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Q: Benefits to the buyer of hiring a real estate agent ( Answered 5 out of 5 stars,   7 Comments )
Subject: Benefits to the buyer of hiring a real estate agent
Category: Business and Money
Asked by: whysdom6-ga
List Price: $15.00
Posted: 01 Jul 2005 05:28 PDT
Expires: 31 Jul 2005 05:28 PDT
Question ID: 539055
Should I hire a real estate agent to assist me with the purchase of a
new home in an area with which I am very familiar?  If possible, I
would prefer to use the 1/2 commission normally provided to the buying agent
by the seller as bargaining chip to reduce the purchase price of the
home by another 3%.  Is this a feasible tactic?  One agent told me
that a full commission (6%) would be paid regardless if I, as a buyer,
have an agent or not.  She said if I do not have an agent, the selling
agent would get the full commission. Is this true?  Bottom line, I
don't understand why an agent should get thousands of dollars when I
have performed months of personal research on the area and home in
which I want to buy.  Is there a way for me to benefit from this money
that is typically allocated to the buying agent? Please advise.
Subject: Re: Benefits to the buyer of hiring a real estate agent
Answered By: hagan-ga on 01 Jul 2005 06:59 PDT
Rated:5 out of 5 stars
Hello, whysdom6.  Your question has both a legal component, and a
"human factors" component, and the analysis of each is important. 
Let's start with the legal side.

On the legal side, the full commission is going to be due and payable
to the seller's agent at the time of sale NO MATTER WHAT.  Here's why.

When a house is listed for sale with a real estate agent, that
document -- the listing agreement -- sets forth the commission to be
paid for the sale of the house.  As you know, typically a commission
is 6%.  Some agents will list for less, but the "standard" is 6%. 
That amount is set by the agreement between the seller and his agent,
and is not dependent on how the property gets sold.

For example, if a seller lists his property with an agent and agrees
to a 6% commission, and the agent lists the house, the seller has to
BUYER.  Let's say Sam the seller lists his property with Ron the
Realtor.  Then Sam's sister Sue says, Sam, sell me the house.  Sam
does.  Ron the Realtor is owed his full commission at the time of

So if you go yourself direct to Sam, and without any involvement by an
agent on your side, say directly to Sam, "I want to buy your house,"
Sam is still going to be stuck paying the entire commission to his own
listing agent.

See, for example:

"In general, the real estate commission is built into the total
purchase price of a home as a percentage fee that is agreed to by the
seller and listing agent prior to execution of the listing agreement."

"Usually listings are "exclusive." If the Seller sells the house to
his own brother without the agent's help, the Seller owes the agent a
commission! If a Seller has a possible prospect, he should exclude
that prospect by name in the listing contract."

HOWEVER.  All is not lost.

Remember that all of the foregoing discusses the legal obligations and
rights of seller and agent.  And as a strictly legal matter, the
seller is going to be on the hook for the full commission regardless.


We are dealing with human beings.  Just because somebody may have an
enforceable "right" to something, that doesn't mean that he will
insist upon it in every case.  Just about ANYTHING can be negotiated.

The seller's agent does not get paid at all, anything, bupkis, unless
the house sells.  If he is persuaded that the difference between
getting a sale and not getting a sale is the 3% that he might have to
pay aanother agent anyway, there is a good chance that he will agree
to reduce his commission in order to make the sale.

Put yourself in the agent's shoes.  Are you going to turn down a sale,
and insist on your "rights" to the full 6%, if you truly believe that
it's the difference between getting 3% and getting nothing?  No.  That
would be foolish.

Here's where you come in.  It is going to be up to you -- your own
negotiating skills -- to convince the seller and his representative
that you WILL NOT BUY THE HOUSE unless the price comes down by the
necessary 3%.  And you DO NOT do this up front.

Remember that the asking price of the house is not the actual
bottom-line can't-take-less selling price.  There is going to be
negotiation up front about the price of the house itself.  This is NOT
when you talk about commissions.  Jumping right to the issue of the
commission is going to turn off the seller's agent before he is
"invested" in the idea of a sale.  You have to make the seller's agent
ANTICIPATE a sale.  EXPECT a sale.  Expectations are KEY in
negotiation.  That's why you don't just jump straight to your bottom
line.  You have to build anticipation and expectations.  You have to
make the seller's agent start counting the money in his head.  Until
he does that, it's all just blue-sky and he won't have a problem
saying No.  But once he's spending the money in his head -- once the
deal is all but done -- THAT'S when you give him the one, last thing
that has to happen before the sale closes.  It's just that one last
thing.  That's all.  He has to agree to accept FROM YOU, RIGHT NOW,
the same thing that he will have to accept DOWN THE ROAD, LATER, if
another buyer comes in with his own agent.  Money now, or the same
money later.  His choice.

None of this is to guaranteee that he would accept it, even if you do
your part perfectly.  Some people don't act in their own best
interest, and you can't make them.  But if you set it up right, you
should be able to negotiate that last three percent.

Here's the caveat, though.  BE VERY SURE that you know what you're
doing before you decide to go in alone.  Real estate brokers and
agents don't just get paid for finding houses and showing them. 
Anybody can do that.  The reason brokers and agents have to be
licensed is that they ALSO know how to protect buyers and sellers
legally.  They understand mortgages, contracts, contingencies,
inspections, chain of title, title insurance, escrow, and a host of
other details that have to be done RIGHT.  This is the single largest
investment most people ever make.  It CAN GET SCREWED UP.

If you are comfortable with the details of financing, contracts,
contingencies, escrow, and title insurance -- and if you are going to
have the time to deal with them -- then you can probably do this

Of course, another option is to find houses FSBO -- For Sale By Owner.
 In that case, you can BOTH save the commission.

I hope this was helpful.  Good luck!
whysdom6-ga rated this answer:5 out of 5 stars and gave an additional tip of: $10.00
This is an exceptional answer.  It is very comprehensive, in that, it
covers every uncertainty and concern I have on the topic and it has
helped me make a very important decision. In addition, it is extremely
well written...cery clear and concise.  Use of caps for emphasis
proced very effective.  Thank you very much.

Subject: Re: Benefits to the buyer of hiring a real estate agent
From: research_help-ga on 01 Jul 2005 07:34 PDT
I think you need to be very careful and cautious about following the
advice given in the official answer.  Hagan-ga may not fully
understand the dynamics of the real estate market.  Hagan-ga assumes
this is a one time deal with a money hungry selling agent.  Most
likely, this is an agent who has many deals going and relationships
with other agents.  The selling agent will not be desperate to make a
deal with you (unless for some reason the house is undesirable, but
then why would you want it?).  The agent will be willing to wait it
out for a better deal.  Also, consider that this selling agent has to
keep up good relationships with other agents for the sake of future
deals that are his/her livelihood.  He/she would much rather have
another agent take the 3% than have the buyer pocket it.  And lastly,
in most areas of the country, this is a seller's market.  Buyers have
to compete to get a desirable house and will usually have to settle
for the terms set by the seller.  In very few markets can a buyer
currently dictate any terms.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: whysdom6-ga on 01 Jul 2005 09:22 PDT
Thank you for your thoughts, research_help-ga, however I think
Hagan-ga hit it right on.  Below are my thoughts on the three primary
points you made. First, you must understand that the selling agent
will not get 6% of any house I decide to buy.  If I hire an agent it
will not be the selling agent.  Thus, you must assume the selling
agent realizes his/her commission ceiling is 3% if they sell the home
to me with or without an agent.

It has been my experience that most sales people, regardless of the
industry, are money hungry.  There is nothing wrong with this- it is
what makes them successful sales people.  Most would rather close a
deal today with a potential client with whom they have invested time
and effort rather than taking their chances on tomorrow.  This is not
desperation, rather a clear understanding of return on investment.  By
turning down my offer, the selling agent would not necessarily be
holding out for a better deal...the next buyer will likely have their
own agent and they would only get 3% in that scenario as well.

Your point about maintaining relationships with other sellers is a
valid one, but I think you overestimate the impact of such an action.
As a community, do other agents really care if a selling agent makes
3% or 6%?  Since I have NOT committed to a buying agent, I wouldn't be
taking money away from any particular individual.  Thus, there would
not be any personal conflict as a result of this action.  The only
impact I see here is if collectively agents frown on such an action
because they don't want this negotiating tactic to become a trend,
thus overall reducing their collective earning potential.  I doubt the
agent would give up a sell based on this improbable risk....not
because he/she is desperate, but because they are in business.

I think your point about the sellers market is flawed.  First, at this
stage of the negotiation, the seller has gotten what he/she wants. 
The final step is between the selling agent and the buyer.  In fact, I
think the seller would be frustrated that their agent would not close
the deal for no other apparent reason than to protect the future of
the agent community (see point above)

Again, I think Hagan-ga provided an exceptional answer with a wise
caveat.  Nonetheless, I appreciate your time and comment.  Thank you.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: research_help-ga on 01 Jul 2005 10:48 PDT
Whysdom6 - I am glad that you appreciate my comment.  Your response,
however, makes it clear that you should consult with a buying agent. 
I am very familiar with the real estate market and your points show
that you may not be as familiar with how things work in this industry.
 I am not interested in debating my points back and forth, but I
suggest you speak to someone knowledgable before proceeding which I
believe will show you that my comments are indeed correct.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: wordsmth-ga on 01 Jul 2005 13:11 PDT
Couple of points we're overlooking here. First, I'm not a real estate
agent; I'm a real estate investor so I occasionally use agents, but
generally I don't...and I enjoy the 6% I save. However, agents can
perform some very useful services for the 6% total (much less the 3%
for the buyer's agent we're talking about here). There's a lot of
paperwork involved in making the deal work, and your agent can well be
worth the 3%. Who pays what closing costs? If there's a problem, is
the price reduced, or money put into escrow? Lots of dollars-and-cents
issues where an agent can save you 3% or more. So, if you resent the
3%, you shouldn't. And remember: It's the seller who's signed a
listing agreement with his/her agent, not you. The seller has promised
the agent 6%. Unless you somehow prevail on the agent and seller to
reopen their listing contract and reduce that figure to 3% (won't
happen!), 6% is still going to go to the agent(s). What you're really,
in fact, asking is that the agent collect the 6%, then hand half of
that over to you. As a practical matter, that won't happen.

If you want to reduce the price by 3%, there are a whole bunch of ways
to do that, too, other than trying to get the agent to cut his/her
commission in half.

Hagan-ga's negotiating strategy is OK (make 'em think they've got the
sale, then at the last minute, after they've already mentally spent
the money, ask for concessions). But it tends to be more effective
when used on the seller (who really has often spent the money, and is
far more emotionally invested int he sale) than on the agent.

Hagan-ga's advice regarding FSBOs is only partially correct. Sure, you
"save" the 6% commission. But, trust me, the owner intends to pocket
some or all of the difference. He's not selling the house as a FSBO to
do YOU a favor and save YOU the 6%. He's doing it to try to pocket the
6% himself. Nothing wrong with that, but just understand his
motivation. His life would be simpler if he listed with an agent; he's
willing to try to sell the house himself in order to recoup some or
all of that 6%.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: whysdom6-ga on 05 Jul 2005 09:26 PDT
Wise thoughts, wordsmith, thank you.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: kdr-ga on 06 Jul 2005 19:18 PDT
Your original observations are correct, but I don't think you should
make it your issue:

Once listed on the MLS the seller has planned for a 6% commission in their price.

If approached by a buying agent, the buying agent will get the 3% like you said.

If approached by you just lower your price by 3% and explain your
justification for the lower price and make is the sellers issue.  You
get what you want a 3% reduction.

After that it's between the seller and their agent.  The seller agent
will probably get their 6%.  The seller may negotiate a 3% reduction
but not usually.

If you really want to save money, focus on for sale by owner
properties, or real estate companies like "HelpUSell" or
"Assist2Sell".  You can also wait out the contract between the seller
and their agent.

But the bottom line is that real estate agents are battling this every
day.  So, don't make it your issue.  Offer a price.  Deduct your 3%. 
It is a reasonable thing to do given your local knowledge.
Subject: Re: Benefits to the buyer of hiring a real estate agent
From: kevinrob-ga on 16 Nov 2005 06:58 PST
Well you could try a free For Sale By Owner site just to see if your
getting any showings for your home. I listed my home with a <a
href="">Cincinnati For Sale By Owner
service</a> and they provided marketing materials to me (for a small
fee). But the marketing tools (flyers, postcards, magazine exposure,
etc.) were the same tools real estate agents offer. They even
presented me with a closing gift that was a multimedia presentation of
photos and virtual tours of my home.

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