's agent the same net, while he pays less (because there is no 3% skim going to the buyer's agent). – dodgethesteamroller Nov 6 '15 at 18:58
  • @dodgethesteamroller I don't think this is right. In a sale, the agreement is not 3% to the listing agent and 3% to the buyer's agent. The deal is 6% to the listing agent. If the deal is done on MLS, there are MLS rules that dictate that the listing agent will give 3% to the buyer agent. If the sale is off MLS, some other agreement can be reached. – Limited Atonement Oct 3 at 20:30
  • This is an excellent answer. does it matter whose pocket the discount came out of? It makes me sick to think of sellers losing money to real estate agents when they don't want to or don't have to, but that's the position they put themselves in when they got a listing agent! Hopefully they'll wake up to FSBO and other options and save some money next time. – Limited Atonement Oct 3 at 20:31

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