Across the Picket Fence - Handling Real Estate Agents

Across the Picket Fence

Q: A real estate agent recently told me that only 1% of the houses sold are by for-sale-by-owner, or only 1% of the houses that are for-sale-by-owner actually sell... something like that. Do you have any statistics on this?

According to the U.S. Department of Commerce, 28.6% of all real estate transactions nationwide in 1996, were made privately (that is, without brokers).

Q: I have to relocate in a month and would like to sell my home before I leave. I'd like to sell on my own, but don't think I have the time. Do you have any information on how long it takes to sell by owner vs. a broker?

All things being equal a private seller will sell a home faster than an agent because the buyer prefers to deal directly with the owner. In our experience as magazine publishers, we have seen thousands of homeowners who have earlier had their homes listed with agents, subsequently advertise their home through (Picket Fence Preview) and sell very quickly...sometimes within a week or two! Overall, you'll sell your property TWICE as fast if you sell it by owner...provided you have effective advertising resources and information.

Many factors affect how fast a particular home sells... the price, of course; market demand for the type of home and its location; time of year, and the effectiveness of the marketing and advertising. You will be able to sell faster on your own by offering a good price and advertising aggressively. If you have to pay a commission you won't have as much (if any) negotiating room in your price and might be forced to take a significant loss in order to make a quick sale. Your best bet would be to try to sell it yourself first.

Q: Seller: I've recently been approached by a buyer's broker whose buyer is very interested in our home (they saw our ad in your magazine). The broker, however, is insisting that I agree to pay a 3% commission if her buyer purchases our home -- or she won't show it to them. Is this how buyer's brokers work? I thought the buyer paid their fee!

Although it is the buyer's responsibility to pay the buyer broker, often he or she simply does not have the extra funds to do so. When buying a property listed with a real estate company this is not an issue, as the buyer's agent is paid half of the 6% commission that the listing agency collects (hence the 3%). However, when a buyer broker is involved in a private sale, it is a different story.

The agent usually has an agreement with the buyers specifying who will pay the broker's fee in the event that she represents them in a private sale. Often buyers will indicate that they want to try and have the seller to pay the 3%, or simply that it will be negotiated between buyer and seller. In your case, it sounds like : A) the buyers specified that they only wanted to look at properties where the seller would pay the buyer's broker fee, or B) this particular buyer broker does not have a written contract with her buyers, and is nervous that she will never see her commission unless she makes an agreement with you. Also, savvy buyers often specify that they will not pay the broker a fee unless she showed the property to them. The buyer broker is may be trying to get to you before the buyers do...

If you have enough cushion in your asking price, you could agree to paying the broker's fee upfront, provided you receive a full price offer. This would save everyone valuable time if the buyer can't afford your asking price (and the agent won't encourage them to offer less if she knows she won't get her commission!) In any case, you do not need to sign anything -- nor should you -- prior to the buyers making you and offer. When they make an offer to purchase your property, who will be responsible for the broker's fee will be spelled out in the contract.

Q. Can the buyer broker collect a 6% commission -- 3% from the seller, and 3% from the buyer?

Typically, an agent only makes a maximum of 3% for a residential property when representing the buyer. While it is not illegal to ask each party for 3%, or even to ask one party for 6%, but either party would be foolish to pay this. Remember, in a private sale you are representing yourself, and are not obligated to pay the buyer's agent anything.

Seller: I'm in a hurry to sell my home, and want to reach as many prospective buyers as possible. I'd like to sell it on my own, but am afraid that I'll miss out on all the buyers out there looking with agents. Any suggestions?

First, don't underestimate the number of buyers who are looking at Private Sale properties. Even if they're working with an agent, chances are they are also looking at homes offered by owner as well. In fact, many pursue this option first, before looking at agents' listings.

To maximize your chances of reaching all prospective buyers, though, you might include "Brokers Welcome at 2%" (or whatever percent you are willing to pay) in your advertising -- and even on your sign. This tells agents that you welcome their buyers, and are willing to pay a "transactional fee" (i.e. commission) for their services. Just be sure that you have enough "cushion" in your price to cover their fee!

Seller: Our house inspection didn't go well, and now the buyers want to buy the house for less (which we've agreed to). The problem is that there's a buyer broker involved, and in the original contract the broker wrote in a dollar amount for her commission fee, rather than 3%. Now that the sale is less, isn't she entitled to less?

Lawyer: Perhaps. How is it worded in your current sales contract?

Seller: It just says the dollar amount. Basically, we just used the original contract and crossed out the old sales price, put in the new, and both initialed it. However, when my wife realized that we were paying the broker too much and brought it to her attention, she said she wouldn't renegotiate her fee and that she had a legal contract signed by us.

Lawyer: Ouch. In this instance, a new contract should have been prepared to replace the previous, now null and void, contract. By modifying the original you unwittingly set yourselves up to signing an agreement based upon all the previous terms, including the dollar fee stated for the broker's fee. Sorry.

Can the buyer broker collect a 6% commission -- 3% from the seller, and 3% from the buyer?

Again, the fee is entirely negotiable. A buyer broker may negotiate a fee from both the buyer and seller, although it is very unlikely that both would agree to pay 3%.

Seller: Help! I'm in a strange predicament. I have my house on the market with a real estate agency, but I retained the right to sell it myself also. The problem is this : My buyer found the house through Picket Fence, and came to me on his own. However, he had previously worked with a buyer broker, he contacted her for help in making the offer. This buyer broker then contacted the listing agent for my property, and now I'm staring at a contract that says I'm obligated to pay 6% commission!! What can I do? I don't want to lose this buyer!

Don't worry. According to the Vermont Real Estate Commission, you aren't obligated to pay your listing agent any commission in this case. The buyer broker should not have contacted the listing agent, and most likely simply made a mistake. Explain to your listing agent that this buyer came to you directly, and the matter should be resolved. If not, contact the Vermont Real Estate Commission, or a lawyer, for further help.

Note: The Vermont Real Estate Commission is a state regulatory agency concerning real estate matters and should not be confused with the Vermont Real Estate Association, an organization for real estate agents and brokers.

'Seller: I've recently been approached by a buyer's broker whose buyer is very interested in our home (they saw our ad on the web). The broker, however, is insisting that I agree to pay a 3% commission if her buyer purchases our home -- or she won't show it to them. Is this how buyer's brokers work? I thought the buyer paid their fee!

Can the buyer broker collect a 6% commission -- 3% from the seller, and 3% from the buyer?

Seller/ Buyer: I need to cancel my ad . .. I just tried to make an offer on a listed property, and contacted the listing agent. The agent asked right away if I had a property to sell first, and when I said yes, said the sellers wouldn't be interested in my offer if I was selling by owner, and that I should list my house with her to "improve" my chances of the sellers entertaining my offer.

The listing agent has a fidiciary responsibility to the seller to present all offers made on the property in a timely fashion. He or she cannot decide for the seller what they will or will not be interested in. It is hard to believe that the seller indicated they only want to sell their property to buyers who also list with their agent. This agent is using coercive tactics to get your listing. No doubt the sellers would be appalled to know that good offers were being turned away in this fashion.

You said you tried to make an offer. Did you actually specify the amount you would like to offer or present a deposit check to the agency (better yet, you could present the check with a signed contract to the listing agent)? If not, do so. According to a real estate lawyer, it would be illegal for the agent not to present your offer, and s/he risks losing her her real estate license not to do so.

Seller: I've recently been approached by a buyer's broker whose buyer is very interested in our home (they saw our ad in your magazine). The broker, however, is insisting that I agree to pay a 3% commission if her buyer purchases our home -- or she won't show it to them. Is this how buyer's brokers work? I thought the buyer paid their fee! -- R.L., Westford

Buyer's brokers can work a variety of ways -- it depends upon their agreement with the buyer. Typically, the buyer chooses one of three options for the broker's fee payment: 1) buyer assumes responsibility for payment 2) to be paid by the listing agent 3) to be paid as part of a "transaction fee" (in essence, this is added to the buyer's or seller's closing costs). Since the buyer often opts for the third choice, this would explain why the agent is pressing you for an agreement before showing the property.

You should know, however, that you may negotiate the amount to be paid. there is no standard commission fee. This is entirely negotiable between you and the buyer's agent. It is also important to note that a true buyer broker represents the buyer. It's a good idea to consult an attorney before signing a contract presented to your to be sure that your interests are protected.

Seller: I've had pretty good responses to my ad, and am confident that my home will sell fairly soon. The problem is we are buying our land through a real estate company, and they are putting pressure on us to list our current home with them, claiming that it will take too long to sell on our own. What should we do?

Continue to follow a successful strategy, and don't allow yourself to be coerced into something that is not in your best interest! As you know, you can often sell faster selling on you own because you can afford to be more competitive in price.

Examine the contract: Does it specify that you must have your property listed through MLS, or does it simply state that you demonstrate a "conscientious effort" to sell your property within the given timeframe? "conscientious effort" does not imply that you must list with an agent. Document how you are advertising the property, and how successful this has been for you. If the agent still insists that you must list your property, you can offer an "exclusive agency" listing, retaining the right to advertise and sell your property on your own. DO NOT ALLOW THEM THE 'EXCLUSIVE RIGHT' to sell your property -- this means you lose your right to sell by owner. If you feel you are coerced, talk to a lawyer or the State Real Estate Commission.

Buyer: What is your position on buyer's brokers? We just had a bad experience with one, and basically felt we were double-crossed at the last minute. The agent had assured us in the beginning that she would represent us as buyers, but then changed her tune when it came time to make an offer on a house, saying she would have to represent the seller in this transaction since the house was one of her agency's listings. We ended up walking away rom the deal because she wouldn't negotiate on our behalf and kept trying to get us to offer more. -- Eric G., Essex Jct.

To answer your initial question, our "position" is this: We think the concept of buyer brokering is great when you are looking at agency listed properties as long as the agent is truly watching out for your best interests. There's a built-in conflict of interest when your buyer broker/agent is showing you a property that is listed by their agency. After all, they are obligated to represent the seller also!! Try to avoid this situation if possible. Be sure you buyer broker agreement states that you may employ the services of another buyer broker if you wish to look into some of that agency's properties.

However, when looking at a property offered by owner, your best bet is to deal with the owner directly. He/she knows the most about the property and can answer your questions directly. You'll most likely get a better deal too, since neither of you will have to pay the broker's fee (even if the broker tries to get the seller to pay the fee, you can bet it will increase the amount the seller will settle for!) And if the seller simply can't, or won't, agree to pay the fee, you'll have to either come up with the funds yourself, or walk away from the deal. All of which could have been avoided if you'd dealt face to face with the seller in the first place!

Seller: Our buyer's buyer broker is insisting that we pay his 3% commission in full, and won't consider any negotiation. What really stinks is that this broker was brought in at the last minute, after we had accepted the buyer's verbal offer. Now it looks like the deal may fall apart...

Do the buyers know anything about this? Have you contacted them directly? I'm sure they would be mortified to know they risk losing the house they want, all over the buyer broker's fee. Since you showed the house to the buyers directly, you must have a means of contacting them. You and the buyer had a verbal agreement before the agent was hired, so the agent's fee was not part of that verbal agreement. It's up to the buyers to pay the broker, or renegotiate the broker's fee themselves.

Buyer: I'm using a buyer's broker to help me find a home. How do for-sale-by-owners feel about this arrangement? I've noticed that many specify "no realtors" in their classified ads. Does this apply to buyer's brokers too?

Very few - if any - sellers will turn down an interested buyer! Not everyone is aware of the role of the buyer broker however, and may think that they will have to pay a 6% commission if you buy the home. It is a good idea to contact the homeowner directly yourself first, and explain your arrangement. You will find most, if not all, may gladly welcome a tour by both of you.

Seller: How does it work with a buyer's broker, anyway?

A buyer broker represents the buyer, and acts on the buyer's behalf in negotiating the price and conditions of the sale. Technically the buyer is responsible for paying the commission to the agent (usually around 3%), although it is usually requested that this be paid by the seller in the buyer's offer.

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