Sharing Buyer's Agent Commission

Where I'm at in Michigan, the typical realtors commission is 7% split between the two agents. I have found an apartment property that is listed in MLS. I don't know for certain if the commission is the same, but assume it must be at least 4 - 5%, if not the same 7%.

Since I have a particular property in mind, I figure that I can easily find an agent to act as a Buyer's Agent for just that property based on the standard commission. However, I would like to negotiate 1% of this commission to go towards closing costs.

Is this reasonable? I am thinking that since the property is listed at $1.8M, the agent would still be left with somewhere between $18-45K (before the broker takes his cut).

Any thoughts?

Comments(8)

  • pmatheson126th March, 2004

    In CA, Unlawful for a Non Licensed person to receive Money for any transaction involving RE.

    Must be a RE Broker (not just a Salesman) Usually there are ways to accomplish the same thing.

    I think most agents would welcome this challange.

  • monkfish26th March, 2004

    It's not at all unreasonable. In fact, it's the same strategy I use when buying REI every time. I never use a buyer's agent for this very same reason.

    Now, technically you're not a licensed broker and can't earn a commission, but it doesn't matter. It's not a "commission," per say. It's a closing credit. You have the agent cut you a personal check at closing. Everyone’s happy.

    The beauty of this strategy is without knowing it the seller's agent begins working for you, on your behalf. Greed is a powerful tool.

    Now without asking for it up front, there are other ways to get part of the commission back.

    My favorite strategy is to play the “money back” card during P&S negotiations.

    For example, I just closed on a property last month. The inspection I had uncovered some concerns, which they always do. The inspector said it would cost $1500 to fix the problems (asbestos pipes). But I told the agent I wanted $6K credit a closing to cover repair costs, which was bull. I was now essentially saying give me part of your commission.

    Anyway, he told me the seller would never go for it because he felt like he'd already come down lower than he'd wanted. Again, I already knew the seller would say this.

    “So what,” I said. “I want $6K or I'm killing the deal. I don’t care how you make it happen. Just make it happen.”

    It helps sometimes when you get dramatic.

    Now, the greed factor begins to work its magic. By this time it’s too late for the agent to turn back. Not literally, of course, but figuratively. The agent assumed this was a done deal. He’s already pulled this house off the market. What’s worse is he’ll lose that hefty commission. Hell, I bet he already had the double commission spent in his mind. So the last thing he wanted was for this deal to fall through.

    As expected, the agent said, “I have an idea: why don’t I see if the seller will meet you part of the way, and I’ll kick in the rest. It’s worth it for me because I’m double-dipping. Whatever he doesn’t pay, I will.”

    Perfect. He came to the conclusion all on his own. I didn’t even have to ask.

    In the end, of the $6K, the seller gave $1K and the agent gave $5K.

    He wrote me a personal check at closing.
    [addsig]

  • pmatheson126th March, 2004

    Monkfish,
    In CA the agent could lose his license for the personal check to an unlicensed member of the public. I don't know what, if any, repercussions you would have.

  • LJT26th March, 2004

    It's better to go to the listing agent and than talk down commission. Because, than there is only 1 RE agent in the transaction, now he or she is going to get all the commission. Normaly you can talk down the commission that way!

    Lance Thate

  • tjl200026th March, 2004

    So you feel that an buyer's agent isn't really going to do anything more (as an agent) for me than a 'dual agent' so I would be better off with the dual as far as negotiating commissions. Does anyone have any reasons/benefits to have that buyer's agent 'on my side' instead? I'm not sure how much either of the agents add to a commercial deal.

    Also, I saw an add in the local paper from a RE brokerage saying, "This time next month you could be selling for us." I suppose if I wanted to invest the time in that, then I could grab half of the full commission (less whatever my broker would get). Do any of you find it beneficial have to have a RE license?

  • lp126th March, 2004

    a better way to do it is the agent to lower his commission with the seller that way the seller nets the same the buyer gets it at the price offered and everybody is happy without having to break any rules.

  • NancyChadwick26th March, 2004

    Some thoughts...

    monkfish,
    In PA, that agent would have violated the licensing laws. I don't engage in dual agency--never have been comfortable with that concept. So, if I had been the listing agent, I would have been present during the inspection (I always attended inspections of my listings) and would have known what your inspector said about the repairs. If you or your agent told me the inspector claimed that repairs would cost $6K, I would have asked for a copy of the inspector's report saying that the repairs were $6K. Nothing personal, but I wouldn't have taken your word or that of your agent. I would also have told the seller that that's not what the inspector said during the inspection. Now if what you really wanted was a seller credit towards closing costs, why didn't you just negotiate for that upfront?

    tjl2000,
    I have a somewhat different view on agency. If I represent a seller, I represent only the seller. If I represent the buyer, I represent only the buyer. Whether the representation is of the buyer or seller, I believe the RE licensee must put the best interests of the client first, and that means one's own best interests have to take a back seat to those of the client. I would caution people about basing their choice of agent representation in a RE transaction on just being able to maybe shave commission dollars off the purchase price. There are many issues involved in even the rare "typical" RE deal. Each party benefits from having full, competent, unfettered representation from their respective agents. Conversely, each party can be at risk if they don't have that fully-committed representation from their respective agents.

    [ Edited by NancyChadwick on Date 03/26/2004 ][ Edited by NancyChadwick on Date 03/26/2004 ]

  • Lufos26th March, 2004

    I know how you feel the lure of pelt is heavy. But sometimes you have to utilize a "Class Approach" Also sometimes the introduction of another mouth at the trough of commission will kill a deal and you end up with egg on the face.

    I sometimes utilize the same teck that is used in large corporate merger, when you utilize worthless stock in exchange for an even more worthless company which then shows a high flood of buyers of the stock and all goes well for a few days until reality sets in and matrix of the purchase is complete with the same old non performance.

    I sit everybody down at a table and we negotiate. Not so much cutting commissions and sharing as taking the monies of purchase and distributing them among the players of the other side.

    We have many combinations of race and ethneticity out here and sometimes this highly western approach makes it possible for each minority to indulge themselves and still meet at a common table.

    The Armenians with their double and triple closings. The British in their small asides and inability to come direct to the bargain. Always want to write everything out long prior to the actual contractual documentation. The Mainland Chinese trying to drag in five and six agents all to be allowed to slurp at the pool of tendered monies. The Albanians, just want to shoot everybody directly after signing. The French all contractual matters are served with food. All food is served with heavy sauces and very little substance.

    Seems to work well, the Brokers do not fee inferior to all, the members of the second oldest profession (Lawyers) get to say their wordy pieces and present bills and cards to all.

    And us the Negotiators the true oldest profession, (sorry ladies) get to do our thing. Much waving of hands and lots of scratch paper. Everybody takes a little less and the deal gets done.

    Of course we keep the Bankers outside in the lobby, no use screwing up everything right off the start. Then, and only then, you bring them in one by one and inform them of the great honor they are being given. To Finance this amazing piece of property and only 110%.

    I think you all get what I am talking about.
    Lets just do it not looking up or down. Dont just cut into the brokers pile, go for the main one. Play in paper as you short in cash.

    Lucius 8-) 8-) 8-)

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