Should you "cooperate" with buyers' agents?
this primer, I use the term buyers' agent to refer to
agents who show property to buyers and help them prepare
offers. But other kinds of agents--like selling
agents, seller's agent, cooperating agents, and
sub-agents--perform many of the same duties. Click
here to learn how these agents differ.
you agree to pay a commission to an agent who brings you an offer from a buyer
(assuming the deal goes through),
you’re said to be “cooperating” with agents. I
recommend you do this, for these reasons:
prospective buyers (especially first-time homebuyers) are inexperienced at real estate transactions and
need a lot of handholding when buying a house. Buyers'
agents are good at this.
Many prospective buyers are already working with real estate
agents, and are expecting their agents to show them all available houses.
Unless you offer a commission, these buyers may never learn about
prospective buyers are so frightened of making a mistake that
they become paralyzed with indecision. A good buyer's
agent can help allay their fears and coax them into making an
Agreeing to cooperate
with agents doesn't prevent you from selling to an
you don't cooperate, you probably won't pocket all or even most
of the commission savings. Buyers who make offers without
the services of a buyer's agent usually expect a price discount.
You have to
cooperate to get on the multiple listing service (MLS) and various MLS-affiliated websites, like Realtor.com. These websites get lots of traffic.
always reject any offer. (Though if you were to reject a
full-price offer with no contingencies, you might have to pay a
commission to the buyer's agent who brought it.)
Agreeing to cooperate with agents lets buyers make choices about the
amount of services they want. If you were to offer a
commission of 3% on a house that sold for $500,000, for example,
here are different ways it might play out:
the buyers are inexperienced and need a lot of handholding, they'll
probably want to work with a buyer's agent. In this
case, the agent would get (and probably deserve) the full 3%
commission, or $15,000.
experienced buyers might want to negotiate a partial
commission rebate with a buyer's agent and make do with less
handholding. For example, the buyers might ask the agent
to accept a commission of just 2% of the sales price ($10,000),
and rebate back to them the remaining 1% of the sales price
buyers might want to dispense with a buyer's agent altogether
and make an offer through a lawyer. In the offer, the
buyers might ask the lawyer to accept a commission of just 1% of
the sales price ($5,000), and rebate back to them the remaining
2% of the sales price ($10,000). Alternatively, the buyers
might pay for the lawyer's services directly, waive the buyer's
agent's commission, and bid a lower price for the house (say,
$485,000 instead of $500,000).
|| When I was
selling my Sacramento rental, a woman came by herself to an
open house and seemed very interested. The next
weekend, she came to another of my open houses with an agent
in tow. She, like many buyers, had
assumed the agent's assistance was
"free." It was not. As a seller,
I would have accepted a lower offer from her if she hadn't
come in with an agent.
commission should you pay?
many areas, the total sales commission paid by the seller is 5% to
6% of the sales price of the home. The
buyer's agent usually gets 2.5% to 3%. (This share, by the
way, is normally split again between the agent and the agent's
broker.) I recommend that you offer a competitive commission
to the buyer's agent. In California, this will usually come to 3%
if the home's value is $300,000 or less, and a 2.5% if its value is more than $300,000.
a case to be made, however, for offering a slightly more generous
commission. Some agents discriminate
against FSBO homes (in violation of their fiduciary duty to their
clients and the Realtor code of ethics) since they see the FSBO movement as a
threat to their livelihood. Offering a generous commission
will help motivate agents to do the right thing and show your
house without bias. A
second reason is that many buyer agents believe that a FSBO
transaction will require them to do "double duty" to close the
deal since there's no listing agent to share the work. This shouldn't be
a problem if you follow my advice and hire a discount broker or real estate attorney to help you
conclude the transaction, but offering a generous commission
will help persuade buyers' agents that selling your house is a good
deal for them.
you've set the commission, you're pretty much stuck with it.
Agents usually check out commission rates only when houses first
come on the market. If you come back later and raise the
commission, many won't notice the change and will continue to view
your home as a low-commission property.
Should you offer a discount to buyers without agents?
You'll almost certainly want to offer a discount to buyers who come
without agents, since you'll save money by not having to pay a
commission. But be discreet about it. It's okay to write
"Buyers without agents take 2.5% off!" on your FSBO website ads, or
on your Craigslist.org ad.
But don't put it on your signs or flyers or anywhere buyers who are
with buyers' agents can see it. Buyers' agents may stop showing your property
if they think you're encouraging their clients to ditch them.
hard to imagine buyers'
this property since it gives clients a strong incentive to
you encourage unrepresented buyers to make offers through lawyers or
my open houses, I usually ask prospective buyers if they're working with an agent. If
they're not, I hand them a flyer that explains how they can save
money by making an offer through a real estate lawyer or discount
brokerage rather than a
buyer's agent. Click here to download a copy of my flyer.
I believe, however, that's it unethical to encourage prospective
buyers to ask for rebates once they've begun working with an agent. It's not fair to the
agent to change the rules after the game has already
a seller, you'll be better off if your
buyers can get commission rebates. Buyers who receive
rebates are able to make higher down payments, which allows
them to bid more for your property.
topic: More decisions
Alden, 2008. All rights reserved.