Making Reduced Agent Commission Adjustments

[Deleted member 134708]

Buyer buys house for $500k. Seller pays $20k to both agents for their commish. Seller nets $480k.

Shouldn't the appraiser reconcile these?

Ebay auction: buyer buys $10.00 item, seller nets $9.00 after comission.

If the bank is the client and they are going to be on the hook for selling the home if things go south, shouldn't we be using the sellers net value?

Or I guess the bank can do the math. Current definition MV minus 6%, minus bank additional costs = their Value

Not taking a hard line. Just putting out there. Am probably wrong.

 

[Deleted member 134708]

Stock market. Most liquid auction in the world.

Bid/ask
$10.00/10.05

You have to buy at $10.05 and seller has to sell at $10.00 if want to make transaction. The middle man scoops up the $0.05. What's the value? I'd ask for which side? Seller $10.00, buyer $10.05.

Just curious why the industry or client your trying to protect doesn't want to know what they can actually sell the subject for, cause it's not for what the buyer paid that's for sure. As above.

 

[jackimoya]

You do realize how ridiculous this statement is, right? The statement implies that adjustments are only applied for variances in physical characteristics of properties.


You do realize that this is actually an adjustment? Implicit as opposed to explicit, but an adjustment nevertheless.


While the PRICE of the property was affected in this example, do you believe that the VALUE change? The answer would be no. Now if the transaction was for a comparable as opposed to the subject, an adjustment for transaction terms may apply to the comparable. However, transaction terms do not impact the value of the subject.

Yes absolutely, it would not affect the value of the subject. I'm referring to comparables.

 

[jackimoya]

You do realize how ridiculous this statement is, right? The statement implies that adjustments are only applied for variances in physical characteristics of properties.


You do realize that this is actually an adjustment? Implicit as opposed to explicit, but an adjustment nevertheless.


While the PRICE of the property was affected in this example, do you believe that the VALUE change? The answer would be no. Now if the transaction was for a comparable as opposed to the subject, an adjustment for transaction terms may apply to the comparable. However, transaction terms do not impact the value of the subject.

Yes absolutely, it would not affect the value of the subject. I'm referring to comparables.

For the sake of debate and pondering - How much does an agents commission actually contribute towards the market value of any property's bricks and mortar. What is the market value of an agents commission.

It does not affect the market value, however it can affect the sale price.

 

[Peter LeQuire]

I suppose we have to adjust for professional staging of a house, also - since its cost is a fee for a professional service?

 

[jackimoya]

Similar situation here with my first house. Mama gave up her comission, but she had both sides of the deal.

What you have to realize is that your dad didn't give up a comission. He gave you a gift. Uncle Same just didn't know about it. It was a gift that wasn't disclosed. It was an "under the table" gift of comission.

If it was done the correct way, your dad would have charged his same comission and shown it on the closing statement as a gift to you. Doing this means uncle sam gets his hands on the money... TWICE.

The sale shouldn't be used as a comp. If you do use it as a comp, you would need to make a positive concession adjustment. FNMA will not accept an appraisal with a positive concession adjustment no matter what kind of explanation you provide.

In my case, my mother (was an agent) gave me both sides of the comission. The listing was amended to indicate what happened so that an appraiser wouldn't think the sale was a true reflection of the sale price it would have sold for without the relationship of buyer/agent/seller.

In your case, the seller agreed to the price reduction based on your relationship with your dad. In essence at this point, this wasn't an arm's length transaction any longer since the seller (or seller's agent) was considering the buyer's needs in arriving at a price. In a true arms length transaction, the buyer and seller do not give a rats arse about each other's "needs"... The buyer and seller should only be considering their own respective needs.

Will Fannie Mae allow it if it's done as a separate line item at the bottom of the grid under the heading of 'Condition of Sale' (or something similar)?

 

[glenn walker]

NO ** It's like a seller paid concession ... The seller just reduced the price by the agents commission and once you go down that rabbit trail it never ends. Just appraise the property and be done.

 

[Evincere]

It does not affect the market value, however it can affect the sale price.

Unless its a FSBO doesn't' SP include a Sales Commission. The Seller supposedly pays for it but so does the Buyer. Do you not you use other MLS sold properties as Comparable s which also include a sales comission?

ie. $500,000 x .06 = $30,000. In what way does that $30,000 add to the market value of the physical bricks and mortar.

Is it that their marketing "expertise" is worth $30K - as some type contributory value?

 

[Ahhhh Yeahhhh]

Look at it this way.

If you have 5 houses listed for sale in your subdivision and they are all basically the same. The listing prices are 500K, 505K, 510K, 507K, 503K.

What price should you list your house at to get the most money? Somewhere between 500-510? or somewhere in the $470K-$480K range?

If you are not trying to get the most money, you are not a seller acting prudently.

FSBO's sell at full retail value all the time. Some FSBO sellers reduce the price because they don't have the knowledge to effectively market the home like an agent or an experienced seller. Some sellers choose to use an agent because they simply don't have time to field calls, deal with pre-quals, showings, etc.

 

[Evincere]

Look at it this way.

If you have 5 houses listed for sale in your subdivision and they are all basically the same. The listing prices are 500K, 505K, 510K, 507K, 503K.

What price should you list your house at to get the most money? Somewhere between 500-510? or somewhere in the $470K-$480K range?

If you are not trying to get the most money, you are not a seller acting prudently.

FSBO's sell at full retail value all the time. Some FSBO sellers reduce the price because they don't have the knowledge to effectively market the home like an agent or an experienced seller. Some sellers choose to use an agent because they simply don't have time to field calls, deal with pre-quals, showings, etc.

You are missing my point. Thats OK. NP