Negotiating the Buyer Agent Fee

[photopress:swan.gif,thumb,alignright] Greg Swann over at Bloodhoundblog wrote a lengthy piece on his feelings with regard to changes that are needed in the real estate industry.

I happen to be writing an offer as I write this, actually waiting for a buyer client to come over and sign it, who was the first client with whom I negotiated the fee at first contact over coffee. That is not my normal scenario of negotiating the buyer agent fee, as I generally like to see at least three homes, of my choice, with the buyer before having the discussion regarding commissions.

I like to see how they look at property, what types of things bother them, how many and what kinds of questions they ask, etc… Just as I need to see a house before I know what I would charge the seller, I have to have some idea of the level of difficulty involved with the buyer attaining his objectives, before I can establish a reliable fee base.

So while I do not totally agree with Greg that a buyer should, or even can, negotiate a fee before seeing any homes, his article is well worth reading. I plan to read it again more thoroughly after this contract is signed 🙂

I will mention, that this particular client and I renogotiated the intital fee we came up with over coffee. So breaking my rule of not looking at houses first, was not a good thing. Having some experience with the agent and vice versa, is the best way to establish a fee that will work for all involved.

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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

36 thoughts on “Negotiating the Buyer Agent Fee

  1. P.S. After we determine the amount of the commission, I offer to give them a contract that says that, or we can go on trust. I tell them I do not need a contract from my side, as I trust them, but am more than willing to enter into one if it makes them feel more comfortable. Not one has required that it be put in writing. A great way to start the relationship, on trust.

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  3. Trust is good for friends and family. It totally sucks for business. You may have your bliefs Ardell, but there’s nothing more comforting to both buyers and their agents than a representation agreement.

    As agents, we already get the bad end of the deal from the start, since we have to do a lot of work potentially with no pay. At the very least we should put it in writing that we WILL get paid once we are done. Don’t see anythin wrong with that.

  4. Trust is GREAT for business. One of my best mentors once said to me, “if someone is willing to sign an agreement…you reached that meeting of the minds where you don’t need one”. Trust is much better than a piece of paper.

    I find buyers to be exceptionally loyal to me, though many have seen property with other agents before they met me. That is part of the agent selection process, and the buck seems to stop here.

    As I tell new agents, the best way to retain a client is to be good at what you do…not chain them to your leg.

  5. Btw, it’s a legal issue more than anything. If you have no written agreement, you can be working either for the buyer, or as a subagent of the seller. If there’s any kind of lawsuit, the suing lawyer can claim that you’re working for whichever side makes his case more convincing.

    You’re playing with fire Ardell. If the buyer trusts you and you trust them, there won’t be a problem signing the agreement. It seems to me you somehow feel guilty doing it, thinking that the buyer won’t resepect you or will get offended. Kind of weird.

  6. Ardell,

    Imagine this you and I disagree again. One of the biggest issues coming into question with regard to real estate agents is “professionalism”. I feel it is unprofessional to be working with someone when the obligations to each party are not clearly defined in writing. If you are in a “find out if you want to work together mode” that is one thing. But once you decide to work together then there should be written agreement stating what each party is obligate to. That is professionalism.

    Trust can be bought. How many times have you heard a listing agent say “if you let me write it up we can take the selling side commission off the price”. Just picture your client sitting before a judge saying “Ardell said to trust her that xy and z would get done and our dream home would close”.

  7. Joe,

    You are just flat out wrong on that one. We don’t have subagency here in Washington. Where are you from, the dark ages?

    I was one of the first agents to use a buyer agency ageement in this Country and I will, and still do, use them WHEN IT BENFITS THE BUYER TO HAVE ONE! Which is rarely. Mostly when I need to approach people whose homes are not for sale.

  8. Allen,

    You appear to be in an unrelated field and so apparently do not comprehend that the duties of an agent vary from individual to individual. The stock contact used for Buyers in this Country are for one reason, to chain the buyer to the agent and insure the agent gets paid.

    If and when the buyer has a clear benefit to signing the contract, I may change my opinion of them. Right now, they are useless to buyers and harmful to buyers, by design. When the contract is drafted by an attorney for the purpose of the buyer instead of by the Realtor Organization, maybe one will exist that truly benefits a buyer. I don’t see that day coming anytime soon.

    Your definition of “professionalism” is cheesy.

    BTW, clients have “trusted” me for 16 years and their dreams homes DO close…your point?

  9. Ardell,

    I am in the same industry as you but do not have the same mindset and I very much understand the duties and responsibilities of the real estate agent. My point is the agent community is going to have to step it up.

    There is nothing stopping you from having your own attorney draft your own buyer agreement. Maybe Russ can help you with it :).

    In your post to Joe you said:

    I will, and still do, use them WHEN IT BENFITS THE BUYER TO HAVE ONE! Which is rarely. Mostly when I need to approach people whose homes are not for sale.

    How does it benefit the buyer when you are approaching homes not listed for sale? This is truly in your best interest to have an agreement signed not the buyers because if you talk to an unlisted homeowner there is no agreement for compensation. This also shows trust is a one way street with you. Why wouldn’t you just say I trust you will pay me if I write up this fsbo for you?

    Ardell you make my points better then I do. THANKS

    If you can tell me one good reason not to have an agreement of understanding and compensation in place I would love to hear it.

  10. Allen,

    Sorry, I click your link and it looks like you “service” my industry in some fashion vs. being “in” it.

    Allen, obviously you have it all wrong again. Written agreements are always required, in every state, when you are dealing with both the buyer and the seller at the same time.

    When you knock on a door of a consumer who is unrepresented, both the person inside the door and my client need greater clarification than normal, with regard to whom I am representing at the time of the discussion. The nature of the agency needs to be in writing for the benefit of both parties. It is simply the reverse of being approached by a buyer on my listing. There has to be a written agreement by one or both to talk to both at the same time.

    Personally, I strongly recommend to the buyer they get a written agreement, when I offer to charge them less than the mls offering, for their protection. They choose to trust me. Do you propose I fight them on that point?

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  12. Umm, I still don’t understand, HOW a buyer can be wronged by a buyer’s agency agreement? Why not have one? If they don’t like working with you, they can always tear it up, and it benefits you.

    The only explanation I see, and which you stubbornly refuse to admit, is that you feel guilty asking them to sign one. That’s what I got from all your ranting about them in previous posts. Somehow it ruins that special bond between you and the client.

    Well guess what, it is very unprofessional to try and make the real estate transaction some touchy-feely trust thing where everyone is over optimistic. This is business first, friends later. When the deal is done, the trust will come naturally. Until then, I’m protecting myself from getting screwed by unscrupulous buyers who look at homes with you, but have their friend sign off on the contract to get the commission.

    Btw, I’m from TEXAS, not the dark ages. We have some of the best real estate laws and systems in place. No way would some crap like REDFIN ever take root in our state.

  13. Joe,

    You say “until then, I’m protecting myself from getting screwed by unscrupulous buyers who look at homes with you, but have their friend sign off on the contract to get the commission.” Has that happened to you Joe? It has NOT happened to me. Why should I protect myself against someting that happens to YOU?

    But thanks for making my point. You get it signed for your own self interest reasons.

    I think people can tell that I say what I think and I have absolutely no problem getting a buyer to sign one when I want one signed. If you say sign this because I don’t trust you, what does that say about you?

    When you say sign this because I don’t trust you, how can you say it does not destroy the bond of relationship between agent and buyer.

    If I don’t trust someone, I don’t work with them. It’s that simple.

    Why does everyone think it is the buyer’s goal to run around screwing people over?

  14. All things are negotiable, but not everyone is willing to negotiate. I would suggest finding a good buyer’s agent who is focused on getting a lower price and better terms on the home purchase; your agent can offer you a rebate too.

  15. first time buyer, buyers agent ignores question about fees. only says that if it is bank owned the bank will pay there fees. one more question we were just approved for a loan saw about 40 home we would lke to see. when we emailed agent her reply was are we sure we want to see all of them. I’m confused, thought this was there job?

  16. Where are you Mark? I have never, ever had someone want to see 40 homes in 18 years. I would not do that without a buyer agency agreement and I don’t EVER use buyer agency agreements. But that’s really a bit overboard.

    Still if you are in an area where there are 40 homes for sale in your price range in the same area, it could possibly be reasonable. So I ask again. Where are you?

    It might me the guy at McDonald’s “job” to make french fries, but if you walked in and asked for 8,000 orders…well, he might look at you funny. It being her job is not the issue. What is the price range and where are you looking?

    If someone wanted to see 40 properties that covered three counties and they cost $80,000, I’d probably take a pass.

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