And a realtor has specialized legal knowledge needed to sell or buy a home. The process is not as simple as you think it is. And I've read tons of documentation stating that the money FSBOs save by not paying a realtor is wiped out, and/or, surpassed by not having representation. We had a lady on the street over from us who is a FSBO. Beautiful home .....its been on the market for close to a year and is now priced out at $60 a square foot, whereas, other homes in the section are selling in 90 days at $70 a square foot plus. FSBOs put themselves at a disadvantage by not paying commission because any sane realtor will never show that house to a client knowing they won't get paid for their time.
I remember that we did, but now that I think about it, I don't think it was a legislated rule.....but rather a requirement of the lender--which would make sense. So for those people who can pay cash, you would be absolutely correct.
Huh? If they buyer has an agent, that agent should get their 3% even if they seller doesn't use an agent. I don't see why they'd lose their commission as well.
FSBOs wont pay any sort of commission in most cases. On occasion, they will if they know they have a buyer and the buyer refuses to buy unless their realtor is compensated. Last year, my wife represented a couple who wanted to buy a FSBO, but the seller refused to pay one cent to my wife. The buyer ended up paying my wife out of their pocket (which was ok, because the FSBO was so desperate to sell at that point, their house was $22K under market value). The selling commission on a house, 6% actually goes, in full, to the seller's agent and he disperses it as he/she sees fit (although, its basically understood that 3% will always go to the buyer's agent and is usually noted as such in he listing agreement).
You have to let the local agents know though. When we sold our bay house, we did it by ourselves. We got an awesome price per square foot on it and made a really nice profit, but we did our homework. We also overpriced it for the market, but let people know in our flyers that we were anxious to sell. I was expecting to have to come down quite a bit, but in the end, we really didn't have to. It was awesome. That being said, we had quite a bit of traffic during our open houses, but no firm offers. I finally figured out that most people are scared to take that sort of plunge without going through the tried and true route of using a realtor. So...I went around to all of the local agencies, passed out flyers, and let the agents know that we would pay 3% to the buyer’s agent. Sure, I would have liked to have had that 3% myself, but it was better than paying the full 6%. Within a month of our change in strategy, we had an offer from the eventual buyer.
I would guess it depends on the lender then and their requirements. My wife is a loan officer and she has done at least 3 or 4 loans where the buyer negotiated the deal and closed on their own, and they weren't a licensed attorney or realtor.
I know when my parents bought a new house a few years ago, they used the realtor that was selling their old house. They had already picked out and found the house they wanted, so the realtor agreed to split the commision with them.
My wife and I are both highly educated and very good with financial matters. When we decided to buy a house, we researched everything about the house, the neighborhood, taxes, gathered all the details through the town's assessor site (equivalent to HCAD in Houston). We had the opportunity to work with the USAA rep and we also called Lending Tree because we felt we "knew everything" and could get some money back if we worked with one of their assigne reps. The person they assigned to us wasn't bad but they weren't superior. During the course of our search, we went to an Open House and met an agent we felt very strongly about. Even though we gave up a lot of money, we wanted to work with her. She knew the town inside out including which builders were good and which ones cut corners. After a long search, she called us one day and insisted she had "the house" and it would sell quickly. We met her there and we instantly knew this was it. The house had 9 showings and 3 offers on the first day. We had an amount we were willing to pay. Our agent told us we wouldn't have to pay that much and guided us to make a proper offer. In the end, the seller accepted our offer. That offer (which the real estate agent helped us make) was about $10,000 less than what we wouldve been willing to pay. She not only located the house and arranged a quick viewing (something we would not have been able to do right away) but also helped us negotiate the price. Penny wise Pound foolish.
So you sold your home, by yourself, and got a good price, by doing the homework. Doesn't that directly refute your argument that "You wouldn't represent yourself in court"?
funny it was posted cause this is what i did in austin 2 years ago...got the full amount back and spent it on a tv...trying to do same again this year but didnt know how legal it was..
He paid the buyer agent 3%, which obviously helped his cause. Most FSBO's won't pay any sort of commission and those that don't are usually at a disadvantage in the market place, just like someone going to court is usually at a disadvantage without representation.
Uhhhh......I don't think I made that argument here. I think someone else did. That being said, I'd easily negotiate my own real estate deal again (though my wife is an attorney, and I have a great interest in real estate--along with the required 12 semester hours of real estate courses{just no license}), but I would NOT represent myself in court.....unless it was something insignificant like small claims. Those are two different animals in my book.
Ha! Clutch this guy is not much of a friend. The Seller always pays the commissions. We just bought a place and we didn't use a broker/agent. Just about every place we looked at said they would lower their commission to the seller by 1-3% since we didn't have an agent when we asked. Only 1 said they wouldn't but not to worry "the seller pays the commission!" No **** Sherlock, but if the commission is cut by 1-3% to the seller than that is 1-3% less the buyer has to pay! One offered to cut 3% but I hinted we might use their mortgage services. We ended up buying a place and the commission was 4.25% - all to the sellers agent. Guess we could have negotiated down to 3% but this made the sellers agent push the seller to sell to us over others! Talk about a conflict
Excellent work above. An agent may rebate part or all of his commission to his principal. It is commonly reported on the HUD-1. The net effect for a buyer recieving a rebate from his agent will be a reduction of the sales price.
Well, I wanted to thank everyone for their advice. I think I did everything as honestly and appropriately as I could with my friend, but yet still ended up with a spot on impression of Chris Farley and his new pet. I spoke to my friend and was up front about it. I was always wanting him to be compensated some - even though that was not in the agreement we had. I wasn't cool with losing the whole 3% though - I would have gone with a professional, full-time realtor in that case. So we agreed in negotiations that we would move commission down once it got to a certain point. Well, we suddenly got to that point fast... he says there is an offer on the home and only full price is going to get it done, according to the selling realtor. I say whoa... I think that's not quite right, and suggest we come back $8K less at 1.5% commission for the buyer agent (my friend). My friend comes back to me after talking to the selling realtor and says they can't lower commissions (hard to believe) because the agency's deal with the bank (owner of the home - practically brand new foreclosed property) was a fixed 6%. But great news: the selling realtor thinks I absolutely should put that offer in of $8K less (with full 6% commission instead), that it is possible. So now I'm questioning my friend's advice that only full price gets it done and his desire for that commission (again). I talk it over with my wife, and we decide to offer $11K less. We are still angry over the 3% commission "lie", but we absolutely do NOT want to lose this house. This is not a one-in-a-million home, but I have 2-3 solid years experience (practically full-time) looking at and researching homes based on our crazy list of wants, and considering that list, it really was a one-in-a-million home. So I quickly get the financial blessing of their institution and tell my friend to put in the offer. But he waits for his father (the broker) to get home from work, they fill out the paperwork for a few hours and they fax it to me at 9:00pm last night. There are flaws in it, we try to discuss with them but can't reach them. And we're getting more and more angry at the lack of professionalism because of the full 3%. We never would have gone this route. The next morning (this morning), I speak to my friend's father and explain the whole situation ... the whole damn mess. He didn't know any of it, but said they couldn't budge on the commission. He recommended I go directly with the selling realtor. I told him it wasn't my intention, but agreed it was the best route given all of it. So we did that immediately.... but whoops. The house sold last night. That was a huge blow, but ironically, I could have put in the offer this morning with my friend for the full 3% and still lost the home, but never have created any issues/problems. Lost the house - check. (MAJOR check) Botched the friendship - check. In Austin, I had an amazing realtor (who sold my home and helped us look for a year) and he never would have let me lose that home. Never. He would have been on that selling realtor's ass, saying, "We are working on an offer now - hold on". At the same time, I should have swallowed my pride and let them take the full 3%. That, in my mind, would have botched the friendship from my perspective, but it would have been worth it to get that house. We're just kind of stunned. My wife in particular had her heart set on it, and is strangely quiet today (odd that I found the yellow pages left open on "Divorce Attorneys"). In hindsight, I would now be willing to go full price. It was a pure lose-lose relationship, but worse: I felt every step I took made it worse. So now, looking at available homes in the area, I feel like I am stuck picking second in a 500-player fantasy league consisting of Albert Pujols and 499 Chad Scotts. Fortunately I can afford to wait months, so whoever's picking #3, you're screwed.
Clutch, Sorry to hear that. My wife has been in that situation plenty of times. Every time we have a friend or family member who needs a realtor, we swear that will be the last time. It never is though. Its hard to give away work when there is several thousand dollars at stake.
Wow...sorry to hear that. I don't know your religious affiliation, but remember tha God doesn't close a door without openning a window.
Weird. I've done a few legal things for friends before and never in my wildest dream would have charged them, let alone full price. Guess it's a different industry. Anyway, sorry you didn't get your house, Clutch.
