Quote:
Originally Posted by schoy
Given the current buyer's market, it seems to me that buyers should be able to negotiate more creative buyer's agent commission structures than merely 1/2 of the total sales commission (historically 1/2 of 6%, down to 1/2 of 3% in recent years). The typical structure doesn't incentivize the buyer's agent to negotiate the purchase price down; rather it incentivizes the buyer's agent to convince the buyer to pay *more* than what they expected (i.e. close the sale, get more $). Maybe something like this could be more of a market commission structure for buyer's agents (using fake numbers):
Assume the commission structure is 3% total, with 1/2 going to buyer's agent. List price is $500,000. So, under the typical structure, if sale is at list, then buyer's agent would get $7,500. But we could structure the compensation differently:
If the sales price equals or exceeds $490,000, then Buyer splits 1/2 of Buyer's agent's commission (so if the sale is at list, then buyer's agent would keep $3,750 and give the other $3,750 back to the Buyer).
For every $1,000 that the sales price is below $490,000, then Buyer's refund is 1/2 of the Buyer's agent's commission, less $75. So if the sale is at $475,000, then Buyer's refund is (half of $7,125) - $1,125 = $2,437.50. Agent keeps $4,687.50. If the refund becomes a negative number, then Buyer pays that amount as a bonus. So if the sale is at $425,000, then Buyer's refund is (half of $6,375) - $4,875 = -$1,687.50. So Buyer would pay the agent an additional $1,687.50.
Seems like this would make the buyer's agent's interests align with the buyer.  |
It's a good idea, but it doesn't work. Also agents that work on straight commission and most do are not paid for their time, gas, or other expenses and working with buyers is more difficult than being a listing agent. And they pay a percentage of their commission to their broker. So for a 100,000 dollar house at 3% you usually net $ 1,050 not $3,000.
1) Some sellers are not willing to budge on price at all. Take it or leave it.
2) I have negotiated down 75K+ for certain properties... More expensive homes can be negotiated for even more... The list price is usually higher with the expectation of negotiations.
3) Houses in the 25k-250k range usually don't have much much wiggle room, meaning you would be lucky to get $1000 off. In some areas this might be different, but not in NJ.
4) In this "buyer's market," buyers are already low balling sellers and the buyer's agent are not always allowed to help negotiate. It's usually the detail that matter and factor into negotiations that make a good buyer's agent...
5) 100,000 vs 125,000 commission for a buyers agent is a difference of $262.5 in other words $1050 vs $1,312. So agents would prefer that the deal go through and are not trying to get a higher price its just not worth it for a few hundred dollars...
6) for more expensive properties the commission is generally lower, so anything above 400,000.
7) There is also the occasional bidding war where you pay more than the asking price.
Again PM me if you have questions and I totally agree that most agents are completely incompetent. I was a buyer before I picked up my license to handle my own purchase, because half of the agents have no idea what they are doing...