What about commision and % back to buyer in this market?

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Johnny Fever_IHB

Johnny Fever_IHB

New member
Hello,

I will be a first time homebuyer and I was wondering what is appropriate for a % back to the buyer? Ive thought in the past that that was usually a non-issue but then the 1st realtor we had offered 1% (from his 3% of the deal)of the purchase price back to us. The second realtor we had offered a much smaller % back ~.25% or so. Redfin gives back a lot....so naturally am confused by the spread here.

Some realtors argue that they can negotiate for a better price on the home, which is 'better' than a kickback but its hard(if not impossible) to assess that...how could one assess that?





So, in this market, what is fair/appropriate>>? any info appreciated! Also, when the home prices start to get into the 1 million range the kickback does become significant....



-JF
 
[quote author="Johnny Fever" date=1214457920]Hello,

I will be a first time homebuyer and I was wondering what is appropriate for a % back to the buyer? Ive thought in the past that that was usually a non-issue but then the 1st realtor we had offered 1% (from his 3% of the deal)of the purchase price back to us. The second realtor we had offered a much smaller % back ~.25% or so. Redfin gives back a lot....so naturally am confused by the spread here.

Some realtors argue that they can negotiate for a better price on the home, which is 'better' than a kickback but its hard(if not impossible) to assess that...how could one assess that?





So, in this market, what is fair/appropriate>>? any info appreciated! Also, when the home prices start to get into the 1 million range the kickback does become significant....



-JF</blockquote>


First question back to you: Are you sure you want to buy now? Why now?



I put together a spreadsheet earlier to answer a related question on another thread (using a buyer's agent or working directly with the listing agent). The link is <strong><a href="http://www.irvinerealtorsite.com/SameListSellAgent.xls">here </a></strong>regarding all MLS sales data from 1/1/2000 and on. Run the numbers and see for yourself.



If you still decide you are looking for a buyer's agent in the area, you are welcome to PM me.
 
<em>"First question back to you: Are you sure you want to buy now? Why now?"

</em>



I heart IR2.



P.S. Cayci, zovall....can we get a heart and a thumbs up thingy added to the smileys?
 
[quote author="Johnny Fever" date=1214457920]Hello,

I will be a first time homebuyer and I was wondering what is appropriate for a % back to the buyer? Ive thought in the past that that was usually a non-issue but then the 1st realtor we had offered 1% (from his 3% of the deal)of the purchase price back to us. The second realtor we had offered a much smaller % back ~.25% or so. Redfin gives back a lot....so naturally am confused by the spread here.

Some realtors argue that they can negotiate for a better price on the home, which is 'better' than a kickback but its hard(if not impossible) to assess that...how could one assess that?





So, in this market, what is fair/appropriate>>? any info appreciated! Also, when the home prices start to get into the 1 million range the kickback does become significant....



-JF</blockquote>
JF, I do agree with IR2 about maybe holding off a bit for prices to come down some more. I don't know what the appropriate market kick back from the buyer's agent is, but I always kick back 50% of my net commission (90-10 split with the broker) or that comes out to be 45% of the total buyer's commission to whoever uses me as a thanks for using me (I only work on the buyside) which the buyers typically use for closing costs or to buy down the interest rate. I did kick back 60% of my commission for a $1.1M home purchase. The reason I kick back so much back is that I'm a realtor on the side for supplmental income as I have a flexible day job as a commercial real estate lender that pays well plus there is less work involved in being a buyer's agent than there is being a listing agent. I negotiate like hell with the sellers and have had the pleasure of dealing with REO lenders on a few occasions. Keep in mind that most lenders will only allow you to get 5-6% of the purchase price as total credits from the seller and/or RE agent for a primary residence purchase (goes down to 2% for an investment property). PM me if you want to chat some more.
 
The alternative is to not concern yourself with the re agent's commission. Make your offer and let the seller negotiate the commissions. Or hire a fee based buyer's agent. If you negotiate a percentage payback, you will be paying interest and closing costs and property taxes on the the money paid back to you. Keep it simple.


It never ceases to amaze me when I read all the smart ways to leverage, kick back commissions, borrow the down payment, creatively finance, etc. etc. etc. Doesn't it ever occur to anybody that they do not need to be so smart. A little humility and clear thinking can go a long way.
 
awgee,

I guess maybe Im asking for too much. Of course I would rather pay less on the top end rather than some meager(in the long run kickback) but in this slow market Ive been told by many that aggressive offers and a % commision is very commonplace.



See, the last realtor we had kept telling us how he is such a great negotiator and that he would fight to get the deal done. Well, you know what, 6+ offers(different homes) later and only ONE counter. Now that is great negotiating eh? Am I missing something? So it really is hard to asses on the front end really how much the price can be dropped.



To answer the others:

Im looking in the Newp Coast area and have noted some people wanting to sell. Some actually are taking significant $$ off their asking prices and some are even in the 2004-5 range from what I can tell.



I am getting much pressure to buy b/c of a bun in the oven and wife. I personally do not want to buy just for those reasons but again in real life its hard to deny that pressure....honestly.



JF



FYI: NC is 7 miles b/w both of the major placesthat I work at so this area is attractive for many reasons...
 
<blockquote>

JF, I do agree with IR2 about maybe holding off a bit for prices to come down some more. I don't know what the appropriate market kick back from the buyer's agent is, but <strong>I always kick back 50% of my net commission</strong> (90-10 split with the broker) or that comes out to be 45% of the total buyer's commission to whoever uses me as a thanks for using me (I only work on the buyside) which the buyers typically use for closing costs or to buy down the interest rate. <strong>I did kick back 60% of my commission</strong> for a $1.1M home purchase. The reason I kick back so much back is that <u><strong>I'm a realtor on the side</strong></u> for supplmental income as I have a flexible day job as a commercial real estate lender that pays well plus there is less work involved in being a buyer's agent than there is being a listing agent. <strong>I negotiate like hell</strong> with the sellers and have had the pleasure of dealing with REO lenders on a few occasions. Keep in mind that most lenders will only allow you to get 5-6% of the purchase price as total credits from the seller and/or RE agent for a primary residence purchase (goes down to 2% for an investment property). PM me if you want to chat some more.</blockquote>


This sounds like an excellent negotiator. Within two sentences, this agent has given away 50% <strong>of his own money</strong>. And then one sentence later bumped it to 60%.



I'm sure he will do the right thing when the time comes to "negotiate like hell" for <strong>someone else's cheese</strong>.



Somewhere, for no good reason, tears are welling up in tenmagnet's eyes.



:-S



If you're looking in Newport Coast, <strong><a href="http://www.irvinehousingblog.com/forums/member/990/">sell4u</a></strong> specializes there. PM <u>him</u> FTW.
 
[quote author="IrvineRealtor" date=1214479999]<blockquote>

JF, I do agree with IR2 about maybe holding off a bit for prices to come down some more. I don't know what the appropriate market kick back from the buyer's agent is, but <strong>I always kick back 50% of my net commission</strong> (90-10 split with the broker) or that comes out to be 45% of the total buyer's commission to whoever uses me as a thanks for using me (I only work on the buyside) which the buyers typically use for closing costs or to buy down the interest rate. <strong>I did kick back 60% of my commission</strong> for a $1.1M home purchase. The reason I kick back so much back is that <u><strong>I'm a realtor on the side</strong></u> for supplmental income as I have a flexible day job as a commercial real estate lender that pays well plus there is less work involved in being a buyer's agent than there is being a listing agent. <strong>I negotiate like hell</strong> with the sellers and have had the pleasure of dealing with REO lenders on a few occasions. Keep in mind that most lenders will only allow you to get 5-6% of the purchase price as total credits from the seller and/or RE agent for a primary residence purchase (goes down to 2% for an investment property). PM me if you want to chat some more.</blockquote>


This sounds like an excellent negotiator. Within two sentences, this agent has given away 50% <strong>of his own money</strong>. And then one sentence later bumped it to 60%.



I'm sure he will do the right thing when the time comes to "negotiate like hell" for <strong>someone else's cheese</strong>.



Somewhere, for no good reason, tears are welling up in tenmagnet's eyes.



:-S



If you're looking in Newport Coast, <strong><a href="http://www.irvinehousingblog.com/forums/member/990/">sell4u</a></strong> specializes there. PM <u>him</u> FTW.</blockquote>


IR2,



That was a good come back. I would hope that someone who's going to "negotiate like hell" on my behalf is b/c he has my best interest in mind. Not because he's doing it for the fact that he's a "realtor on the side". hahaha!
 
[quote author="IrvineRealtor" date=1214479999]<blockquote>

JF, I do agree with IR2 about maybe holding off a bit for prices to come down some more. I don't know what the appropriate market kick back from the buyer's agent is, but <strong>I always kick back 50% of my net commission</strong> (90-10 split with the broker) or that comes out to be 45% of the total buyer's commission to whoever uses me as a thanks for using me (I only work on the buyside) which the buyers typically use for closing costs or to buy down the interest rate. <strong>I did kick back 60% of my commission</strong> for a $1.1M home purchase. The reason I kick back so much back is that <u><strong>I'm a realtor on the side</strong></u> for supplmental income as I have a flexible day job as a commercial real estate lender that pays well plus there is less work involved in being a buyer's agent than there is being a listing agent. <strong>I negotiate like hell</strong> with the sellers and have had the pleasure of dealing with REO lenders on a few occasions. Keep in mind that most lenders will only allow you to get 5-6% of the purchase price as total credits from the seller and/or RE agent for a primary residence purchase (goes down to 2% for an investment property). PM me if you want to chat some more.</blockquote>


This sounds like an excellent negotiator. Within two sentences, this agent has given away 50% <strong>of his own money</strong>. And then one sentence later bumped it to 60%.



I'm sure he will do the right thing when the time comes to "negotiate like hell" for <strong>someone else's cheese</strong>.



Somewhere, for no good reason, tears are welling up in tenmagnet's eyes.



:-S



If you're looking in Newport Coast, <strong><a href="http://www.irvinehousingblog.com/forums/member/990/">sell4u</a></strong> specializes there. PM <u>him</u> FTW.</blockquote>
Calm down cowboy, the reason I kicked more back was because the price of the home was much higher than any other home that I helped my buyer close and for full disclosure the buyside commish on that transaction was only 2% (maybe it's me, but I think for a realtor making more than $10k pre-tax on the buyside is a bit much). Why wouldn't I represent my buyer's with passion and vigor? I'm not your typical realtor my friend, I have an MBA and have taken 2 business negotiation courses as well as having negotiation skills gained from my years of being a commercial real estate construction lender at a bank. I also don't rely on the commish to live on so I'm a more objective than most all realtors who push buyers into buying to close the deal and get paid. Don't try to tell me that you get what you pay for because we both know that's BS. Do tell...who is more incentivized to push a buyer into a home, me or you? Yeah, that's what I thought.



Oh yeah, even though we both know that 95% of realtors are greedy, pushy morons (because it's so easy to get a RE license), it doesn't mean that you have the right to bash me especially since you don't know anything about me. Thanks for playing.



To the OP: if you are looking to buy in NC and Sell4u does specialize in that area then you should PM him and see what he can do for you. But be sure that he does kick you back at least 1/3 of the commission because there is less work involved in being the buyer's agent than the listing agent in a slow market. Just remember that whether it be $1 or $100,000 of commission income, a reatlor should present with the same passion!
 
[quote author="reason" date=1214484109][quote author="IrvineRealtor" date=1214479999]<blockquote>

JF, I do agree with IR2 about maybe holding off a bit for prices to come down some more. I don't know what the appropriate market kick back from the buyer's agent is, but <strong>I always kick back 50% of my net commission</strong> (90-10 split with the broker) or that comes out to be 45% of the total buyer's commission to whoever uses me as a thanks for using me (I only work on the buyside) which the buyers typically use for closing costs or to buy down the interest rate. <strong>I did kick back 60% of my commission</strong> for a $1.1M home purchase. The reason I kick back so much back is that <u><strong>I'm a realtor on the side</strong></u> for supplmental income as I have a flexible day job as a commercial real estate lender that pays well plus there is less work involved in being a buyer's agent than there is being a listing agent. <strong>I negotiate like hell</strong> with the sellers and have had the pleasure of dealing with REO lenders on a few occasions. Keep in mind that most lenders will only allow you to get 5-6% of the purchase price as total credits from the seller and/or RE agent for a primary residence purchase (goes down to 2% for an investment property). PM me if you want to chat some more.</blockquote>


This sounds like an excellent negotiator. Within two sentences, this agent has given away 50% <strong>of his own money</strong>. And then one sentence later bumped it to 60%.



I'm sure he will do the right thing when the time comes to "negotiate like hell" for <strong>someone else's cheese</strong>.



Somewhere, for no good reason, tears are welling up in tenmagnet's eyes.



:-S



If you're looking in Newport Coast, <strong><a href="http://www.irvinehousingblog.com/forums/member/990/">sell4u</a></strong> specializes there. PM <u>him</u> FTW.</blockquote>


IR2,



That was a good come back. I would hope that someone who's going to "negotiate like hell" on my behalf is b/c he has my best interest in mind. Not because he's doing it for the fact that he's a "realtor on the side". hahaha!</blockquote>
Why wouldn't I have your best interest in mind? Hello, I'm a realtor that has taken and oath to represent my buyers with passion and vigor. So what if I don't do it on a full-time basis, I'm glad I don't or I'd be going hungry now. Believe me, 99% of realtors today would love to be making the living that I make in my full-time job. haha I don't handle more than 1-2 buyers at one time so I can make sure I give them the time and service that they need. If you still doubt my skills, you could always call my buyers and ask them on how satisfied they were with my service and skills.
 
[quote author="Johnny Fever" date=1214478946]awgee,

I guess maybe Im asking for too much. Of course I would rather pay less on the top end rather than some meager(in the long run kickback) but in this slow market Ive been told by many that aggressive offers and a % commision is very commonplace.



See, the last realtor we had kept telling us how he is such a great negotiator and that he would fight to get the deal done. Well, you know what, 6+ offers(different homes) later and only ONE counter. Now that is great negotiating eh? Am I missing something? So it really is hard to asses on the front end really how much the price can be dropped.



To answer the others:

Im looking in the Newp Coast area and have noted some people wanting to sell. Some actually are taking significant $$ off their asking prices and some are even in the 2004-5 range from what I can tell.



I am getting much pressure to buy b/c of a bun in the oven and wife. I personally do not want to buy just for those reasons but again in real life its hard to deny that pressure....honestly.



JF



FYI: NC is 7 miles b/w both of the major places that I work at so this area is attractive for many reasons...</blockquote>


IR2 - Weigh in on this, please.


Johnny - What I am proposing is forget what is commonplace and tricky and instead think of what is in your best interest.




Example 1: You offer $1,000,000 and get 2% back. You end up only paying $980,000 but pay interest, taxes, and closing costs on $1,000,000. The seller nets $940,000 or 94% of $1,000,000.




Example 2: You offer $980,000 and let the seller negotiate the commissions. After all, he has the contract with the commissions. You do not. He does not want to net $921,200 or 94% of $980,000, but as in the previous example, he will sell for a net of $940,000. Offer $980,000 and let the seller negotiate the 2% commission discount. You pay $980,000 and the seller nets $940,800, so the seller nets $800 more and you do not have to pay costs on the commissions paid, and you are not involved with kickbacks.




Make your offer with the idea of a commission discount in mind, but leave the seller's contract negotiations with the seller. The seller is paying the commission, so my guess is that there is something unethical with the agent paying a kickback of commission that the seller contracted for.




Or better yet, contract with a buyer's agent on a fee basis, so that the agent is working for you. Contract to pay him, not the seller. If the buyer is getting his commission from the seller, you can argue until you are blue in the face, but reality is that the agent works for the party who is paying him and who he is contracted to get paid from.


It seems that most folks find their own home these days and they just need some help writing an offer and countering. Once the deal gets to escrow, there is very little for a buyer's agent to do. An agent with whom you have contracted and gets no commission from closure has no motivation to encourage you to close a deal or pay more than you want. A buyer's agent who only gets paid if the deal closes, has as his first priority a closed deal, whether it is in your best interest or not.
 
[quote author="awgee" date=1214490215][quote author="Johnny Fever" date=1214478946]awgee,

I guess maybe Im asking for too much. Of course I would rather pay less on the top end rather than some meager(in the long run kickback) but in this slow market Ive been told by many that aggressive offers and a % commision is very commonplace.



See, the last realtor we had kept telling us how he is such a great negotiator and that he would fight to get the deal done. Well, you know what, 6+ offers(different homes) later and only ONE counter. Now that is great negotiating eh? Am I missing something? So it really is hard to asses on the front end really how much the price can be dropped.



To answer the others:

Im looking in the Newp Coast area and have noted some people wanting to sell. Some actually are taking significant $$ off their asking prices and some are even in the 2004-5 range from what I can tell.



I am getting much pressure to buy b/c of a bun in the oven and wife. I personally do not want to buy just for those reasons but again in real life its hard to deny that pressure....honestly.



JF



FYI: NC is 7 miles b/w both of the major places that I work at so this area is attractive for many reasons...</blockquote>


IR2 - Weigh in on this, please.


Johnny - What I am proposing is forget what is commonplace and tricky and instead think of what is in your best interest.




Example 1: You offer $1,000,000 and get 2% back. You end up only paying $980,000 but pay interest, taxes, and closing costs on $1,000,000. The seller nets $940,000 or 94% of $1,000,000.




Example 2: You offer $980,000 and let the seller negotiate the commissions. After all, he has the contract with the commissions. You do not. He does not want to net $921,200 or 94% of $980,000, but as in the previous example, he will sell for a net of $940,000. Offer $980,000 and let the seller negotiate the 2% commission discount. You pay $980,000 and the seller nets $940,800, so the seller nets $800 more and you do not have to pay costs on the commissions paid, and you are not involved with kickbacks.




Make your offer with the idea of a commission discount in mind, but leave the seller's contract negotiations with the seller. The seller is paying the commission, so my guess is that there is something unethical with the agent paying a kickback of commission that the seller contracted for.




Or better yet, contract with a buyer's agent on a fee basis, so that the agent is working for you. Contract to pay him, not the seller. If the buyer is getting his commission from the seller, you can argue until you are blue in the face, but reality is that the agent works for the party who is paying him and who he is contracted to get paid from.


<strong>It seems that most folks find their own home these days and they just need some help writing an offer and countering. Once the deal gets to escrow, there is very little for a buyer's agent to do. </strong>An agent with whom you have contracted and gets no commission from closure has no motivation to encourage you to close a deal or pay more than you want. A buyer's agent who only gets paid if the deal closes, has as his first priority a closed deal, whether it is in your best interest or not.</blockquote>
Amen Awgee, preach on brotha man! You got it right, I do agree that buyer agents shouldn't be paid what they get paid because it fogs up their judgement due to the $$$$$ signs in their heads.



I like your 2nd example, but there's one problem with it. Most sellers will not look to re-negotiate the commission with their listing agents after the offer because the listing agents have an incentive not to come up with a creative idea like that. Trust me, most listing agents would be crying like a baby if their sellers come back to them to try to re-negotiate their commission, probably telling the sellers how much "work" they've done and how they can't offer the same level of services with a reduced level of commission. haha I swear, the DRE needs to due two things...one is to impliment a fixed fee structure for commission (that'll never happen because the NAR would never allow for that) and two is to require people to at least have a college degree, along with more required real estate courses, before they can get their RE licenses.



As a fellow CPA license holder, the difficulty of obtaining a CPA license is one of the things that brings the level of respect one gets actually have it.
 
Usctrojanman - I am not trying to be argumentative, <strong>BUT</strong>,


I never said the buyer's agents were getting paid too much.


I suggested that the buyer look out for their best interest and keep things as simple, straight forward, and honest as possible. I do not care how much the agent gets paid, as long as my bottom line is what works for me.


After a few counters, and it looks like the deal will not close, the listing agent is gonna look pretty stupid and greedy if he/she does not adjust to the dynamics of the situation. If I am a seller and there is $20,000 on the table, my listing agent better throw the commission on the table quick if they are going to keep my listing.


By the way, I went to UCLA. And my oldest daughter is currently entering her senior year at UCLA.
 
[quote author="awgee" date=1214511532]Usctrojanman - I am not trying to be argumentative, <strong>BUT</strong>,


I never said the buyer's agents were getting paid too much.


I suggested that the buyer look out for their best interest and keep things as simple, straight forward, and honest as possible. I do not care how much the agent gets paid, as long as my bottom line is what works for me.


After a few counters, and it looks like the deal will not close, the listing agent is gonna look pretty stupid and greedy if he/she does not adjust to the dynamics of the situation. If I am a seller and there is $20,000 on the table, my listing agent better throw the commission on the table quick if they are going to keep my listing.


By the way, I went to UCLA. And my oldest daughter is currently entering her senior year at UCLA.</blockquote>
Nothing wrong with that, I got my undergrad degree from UCLA. I'm actually a BROJAN...shhhh
 
[quote author="usctrojanman29" date=1214527350]

Nothing wrong with that, I got my undergrad degree from UCLA. I'm actually a BROJAN...shhhh</blockquote>




How unfortunate!

I was going to invite you and some of the other SC alums on this board down to the Peninsula next month.

We?re going to be racing my dad?s boat ?The Sweet Life? in the annual regatta hosted by the Newport Beach Yacht Club.
 
awgee,

Great thought but how do you get to that point w/ the seller? How do I pitch it to them? Do I tell my agent to negotiate that and how open is that negotiation? How much of that info am I privy to? That would be fantastic to get the front end clipped off but the buyer agent would likely be pretty chapped about that...right? Seems like that would uproot some bitterness etc...



Im not sure when I hear the pitch..."I am a full service agent"...yep, not sure what to make of that...
 
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