Has anyone gotten an inquiry asking about buyer agent fees. I just received this from a prospect: "Let me know what is your fee when I buy a home through you".
What do you think about buyer agent fees and how would you handle the lead?
I have never charged a fee and, most likely, never will. I let the buyer know there are no fees, that I get paid through the proceeds of the sale with a commission split, and through referrals from happy buyers who pay no added fees.
I also let buyers know that I am acting as a Buyers Agent (NY Disclosure requires that we identify agency at the first substantive contact) and I advise that I do not charge an additional fee. I explain that I am paid by the seller through a commission split with the Sellers Agent. I do know some agents who tell buyers that their commission is 2.5% and if they help them purchase a home that the Buyers Agent receives 2%, they have the buyer agree to pay the additional 1/2%. This is the exception to the rule in my area.
I also also advise them that the seller pays the fees. I do take a retainer up front per our BBA aggreement. On the aggreement it expains that the retainer will be applied against my fee when the buyer buys, lease's, or lease options a home. I have not had a problem with this.
Whoops, I was signed in under LaShell's website that I am trying to fix for her.
Mike
There is a franchise operating in the Greater Hartford area called "Realty Direct" that adverisies "buyers get cash back" after closing. Your inquiry may have been exploring along those lines.
I do get a question from buyers if they have to may any fees..I explain to them if they go for FSBO or if the compensation on the listing in less than # then they have to pay. All the transaction I had none of my buyers have paid.
In this Growing period , where there is every value of the minute, some buyers just take a full services of a agent, from viewing up to documentation and at the end when they got all the information about the property , buyer make some excuses and take away the agent from the deal to save agent fee. 75% are like these , only 25% are those which make a payment. to avoid this frustation the buyer agent fee must fix before doing all homework or buyer must be pay for every information.
Mike,
I have also never charged a fee. I have talked about it when working with one of my investors. He wants me to target FSBO's that have no idea what their house is worth and underprices them. He said he would pay the fee if it gets him the deal. Other than that, I don't see me charging a fee to a typical buyer.
Todd
Todd, who's Mike?
In the event that you are doing the search for that great deal the investor wants to sink his teeth into, such time and effort should be paid for in the form of a retainer and perhaps buyer paying the commission on the purchase. We have been seeing allot of buyer incentive programs where the buyer receives anywhere from 50 to 90 percent of the commission of the selling agent at close. The buyer does all the work and the selling agent only opens the property and writes the offer. My experience in this area is that you end up doing all the work anyway in your service to the buyer so why discount?
Todd, (just kidding Howard)
No charge for buyers unless special circumstance with FSBO. It's all negotiable. (Especially if we are dating-Lonns thread). LOL
We have never charged a buyer fee in the past but just recently thought we may need to revise this policy.
Recently we worked with a buyer that really needed a great amount of time and effort to "process". Finding her a home was not the problem, in fact we put an offer in on a home the very first day we met. After that there was a great deal of "babysitting" that needed to take place both by her mortgage broker and myself as a transaction broker (we represented the seller as well.) Please note..I am not afraid to do a good bit of work to earn my pay but this was excessive!
The scenerio went a little like this. We found the house, she was absolutely in love with it, we were under contract for 2 full months due to the fact that both seller and buyer were out of the area and teachers and we needed to work around their schedules and the buyer was going through a divorce and needed to "work out some things". The mortgage broker and I both found out that over time we had been "fibbed" to many times about this buyer's situation.
On the Wed before closing the buyer was very anxious about the move, she made plans for furniture, decorating...the works, everything was good! On the Sunday before she showed some hesitation but figured it was just last minute jitters and with her going through a divorce, relocating and HER first home purchase I wasn't concerned.
Then the day of closing arrived and she "changed her mind"... she simply decided she would rather move in with "a friend" and save herself some money.
Without having a buyer broker agreement we had nothing! The seller got the $500 escrow, we could have retained $250 of that but WHY? We simply had to take a loss of $8100 in commission because the buyer "changed her mind".
A hard pill to swallow I have to say. A buyer brooker agreement would have helped a great deal per the attorney.
Realtors beware!
Just something to think about!
Same here...never charged a Buyer's fee. Special circumstances arise when Buyer is considering a FSBO or if it's an Investor that I've made an arrangement with. I suppose it just boils down to your business and what works for you in your market.
I always charge my buyers a fee. I do not work for less than 3%. With agents complaining about lower & lower commission splits from the listing broker the money has to come from somewhere.
Why should the seller pay all the commission anyway? I've never understood why buyers get our services for free. In a perfect world the seller would get full service for 3% and the buyer would pay as part of their closing costs. I agree with Jody though - whatever works in your market and for you.
I find once I've thoroughly explained agency and how by having me to represent them I could actually save them money in the negotiations and we have a level of trust most buyers will sign up to pay me a commission. If they do not want too I don't work with them.
Does the seller really pay the commission. Nobody gets paid anything until a buyer buys, and the commission is usually tacked on to what the seller needs to net. This is an old debate, but I would like to see the HUD statement show the seller paying the listing agent's split out of the proceeds and the buyer paying the buyer agent's split out of the proceeds -- if there is representation on both sides.
Funny you should ask Howard, yesterday I farmed an area and was asked that same question. I told the gentleman I don't charge a buyer's fee my commission comes from the seller. He then showed me a contract between him and an agent from Remax for $5000 to find him a mobile home. At this point I told him I could not discuss anything real estate related with him. He said "can I cancel my contract?" I said "you can do anything". He wanted me to look up mobile homes for him and put the results in his mailbox (because I said I couldn't talk to him). I said "I'm sorry but I'm not in a position to help you because you are under contract", and walked away.
If you are getting a commission from the seller, why charge the buyer too? I know there is not much money to be made on mobilehomes but still, take what you can get from the seller leave you client happy and move on. Next.
Finally, Mike Farmer got the real point of my post.
If I am being paid a co-broke, I wouldn't charge the buyer an additional fee. But, who pays the fee anyway, of course, it's the buyer.
Here was my reply to the inquiry:
Bruno, thank you for visiting my website and for your inquiry into fees.
It is likely you have asked several realtors the same question. My answer will likely be different.
Most real estate agents will advise you that there is no fee for using a buyer's agent to help them purchase a home. That is the traditional answer and it is technically correct since buyer's agents traditionally are paid out of the co-broke from the transaction offered by the listing agent. I say technically correct because the seller is paying the listing agent who then offers a portion of the commission to the selling agent so many buyer's agents will in fact tell you that there is no cost to you to use their services.
However, until or unless the buyer closes the real estate transaction, there are no proceeds for either agent to be paid and when the transaction does close, the seller pays the commission from the proceeds of the sale derived from funds provided by the buyer. So in effect, the buyer pays the full commission, not the seller.
Back to your question. I can work with you in several ways. I can certainly work with you as a buyer's agent in the above scenario and be paid out of the transaction.
If you would rather reduce the price of the home by not paying the buyer's agent commission and work on a fee basis, I can work with you as well. The fee would be determined by how much work you would require. If you are a low maintenance client, the fee would be lower, high maintenance, obviously higher.
What is low maintenance? For starters, you would have preapproval from your lender, you would identify several properties to be seen, we would view them and make a decision, and I would provide you with comps for the neighborhood and help you structure the offer, negotiate on your behalf, and guide the transaction from contract to closing including all inspections, removal of contingencies, etc.
High maintenance, I find properties based on your search criteria, you require many properties to view, you need guidance to obtain financing, you want to make unrealistic lowball offers, you think you can "steal" a property simply because we are in a buyers market and many offers are rejected rather than even being counter offered, you require me to spend significant time with you, burn lots of expensive gasoline, buy you many lunches, etc., etc., etc.
Everything financial would have to be clearly detailed on the hud statement.
If this makes sense to you, please let me know how I can be of help and we can negotiate a fair fee for my required services.
Well Jeremy (also just kidding),
That sounds interesting and rather complicated for a good portion of buyers out there that might fall down dizzy from the explaination.
I suspect there are a number of less than savoury characters in the indsutry that would take full advantage of finding ways to increase their take.
In British Columbia it is illegal to suggest the Agents remuneration be determined by the results of the deal. The remuneration must be up front and specific. And, since the seller's agent already has remuneration worked out with the seller, the only deal that could be arranged for the buyers Agent is a minimum % - ie a buyers contract stating a minimum will be topped up by the buyer if the sellers agreement allows only for a lower percentage to the Agent. In the hot hot Vancouver market, these agreements are hard to come by.
Howard,
I am not clear as to what is your specific question about "buyers agent “fees”. Of course, I am very dense to begin with.
I assume that you are asking about the idea of securing an advance pre-set fee to work with a buyer towards finding him/her a property. If that is the right question, here is something I have not yet had enough balls to practice while many of my prominent peers in my neck of the woods constantly brag for practicing this unique “Buyer’s Agent” representation and be successful at it.
The concept is cleverly simple and works like this: Upon meeting a potential buyer, you immediately negotiate your representation as a “Buyer’s Agent”. You, the buyer and your broker will sign a written agreement for a fee (usually between $500 and $1,000) in exchange for your work and efforts to diligently assist the buyer find a property within a pre-set amount of time (usually a three-month period). That money is immediately placed in an escrow account with your favorite Escrow Agent. If within that period of time, you have found a property, engage the buyer into a purchase contract and go to a successful closing, the fee will then be waved against the commission paid by the Seller at closing. Otherwise, you will have rightfully earned your fee and your broker shall write you a check for that amount less your split with the broker.
It is certainly a logical tool that serves two purposes: 1) it ensures loyalty from your buyer and, 2) it most surely guarantees you that you are working with a real buyer, not a flake.
About three years ago, this concept became a major topic in our regional Realtor® circle. In fact, there were even classes given here and there about how to master that notion.
Come to think of it, why not? Why can we not be compensated for our devoted time and efforts to spin our wheels hopelessly?
Coincidently, in that line of thoughts, last year I have argued repeatedly with my CPA about him finding a way to justify an income tax deduction for each dead-end client I have worked with in 2005, like a lost expense, or something. He laughed at me. But I wasn’t. And I quickly retorted: “Then you won’t mind working for me “pro bono” this year. Finish compiling my tax data, sum up what I will owe Uncle Sam and let me have a copy of your figures. I will talk it over with my children and I will call you later.” His lower jaw dropped as his gaze became vapid.
Similarly, around here it is almost customary for all mid-size to large brokerage firms to charge an office “Transaction Fee” only payable by deducting the agent’s commission at closing for each party the agent is representing (single or both sides of the transaction). Usually that fee ranges between $100 and $200. Though, all agents want to recuperate that fee. Therefore, upon first meeting the customer, such fee has to be disclosed, agreed upon and acknowledged with a signature at the same time we are declaring our brokerage representation to the customer. If the customer refuses to agree to pay that fee, the broker will deduct it to your commission, regardless. Consequently, agents eventually began charging charging double to triple the broker’s fee because, if the customer disagrees with the fee, then they negotiate to split it in half with them. Nine times out of ten the customer says OK.
I have been practicing this for the past six years. I charge $395 per transaction. Few times I had to split it with the customer but RARELY I had to eat the entire fee. You all may argue that it is immoral or even unethical. Perhaps, let’s see: For large corporations and all other business proprietors, whenever the price of gasoline goes up, the price of insurance goes up, wages go up, their sales go down, and etc., who ultimately pays to compensate for those losses in profit? The consumer, of course.
So, I don’t feel bad to charge a small fee to every customer who will help defray for my time loss with those “buyers who are liars”.
Well I just charged my first fee to a buyer. It was a FSBO and since the seller had reduced the price by 24k they did not want to pay the commission. The buyer wanted to pay me and I got 2%. Strangest deal yet, they did the negotiations and I wrote it up. It got a bit confusing trying to confirm what both sides agreed to, because I was hearing alot of "He said, They said". After getting the terms straight it turned to pure pleasure. Pretty nice people on both sides of the table.
Realtor, Columbus, Ga