On 3 Sep 2006, wrote (in Message-ID
.com at
http://groups.google.com/group/misc....3f20b8f?hl=en&
) that he plans to buy a house without a buyer's agent, and wants to
negotiate with the listing agent to get part of the 6% commission. He
asked for tips on negotiating that commission.

As the OP pointed out, this could be a win-win situation. Since the
listing agent already expected to give up 3% of the purchase price to a
buying agent, the buyer could negotiate to have the listing agent give
up 2.5% (for example), so that the listing agent still comes out ahead.
The seller comes out neutral, and the buyer comes out ahead, so
everyone should be happy, right?

Lots of people criticized OP's plan, saying that OP should just hire a
buying agent "for his protection". But OP (reasonably) doesn't want
that. OP is confident that he can do all the work that a buying agent
would do, so he'd rather get paid for that work than have the listing
agent (who did none of it) get paid for it.

Others criticized OP's plan, saying that he should just offer a lower
price for the house and hope that the listing agent might offer to give
up some of his commission to bridge any gap between the offer and the
list prices. This is bad advice because it weakens OP's offer relative
to those of other potential buyers. The seller, not the listing agent,
chooses which offer to accept. If the seller has to choose between
OP's offer and another one 2% higher, the seller will go with the other
offer. It's much better for the buyer to offer the higher price, then
have the listing agent pay him back part of the commission.

Most of the criticism to OP's plan seemed to support the real estate
industry's high commission structure. I applaud OP for taking a stand
and refusing to pay the outrageous commissions, especially when he can
do most, if not all, of the work himself. There are several ways that
OP can do what he wants.

1. OP can hire a buyer's agent who will refund most of the commission.
Google for "discount real estate agent" or "discount realtor". A few
I've found are ZipRealty, BuySideInc, and BuySideRealty. Some refund
2.25% to 2.5% of the purchase price to the buyer after closing.

2. OP can hire a buyer's agent that will work by the hour instead of on
a commission. Call a bunch of agents and offer an hourly rate of
$100-$200. Since that rate is far higher than the average agent's
hourly pay, you'll find one who will be happy to work for you. The
total bill can easily end up under 0.5% of the purchase price. The
agent will refund the remainder of the commission back to you after
closing.

3. Despite many people's statements to the contrary, OP _can_ negotiate
with the listing agent for part of the commission. Although the
commission agreement is between the seller and the listing agent, the
listing agent stands to profit from the potential buyer's business, so
the potential buyer _does_ have some bargaining power. Many listing
agents will try to protect their industry and their cushy fee
structure, and so will, as a matter of principle, not indulge any
proposal to split the commission with an agentless buyer. But it's
still worth putting this pressure on the listing agent. If he wants to
sacrifice his profits to protect his industry, fine. Let him hurt
himself. If a listing agent seems uninterested in such an arrangement,
here's how I would negotiate it: Make an offer on the property, but
put a contingency in your offer stating, "This offer is contingent on
the listing agent agreeing to pay 2.5% of the purchase price to the
buyer at closing." Since the listing agent is _legally_ _obligated_ to
present your offer to the seller, the seller will now _also_ pressure
the listing agent not to be greedy and to go along with your proposal.

Disclaimer: I have never tried this, but it I think it ought to work.
If anyone sees any problems with this approach and wants to make
constructive criticism, please do.

I am now donning my fireproof suit and await the flames of the real
estate agent community. ;-)

Sincerely,
Matt Carter

P.S. Please don't bother with any of the following arguments we've all
heard (and debunked) ad nauseum:

"The buyer's agent is free for the buyer, so you might as well use
one."

BS! The buyer supplies the money that (indirectly) pays the buyer's
agent.

"You're a cheapo for trying to nickel and dime the listing agent."

2.5% of a home purchase price is no small change!

"Why should the listing agent pay you for the privilege of working with
you?"

The listing agent was already expecting to lose 3% to a buying agent.
If he pays you 2.5%, he's still getting an extra 0.5% for his troubles
of dealing with you. (If a buying agent really _does_ work in the
interest of the buyer, as real estate agents claim, the listing agent
should be thrilled to work with a buyer _not_ represented by a buying
agent.)

"Just as you'd hire a doctor rather than do surgery on yourself, you
should hire a real estate agent when you buy a home."

1. A real estate license takes a couple months of studying, while an
M.D. degree takes six years of solid education.
2. I don't pay a doctor 15% of my net worth for surgery! (A 3%
commission on a home in which I have 20% equity is 15% of my net
worth.)
3. Doctors don't have an objectionable protectionist fee structure as
real estate agents do, wherein the listing agent gets paid double (for
doing no extra work) if the buyer shows up without a buying agent,
having done all the work himself.
4. A doctor's financial interests aren't directly opposite to those
of the consumer (as is the case with a real estate agent working on
commission).

wrote:
On 3 Sep 2006, wrote (in Message-ID
.com at
http://groups.google.com/group/misc....3f20b8f?hl=en&
) that he plans to buy a house without a buyer's agent, and wants to
negotiate with the listing agent to get part of the 6% commission. He
asked for tips on negotiating that commission.

As the OP pointed out, this could be a win-win situation. Since the
listing agent already expected to give up 3% of the purchase price to a
buying agent, the buyer could negotiate to have the listing agent give
up 2.5% (for example), so that the listing agent still comes out ahead.
The seller comes out neutral, and the buyer comes out ahead, so
everyone should be happy, right?

Lots of people criticized OP's plan, saying that OP should just hire a
buying agent "for his protection". But OP (reasonably) doesn't want
that. OP is confident that he can do all the work that a buying agent
would do, so he'd rather get paid for that work than have the listing
agent (who did none of it) get paid for it.


I seem to recall that most people, myself included, didn;t criticize it
because we thought he needed an agent for protection. We criticized
it because the buyers focus should be what price he's willing to pay
for the house, not who gets what.



Others criticized OP's plan, saying that he should just offer a lower
price for the house and hope that the listing agent might offer to give
up some of his commission to bridge any gap between the offer and the
list prices. This is bad advice because it weakens OP's offer relative
to those of other potential buyers.

He doesn't have to "hope" the listing agent might offer to give up some
commission. He can suggest it to the agent and seller, which is what
I suggested. And it doesn't weaken his offer relative to any other
offer, because once he makes the suggestion to the seller, the cat is
out of the bag. The seller will realize he has the possibility of
getting the agent to cut the commission on ANY offer, not just this
one.



The seller, not the listing agent,
chooses which offer to accept. If the seller has to choose between
OP's offer and another one 2% higher, the seller will go with the other
offer.

The seller is just going to do the math and figure out which offer that
is solid is going to bring him more money. Whether it comes from
someone paying 2% more or the agent cutting his commission 2% makes no
difference.



It's much better for the buyer to offer the higher price, then
have the listing agent pay him back part of the commission.

First, I'm not sure this is even legal under the various state laws
that regulate the business. But one thing is for sure, it's gonna ****
off the real estate agent. And if I were the seller, I wouldn't look
too favorably on it either. If you brought me a signed contract
offering $200K for my house and suggested the agent take 3 or 4%
instead of 6% to close the deal, I would think that is fine.
However, if you walked in and asked the agent to cut the commission
right out of the gate, without any serious and fair offer in hand, I'd
tell you to get lost. Same thing if I was a real estate agent. If a
deal were close and I was asked to consider reducing my commission to
get it done, I would seriously consider it and probably do it. But
start off the negotiation that way, which is what it sounded like the
OP was proposing, and possibly you are too, then I'd tell you to get
lost.

In any negotiation, if you are close and a deal is at hand, it's not
unusual for one party to make a final concession that closes the deal.
In this case, that could be the real estate agent. He looks like a
hero to the seller. He made the deal happen. For the agent, he gets
a quick sale done and the job is over.

But start this cutting your commission crap without a deal about to
happen and it's a whole different story. It looks like some jackass
walking into a store, asking to demo things, waste everbody's time
arguing price, without being serious about buying anything.




Most of the criticism to OP's plan seemed to support the real estate
industry's high commission structure. I applaud OP for taking a stand
and refusing to pay the outrageous commissions, especially when he can
do most, if not all, of the work himself. There are several ways that
OP can do what he wants.

I didn't see much support for the real estate industry. What I saw
was a lot of people suggesting he focus on the price he's willing to
pay and not try to directly interfere with somebody else's commission
arrangement.




1. OP can hire a buyer's agent who will refund most of the commission.
Google for "discount real estate agent" or "discount realtor". A few
I've found are ZipRealty, BuySideInc, and BuySideRealty. Some refund
2.25% to 2.5% of the purchase price to the buyer after closing.

That could work too, as long as the buyer can find one willing to do
that.



2. OP can hire a buyer's agent that will work by the hour instead of on
a commission. Call a bunch of agents and offer an hourly rate of
$100-$200. Since that rate is far higher than the average agent's
hourly pay, you'll find one who will be happy to work for you. The
total bill can easily end up under 0.5% of the purchase price. The
agent will refund the remainder of the commission back to you after
closing.

3. Despite many people's statements to the contrary, OP _can_ negotiate
with the listing agent for part of the commission. Although the
commission agreement is between the seller and the listing agent, the
listing agent stands to profit from the potential buyer's business, so
the potential buyer _does_ have some bargaining power. Many listing
agents will try to protect their industry and their cushy fee
structure, and so will, as a matter of principle, not indulge any
proposal to split the commission with an agentless buyer. But it's
still worth putting this pressure on the listing agent.

Yes, and the way to do this is by making a serious offer and suggesting
the agent reduce his commission to close the deal.


If he wants to
sacrifice his profits to protect his industry, fine. Let him hurt
himself. If a listing agent seems uninterested in such an arrangement,
here's how I would negotiate it: Make an offer on the property, but
put a contingency in your offer stating, "This offer is contingent on
the listing agent agreeing to pay 2.5% of the purchase price to the
buyer at closing." Since the listing agent is _legally_ _obligated_ to
present your offer to the seller, the seller will now _also_ pressure
the listing agent not to be greedy and to go along with your proposal.

Disclaimer: I have never tried this, but it I think it ought to work.
If anyone sees any problems with this approach and wants to make
constructive criticism, please do.


This approach is identical to what you started out calling bad advice
above, with the only addition being you want to put it in writing in
the contract.



I am now donning my fireproof suit and await the flames of the real
estate agent community. ;-)

Sincerely,
Matt Carter

P.S. Please don't bother with any of the following arguments we've all
heard (and debunked) ad nauseum:

"The buyer's agent is free for the buyer, so you might as well use
one."

BS! The buyer supplies the money that (indirectly) pays the buyer's
agent.

"You're a cheapo for trying to nickel and dime the listing agent."

2.5% of a home purchase price is no small change!

"Why should the listing agent pay you for the privilege of working with
you?"

The listing agent was already expecting to lose 3% to a buying agent.
If he pays you 2.5%, he's still getting an extra 0.5% for his troubles
of dealing with you. (If a buying agent really _does_ work in the
interest of the buyer, as real estate agents claim, the listing agent
should be thrilled to work with a buyer _not_ represented by a buying
agent.)

"Just as you'd hire a doctor rather than do surgery on yourself, you
should hire a real estate agent when you buy a home."

1. A real estate license takes a couple months of studying, while an
M.D. degree takes six years of solid education.
2. I don't pay a doctor 15% of my net worth for surgery! (A 3%
commission on a home in which I have 20% equity is 15% of my net
worth.)
3. Doctors don't have an objectionable protectionist fee structure as
real estate agents do, wherein the listing agent gets paid double (for
doing no extra work) if the buyer shows up without a buying agent,
having done all the work himself.
4. A doctor's financial interests aren't directly opposite to those
of the consumer (as is the case with a real estate agent working on
commission).