ZIP, Zillow and ZAP – Part 2 of ?

OK. Everyone seems to get what ZAP is so far. Though many don’t see how it cuts your ability to benefit as a buyer with regard to commission issues. If the $9,000 on the table turns into $7,000, the agent’s gonna want to keep it all. If they are willing to pay that $2,000 to the lead generator, then why wouldn’t they agree to buy something for you with it? Same money, isn’t it? But once it’s gone…it’s gone. Either you have it, or the lead generator has it…your choice.

Darren points out, “I would think a well established (real estate agent) that doesn’t need to market themselves would also be reluctant to negotiate with you.” Joe says, “It sounds like you are describing a scenario where buyers can expect an agent to pay them some of the commish back in the form of washers and dryers, inspection fixes etc…”agent that feels less able to lavish unannounced gifts on buyers.”

The most common form of “negotiating” the buyer agent fee is for the agent to use some of the commission to pay for something for the buyer. It is generally not a direct negotiation, because the seller is paying the buyer agent, not the buyer. So the agent takes some of the commission that the seller is paying to the buyer agent and buys something with it for the buyer. As an example, a common thing the agent may buy that I am sure you have seen, is a home warranty. That can be purchased by the seller’s agent from his part of the fee (it will be a rider on the sign if that is the case) or it can be purchased for the buyer by the buyer agent from her portion of the fee.

Are you with me so far?

There are laws against handing money to the buyer. So you have to pay closing costs, or pay for repairs from the home inspection or include a washer and dryer in the sale and pay for it. It’s not about “lavish gifts”. The only way to negotiate a commission (paid by the seller) is to “gift” it to the buyer in the form of a “thing”. Even then, the lender has to approve that gift, or you have to be creative, so the agent cannot promise it up front. The lender will only allow so much of this to happen. If you are a cash buyer this is not the case.

Since the commission is in the loan, the thing that gets paid with it has to be in the house or in the purchase costs and the lender has to know about it and approve it, otherwise it is lender fraud and we all go to jail.

I’m going to stop here, because I sense from your comments so far that you may have questions on this. How do you think you get to negotiate the buyer agent fee? Did you think you could be handed a check? I’m curious…though not yellow, obviously.

Five more comments and we’re on again. I need to know what you are thinking to know how to proceed. I’m not the “Word Nazi” 🙂

Oh, Steph! ZIP is Zip Realty.

You can, by the way, reduce the purchase price of the house by the negotiated amount, but then you need to get the seller to sign it and sometimes they won’t. It is not as unilateral as paying for something with it. I commonly fix things in the house that come up in the home inspection that aren’t big things that the seller will do. Then the lender doesn’t need to see the repairs needed, which helps the buyer get his loan and it is not lender fraud because the repairs are fixed at closing and the money did go into the house in case the lender needs to foreclose. The value is in there. If you take that money and go to Hawaii…well then the lender will have a problem as all of the monies loaned and the downpayment need to be in that house at closing. There’s a huge law on this that goes on and on. I’m trying to keep it simple.

We have so many laws and rules and fines, you have no idea. Licensing laws, mls rules and they can fine you $5,000 a pop if you break them, RESPA Federal rules. There is no end to them and if you stacked them all up they would hit the ceiling.

I’m just trying to give you the practical application. Everything has to be shown on the final closing sheet and the closing sheet will not allow a line that says “I handed the buyer a check after closing so he and his wife could go to Bermuda.” LOL Of course most of these laws were written before buyers had agents…that’s part of the problem.

The seller negotiates the fee…no problem there. But the buyer negotiating the fee that the seller set up front…a little more confusing. Hopefully it’s worth understanding. If not…then don’t comment and I’ll stop here.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

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