Real Estate Agents: Tricks; Listing Contracts; Buyer Brokers
Q: A real estate agent recently told me that only 1% of
the houses sold are by for-sale-by-owner, or only 1% of the houses
that are for-sale-by-owner actually sell... something like that.
Do you have any statistics on this?
According to the U.S. Department of Commerce, 28.6% of all real
estate transactions nationwide in 1996, were made privately (that
is, without brokers).
Q: I have to relocate in a month and would like to sell
my home before I leave. I'd like to sell on my own, but don't
think I have the time. Do you have any information on how long
it takes to sell by owner vs. a broker?
All things being equal a private seller will sell a home
faster than an agent because the buyer prefers to deal directly
with the owner. In our experience as magazine publishers, we
have seen thousands of homeowners who have earlier had their
homes listed with agents, subsequently advertise their home through
(Picket Fence Preview) and sell very quickly...sometimes within
a week or two! Overall, you'll sell your property TWICE as fast
if you sell it by owner...provided you have effective advertising
resources and information.
Many factors affect how fast a particular home sells... the price,
of course; market demand for the type of home and its location;
time of year, and the effectiveness of the marketing and advertising.
You will be able to sell faster on your own by offering a good
price and advertising aggressively. If you have to pay a commission
you won't have as much (if any) negotiating room in your price
and might be forced to take a significant loss in order to make
a quick sale. Your best bet would be to try to sell it yourself
first.
Q: Seller: I've recently been approached by a buyer's broker
whose buyer is very interested in our home (they saw our ad in
your magazine). The broker, however, is insisting that I agree
to pay a 3% commission if her buyer purchases our home -- or
she won't show it to them. Is this how buyer's brokers work?
I thought the buyer paid their fee!
Although it is the buyer's responsiblity to pay the buyer
broker, often he or she simply does not have the extra funds
to do so. When buying a property listed with a real estate company
this is not an issue, as the buyer's agent is paid half of the
6% commission that the listing agency collects (hence the 3%).
However, when a buyer broker is involved in a private sale, it
is a different story.
The agent usually has an agreement with the buyers specifying
who will pay the broker's fee in the event that she represents
them in a private sale. Often buyers will indicate that they
want to try and have the seller to pay the 3%, or simply that
it will be negotiated between buyer and seller. In your case,
it sounds like : A) the buyers specified that they only wanted
to look at properties where the seller would pay the buyer's
broker fee, or B) this particular buyer broker does not have
a written contract with her buyers, and is nervous that she will
never see her commission unless she makes an agreement with you.
Also, savvy buyers often specify that they will not pay the broker
a fee unless she showed the property to them. The buyer broker
is may be trying to get to you before the buyers do...
If you have enough cushion in your asking price, you could
agree to paying the broker's fee upfront, provided you receive
a full price offer. This would save everyone valuable time if
the buyer can't afford your asking price (and the agent won't
encourage them to offer less if she knows she won't get her commission!)
In any case, you do not need to sign anything -- nor should you
-- prior to the buyers making you and offer. When they make an
offer to purchase your property, who will be responsible for
the broker's fee will be spelled out in the contract.
Can the buyer broker collect a 6% commission -- 3% from the
seller, and 3% from the buyer?
Typically, an agent only makes a maximum of 3% for a residential
property when representing the buyer. While it is not illegal
to ask each party for 3%, or even to ask one party for 6%, but
either party would be foolish to pay this. Remember, in a private
sale you are representing yourself, and are not obligated to
pay the buyer's agent anything.
Seller: I'm in a hurry to sell my home, and want to reach
as many prospective buyers as possible. I'd like to sell it on
my own, but am afraid that I'll miss out on all the buyers out
there looking with agents. Any suggestions?
First, don't underestimate the number of buyers who are looking
at Private Sale properties. Even if they're working with an agent,
chances are they are also looking at homes offered by owner as
well. In fact, many pursue this option first, before looking
at agents' listings.
To maximize your chances of reaching all prospective buyers,
though, you might include "Brokers Welcome at 2%" (or
whatever percent you are willing to pay) in your advertising
-- and even on your sign. This tells agents that you welcome
their buyers, and are willing to pay a "transactional fee"
(i.e. commission) for their services. Just be sure that you have
enough "cushion" in your price to cover their fee!
Seller: Our house inspection didn't go well, and now the
buyers want to buy the house for less (which we've agreed to).
The problem is that there's a buyer broker involved, and in the
original contract the broker wrote in a dollar amount for her
commission fee, rather than 3%. Now that the sale is less, isn't
she entitled to less?
Lawyer: Perhaps. How is it worded in your current sales contract?
Seller: It just says the dollar amount. Basically, we just
used the original contract and crossed out the old sales price,
put in the new, and both initialed it. However, when my wife
realized that we were paying the broker too much and brought
it to her attention, she said she wouldn't renegotiate her fee
and that she had a legal contract signed by us.
Lawyer: Ouch. In this instance, a new contract should have
been prepared to replace the previous, now null and void, contract.
By modifying the original you unwittingly set yourselves up to
signing an agreement based upon all the previous terms, including
the dollar fee stated for the broker's fee. Sorry.
Can the buyer broker collect a 6% commission -- 3% from
the seller, and 3% from the buyer?
Again, the fee is entirely negotiable. A buyer broker
may negotiate a fee from both the buyer and seller, although
it is very unlikely that both would agree to pay 3%.
Seller: Help! I'm in a strange predicament. I have my house
on the market with a real estate agency, but I retained the right
to sell it myself also. The problem is this : My buyer found
the house through Picket Fence, and came to me on his own. However,
he had previously worked with a buyer broker, he contacted her
for help in making the offer. This buyer broker then contacted
the listing agent for my property, and now I'm staring at a contract
that says I'm obligated to pay 6% commission!! Whata can I do?
I don't want to lose this buyer!
Don't worry. According to the Vermont Real Estate Commission,
you aren't obligated to pay your listing agent any commission
in this case. The buyer broker should not have contacted the
listing agent, and most likely simply made a mistake. Explain
to your listing agent that this buyer came to you directly, and
the matter should be resolved. If not, contact the Vermont Real
Estate Commission, or a lawyer, for further help.
Note: The Vermont Real Estate Commission is a state regulatory
agency concerning real estate matters and should not be confused
with the Vermont Real Estate Association, an organization for
real estate agents and brokers.
Seller: I've recently been approached by a buyer's broker
whose buyer is very interested in our home (they saw our ad on
the web). The broker, however, is insisting that I agree to pay
a 3% commission if her buyer purchases our home -- or she won't
show it to them. Is this how buyer's brokers work? I thought
the buyer paid their fee!
Although it is the buyer's responsiblity to pay the buyer
broker, often he or she simply does not have the extra funds
to do so. When buying a property listed with a real estate company
this is not an issue, as the buyer's agent is paid half of the
6% commission that the listing agency collects (hence the 3%).
However, when a buyer broker is involved in a private sale, it
is a different story.
The agent usually has an agreement with the buyers specifying
who will pay the broker's fee in the event that she represents
them in a private sale. Often buyers will indicate that they
want to try and have the seller to pay the 3%, or simply that
it will be negotiated between buyer and seller. In your case,
it sounds like : A) the buyers specified that they only wanted
to look at properties where the seller would pay the buyer's
broker fee, or B) this particular buyer broker does not have
a written contract with her buyers, and is nervous that she will
never see her commission unless she makes an agreement with you.
Also, savvy buyers often specify that they will not pay the broker
a fee unless she showed the property to them. The buyer broker
is may be trying to get to you before the buyers do...
If you have enough cushion in your asking price, you could
agree to paying the broker's fee upfront, provided you receive
a full price offer. This would save everyone valuable time if
the buyer can't afford your asking price (and the agent won't
encourage them to offer less if she knows she won't get her commission!)
In any case, you do not need to sign anything -- nor should you
-- prior to the buyers making you and offer. When they make an
offer to purchase your property, who will be responsible for
the broker's fee will be spelled out in the contract.
Can the buyer broker collect a 6% commission -- 3% from the
seller, and 3% from the buyer?
Typically, an agent only makes a maximum of 3% for a residential
property when representing the buyer. While it is not illegal
to ask each party for 3%, or even to ask one party for 6%, but
either party would be foolish to pay this. Remember, in a private
sale you are representing yourself, and are not obligated to
pay the buyer's agent anything.
Seller/ Buyer: I need to cancel my ad . .. I just tried to
make an offer on a listed property, and contacted the listing
agent. The agent asked right away if I had a property to sell
first, and when I said yes, said the sellers wouldn't be interested
in my offer if I was selling by owner, and that I should list
my house with her to "improve" my chances of the sellers
entertaining my offer.
The listing agent has a fudiciary responsibility to the seller
to present all offers made on the property in a timely fashion.
He or she cannot decide for the seller what they will or will
not be interested in. It is hard to believe that the seller indicated
they only want to sell their property to buyers who also list
with their agent. This agent is using coercive tactics to get
your listing. No doubt the sellers would be appalled to know
that good offers were being turned away in this fashion.
You said you tried to make an offer. Did you actually specify
the amount you would like to offer or present a deposit check
to the agency (better yet, you could present the check with a
signed contract to the listing agent)? If not, do so. According
to a real estate lawyer, it would be illegal for the agent not
to present your offer, and s/he risks losing her her real estate
license not to do so.
Seller: I've recently been approached by a buyer's broker
whose buyer is very interested in our home (they saw our ad in
your magazine). The broker, however, is insisting that I agree
to pay a 3% commission if her buyer purchases our home -- or
she won't show it to them. Is this how buyer's brokers work?
I thought the buyer paid their fee! -- R.L., Westford
Buyer's brokers can work a variety of ways -- it depends
upon their agreement with the buyer. Typically, the buyer chooses
one of three options for the broker's fee payment: 1) buyer assumes
responsibility for payment 2) to be paid by the listing agent
3) to be paid as part of a "transaction fee" (in essence,
this is added to the buyer's or seller's closing costs). Since
the buyer often opts for the third choice, this would explain
why the agent is pressing you for an agreement before showing
the property.
You should know, however, that you may negotiate the amount
to be paid. there is no standard commission fee. This is entirely
negotiable between you and the buyer's agent. It is also important
to note that a true buyer broker represents the buyer. It's a
good idea to consult an attorney before signing a contract presented
to your to be sure that your interests are protected.
Seller: I've had pretty good responses to my ad, and am
confident that my home will sell fairly soon. The problem is
we are buying our land through a real estate company, and they
are putting pressure on us to list our current home with them,
claiming that it will take too long to sell on our own. What
should we do?
Continue to follow a successful strategy, and don't allow
yourself to be coerced into something that is not in your best
interest! As you know, you can often sell faster selling on you
own because you can afford to be more competitive in price.
Examine the contract: Does it specify that you must have
your property listed through MLS, or does it simply state that
you demonstrate a "conscientious effort" to sell your
property within the given timeframe? "Conscentious effort"
does not imply that you must list with an agent. Document how
you are advertising the property, and how successful this has
been for you. If the agent still insists that you must list your
property, you can offer an "exclusive agency" listing,
retaining the right to advertise and sell your property on your
own. DO NOT ALLOW THEM THE 'EXCLUSIVE RIGHT' to sell your property
-- this means you lose your right to sell by owner. If you feel
you are coerced, talk to a lawyer or the State Real Estate Commission.
Buyer: What is your position on buyer's brokers? We just
had a bad experience with one, and basically felt we wre double-crossed
at the last minute. The agent had asured us in the beginning
that she would represent us as buyers, but then changed her tune
when it came time to make an offer on a house, saying she would
have to represent the seller in this transaction since the house
was one of her agency's listings. We ended up walking away rom
the deal because she wouldn't negotiate on our behalf and kept
trying to get us to offer more. -- Eric G., Essex Jct.
To answer your initial question, our "position"
is this: We think the concept of buyer brokering is great when
you are looking at agency listed properties as long as the agent
is truly watching out for your best interests. There's a built-in
conflict of interest when your buyer broker/agent is showing
you a property that is listed by their agency. After all, they
are obligated to represent the seller also!! Try to avoid this
sitiation if possible. Be sure you buyer broker agreement states
that you may employ the services of another buyer broker if you
wish to look into some of that agency's properties.
However, when looking at a property offered by owner, your
best bet is to deal with the owner directly. He/she knows the
most about the property and can answer your questions directly.
You'll most likely get a better deal too, since neither of you
will have to pay the broker's fee (even if the broker tries to
get the seller to pay the fee, you can bet it will increase the
amount the seller will settle for!) And if the seller simply
can't, or won't, agree to pay the fee, you'll have to either
come up with the funds yourself, or walk away from the deal.
All of which could have been avoided if you'd dealt face to face
with the seller in the first place!
Buyer: I'm using a buyer's broker to help me find a home.
How do for-sale-by-owners feel about this arrangement? I've noticed
that many specify "no realtors" in their classified
ads. Does this apply to buyer's brokers too?
Very few - if any - sellers will turn down an interested
buyer! Not everyone is aware of the role of the buyer broker
however, and may think that they will have to pay a 6% commission
if you buy the home. It is a good idea to contact the homeowner
directly yourself first, and explain your arrangement. You will
find most, if not all, may gladly welcome a tour by both of you.
Seller: How does it work with a buyer's broker, anyway?
A buyer broker represents the buyer, and acts on the buyer's
behalf in negotiating the price and conditions of the sale. Technically
the buyer is responsible for paying the commission to the agent
(usually around 3%), although it is usually requested that this
be paid by the seller in the buyer's offer.
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United States For Sale by Owner
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