Making Reduced Agent Commission Adjustments

[jackimoya]

Has anyone made these adjustments? If yes, under what circumstances and how?

 

[Michigan CG]

No.

 

[J Grant]

No. Why would you do that, unless you saw it severely impacted price?

 

[Howard Klahr]

Has anyone made these adjustments?

Provide greater context as to what specifically you are asking

 

[Joe Flacco]

I wouldn't make a adjustment but I would mention it in the addendum.

 

[Dublin ohio]

Like J Grant said. Only if it actually impacted price. In my experience. It does not. Most of the time. It is only done to make the deal "work". Appraisal comes in below purchase price. Buyer wants seller paid closing costs but seller does not want to reduce their net. What about a fsbo with no agent involvement. Might increase net to seller but not impact sale price. What about discount brokerages or MLS listing only agreements. Too many if, ands or buts.

 

[Joe Flacco]

I was thinking that the OP was talking about when the buyer is a agent and they applied the whole commission to the sale price resulting in a 2.5-3% lower sale price.

 

[J Grant]

We don't always have to adjust for every little thing especially when it is a sale term and not related to an actual physical feature of a property.

We can instead weight certain sales more than others in the reconciliation, and atypical commission or terms might be a reason why....assuming it did not substantially impact price...my pov is if sale terms so substantially impacts price I'd rather not use it as a comp ( unless nothing else is around)

 

[Michael P Jacobs MAI]

Has anyone made these adjustments? If yes, under what circumstances and how?

The most meaningful benchmark for this answer is whether it's market standard or not. If it's a one-off discount, what is the likelihood that the subject property would sell under similar conditions - you would be assuming that the subject property will in fact be sold with a reduced commission, right? Keep in mind that commissions wouldn't be so standardized if this was market-standard.

I have made a nominal adjustment when a comparable was so close and physically similar to the subject that market participants would not overlook it, and I noted during verification that the principals felt it was significant. I wouldn't say that it changed my observations or conclusions, however. Let's say a single-user industrial comparable is next door, the same production-quality design and condition, and it just closed with a 2.5% instead of 5% market-standard commission. In this case would a market participant expect the subject property to sell for more than the comparable because the comparable seller might have reduced the price 2.5% (or probably less)? No, it's pretty much indiscernible although a full-commission discount can be a little more meaningful - as long as market participants considered it significant and acted on it.

If everybody is looking for it - like the borrower or broker - make the adjustment to be illustrative and conclude to the point in the range you feel is best supported overall. I won't say that otherwise it is indefensible but certainly feel it is in the vast majority of cases. How many appraisers can appraise to within two or three percent of a price?

 

[jackimoya]

I was thinking that the OP was talking about when the buyer is a agent and they applied the whole commission to the sale price resulting in a 2.5-3% lower sale price.

Yes, I'm talking about this situation, where the buyer was an agent and as a way to reduce the price they reduced or eliminated their commission. Where it actually does affect the sale price. Not to make the deal work.

I'm also a broker (however I rarely do sales) and I did this in working as a selling agent for my nephew. There was already an offer on a place he wanted and we were able to offer the same price as the other offer with my reduced commission, which netted the seller an additional $5,000. So, they accepted my nephew's offer.