Making Reduced Agent Commission Adjustments

[jackimoya]

I'm sorry, I'm referring to those cases when the buyer is an agent and they offer a lower price with no commission, which does affect the sale price.

 

[Deleted member 134708]

3 houses just went up in a row on my street few weeks ago. and all sold, all about same sq. ft and condition. I went and walked all 3 during open houses. I so, so know the owners just from walking my neighborhood daily for 5 years. 1 sold $519K, 1 $515K and FISBO guy sold his for $499K. I asked him why lower, he said cause no commissions involved. FISBO guy told me "I got the same net as them"

2 cents from real market participants. If you adjust for concessions, I'd be adjusting for realtor fees, lack of, closing costs, transfer taxes, etc. Every single cost.

 

[J Grant]

I'm sorry, I'm referring to those cases when the buyer is an agent and they offer a lower price with no commission, which does affect the sale price.

I personally would not adjust for that, I'd just comment on it and perhaps weight the sales that sold with full commissions a bit more if paying full commission reflected in price is more typical in market.

That said, homes sold to other RE agents can make me a bit nervous as a comp...who knows what they are up to with insider market knowledge...jmo .

 

[Howard Klahr]

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.

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

We can instead weight certain sales more than others in the reconciliation,

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

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.

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.

 

[Ariba]

3 houses just went up in a row on my street few weeks ago. and all sold, all about same sq. ft and condition. I went and walked all 3 during open houses. I so, so know the owners just from walking my neighborhood daily for 5 years. 1 sold $519K, 1 $515K and FISBO guy sold his for $499K. I asked him why lower, he said cause no commissions involved. FISBO guy told me "I got the same net as them"t.

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

 

[J Grant]

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

Since I did not actually state adjustments are only applied for variances in physical characteristics, your comment is ridiculous. I implied nothing of the kind, you invented that part.

 

[Gobears81]

Most of the time. It is only done to make the deal "work".

That was the rationale used for my house to convince the FSBO seller to take my offer. They were initially listing the house on MLS and I offered a lot less, to which they hung up on me. When they eventually called back, I explained that 5% off of the listing price plus a 6% brokerage fee would net them less than my final counteroffer, so they took it. I thought it was a good deal for me, although the appraisal came back right at the purchase price number (although I found some of the adjustments pretty debatable, such as $1,000 for the second 2-car garage that has about 600 square feet).

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.

I have seen this happen multiple times and it would often be appropriate to make a conditions of sale adjustment. But, remember that could be used as a tactic for the broker to profitably purchase a property slightly below market, yet not necessarily at a level commensurate with the lost or reduced commission. That is where verifying the sale becomes important.

 

[Evincere]

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.

 

[Mr Rex]

Would you adjust 6% for a cash sale with no RE agent involved? For limited service $500 flat fee MLS listing?

 

[Gobears81]

Would you adjust 6% for a cash sale with no RE agent involved? For limited service $500 flat fee MLS listing?

Probably not, but if you are the seller of a home and it is being purchased by a broker, do you care whether you sell it for $150,000 to an individual or $145,500 to a broker? Either way, you net out $141,000. If the discount is implicitly reflected in the price, it is appropriate to adjust.