Making Reduced Agent Commission Adjustments

[Mr Rex]

I don't follow your math. How often do brokers buy houses?

 

[Gobears81]

I don't follow your math. How often do brokers buy houses?

What I meant is this:

$150,000 is "gross" selling price

If seller pays 6% brokerage fee, they net out $141,000 before all of the other deductions that result in their equity plummeting :-/

Let's say Broker A is selling your property and is approached by Broker B to purchase. You will still have to pay 3% of the selling price to Broker A, but since Broker B is effectively the "buyer's broker", they are also due 3% of the commission. But since they are buying it, they choose not to receive a commission, but rather to buy the home for 97% of what the market value or original agreed-upon selling price is ($150,000).

I did this on my first house-my father has a broker's license and he acted as my broker. Instead of obtaining a 3% commission, we just knocked the price down to 97% of what was originally agreed upon. The seller of that home was indifferent to that.

 

[Deleted member 134708]

The FISBO in all likelihood would still have to pay the buyer's agent the standards fee. .

He didn't pay anything. He was old dude who's been around the block. I went and talked to him cause I liked the cut of his business jib. It's how I started the conversation, "I like the cut of your jib"

He went FISBO right in between these other two agent listed homes. So those agents had to show his house too, all for $0. Those buyers when went looked at agents homes, always asked about his too. I loved it.

He was all about paying $0, take it or leave it. Ended up selling cash (full price offer) from someone who found it on Zillow.

 

[Mr Rex]

I don't follow your math. How often do brokers buy houses?

What I meant is this:

$150,000 is "gross" selling price

If seller pays 6% brokerage fee, they net out $141,000 before all of the other deductions that result in their equity plummeting :-/

Let's say Broker A is selling your property and is approached by Broker B to purchase. You will still have to pay 3% of the selling price to Broker A, but since Broker B is effectively the "buyer's broker", they are also due 3% of the commission. But since they are buying it, they choose not to receive a commission, but rather to buy the home for 97% of what the market value or original agreed-upon selling price is ($150,000).

I did this on my first house-my father has a broker's license and he acted as my broker. Instead of obtaining a 3% commission, we just knocked the price down to 97% of what was originally agreed upon. The seller of that home was indifferent to that.

So you treat all sales with an agent involved as if the commission is a 6% concession?

 

[Gobears81]

So you treat all sales with an agent involved as if the commission is a 6% concession?

No, I am using that as an example

 

[Bobby Bucks]

The last time I moved I took no commission and told the listing agent to put the comments in MLS addressing that fact. It was 3% of the price. I suppose it's similar to concessions, they only truly matter to the buyer and the seller, otherwise 100-3 still equals 100 for GSE purchase purposes. As for as adjusting, like so many things in this business, sometimes it's best to simply adjust in the reconciliation. Purists and witch hunters may deplore the practice, but AMC team leaders and Henry Harrison would probably have no objections. :- )

 

[TRESinc]

Ended up selling cash (full price offer) from someone who found it on Zillow.

if it sold for $499k what was the zestimate?

 

[Ahhhh Yeahhhh]

If the FSBO dude listed his house purposefully below market to compete against professionally marketed homes, I could make the case that the comp shouldn't be used as it was not professionally marketed by a knowledgeable party. Sure, he listed it less to sell it, but he could have gotten more. If he intentionally lists too low when he knows he could have gotten more, then he isn't acting prudently and the sale shouldn't be used as a comp.

As far as the broker paying less by giving up their commission.... They didn't give it up, they just didn't claim it on their taxes. Think about it. The discount was their pay, uncle same just didn't know about it.... its a barter or an under the table concession.

 

[Deleted member 134708]

If the FSBO dude listed his house purposefully below market to compete against professionally marketed homes, I could make the case that the comp shouldn't be used as it was not professionally marketed by a knowledgeable party. Sure, he listed it less to sell it, but he could have gotten more. If he intentionally lists too low when he knows he could have gotten more, then he isn't acting prudently and the sale shouldn't be used as a comp.

Or $0 realtor service on both sides with zero borrowed money = true MV of $499K.

Borrowed money and realtor service = $499K MV for the real property and $16K for the value of borrowed money and a realtors service.

Non borrowed cash and $0 fee's = true MV of the real property of $499K

Solve for X and Y.

Realtor w/ non-borrowed money = X

No Realtor w/ borrowed money = Y.

The only equivalent of cash is your cash. Borrowed cash is not the equivalent of your cash. The industry lumps in real property value + service value = MV of the real property. This isn't correct but the industry needs it to be this way, so we go along with it. I'm just as guilty as the next, but at least I know I'm not doing it correctly.

Edit: was talking about FISBO and sellers pays $0 realtor fees.

 

[Ahhhh Yeahhhh]

If FSBO dude was smart, he would list competitively with the MLS listings. That way he could get the most money. IN effect, he is not benefiting and is purposefully lowering his price and accepting a price below what many buyers would be willing to pay. This means he isn't acting prudently. If he were he would be asking a price in line with other listings and the buyers would still feel compelled to buy his house at a price higher than he is currently asking because it would still be competitive with other market listings. Sure, his net is the same.... But he COULD net more and he knows this yet he still chooses to list at a price lower than the competition to account for his limited marketing effort.

Its not a good representation of the market because the seller isn't seeking the highest price he can get.