When buying a property without using a realtor as a buyers agent, can you build a discount of the buyer's agent commission into the contract?

Question

I want to buy a home, but I'm not interested in using a realtor as a buyer's agent.

I know that in MLS systems, when a realtor lists a house they specify what commission a buyer's agent will be paid. Since I am the one who is bringing a qualified buyer to the listing agent, I feel that I would should get the commission (even if it is in the form of a discount on the house).

Essentially, the seller would get the same amount of money at closing... the listing agent would get the same commission as they normally would for showing the house to someone with a buyer's agent... but I would pay less for the house.

Is there a tactful way to negotiate this with the listing realtor? For example, should I make a side contract with the realtor to pay me the commission at closing? Or perhaps I can specify in my offer that they should reduce their fees to the seller by the commission amount if the offer is accepted, in order to make my offer more attractive? Are these types of deals ever done, and if so, is there a conventional way to make it happen?

Thanks

Answer 1

I pulled it off. I did my own searching and so took a lot of load off my agent. As a result my agent agreed to work for 1% commission instead of the normal 3%. Got seller's agent to agree to take 4% instead of 6% and pay my agent the 1%. Seller and I pocketed the difference (I forget how exactly the split went).

As it happened, my agent only had to process offers on two houses (one I got outbid on and one I got to buy).

Answer 2

See if you can find a buyer's agent who will represent you at an hourly rate, and refund the balance of the buying agent's commission. As I noted in a comment, I know of at least two agencies that will do this in Chicago.

Start with a google search of something like "[MyCity] discount real estate brokers".

Answer 3

I am a realtor. When I am approached directly by a buyer, it's their choice to bring their own agent, come unrepresented, or buy through us via disclosed dual agency. With no buyer agent, my office and I get the full commission. The seller has already agreed to a fixed percent of the sale price. How does it benefit me to agree to this?

Update

From all the comments below, I'll add this. The Realtor site (country-wide) states

"A real estate professional can also agree to rebate a portion of his/her commission to a consumer. However, note that some states do have laws prohibiting the payments of rebates to unlicensed individuals, and so this would not be legal in those jurisdictions."

So far, so good. My own state, Massachusetts, says

Inducements or rebates to the seller or buyer are permissible given that the seller or buyer in the transaction is a principal and is not required to be licensed as a broker. Brokers are, by definition, agents for either the seller or buyer. Consequently, using inducements to attract listings or giving incentives such as rebates for those who purchase a listed property do not violate the prohibition on sharing valuable consideration with those who are brokering without the benefit of a license. The sellers and buyers in purchase and sale transactions are not acting for anyone else and, therefore, are not brokering. Indeed, it is their broker who acts on their behalf.

Thus, in my state, what OP asks for is legal, and a matter of whether or not either broker wishes to participate. If another member wishes to research NY laws, that would be great.

Answer 4

Well sure you can ask. You can ask for the sun, the moon, and the stars too. Whether they are willing to accommodate you depends on how the local real estate market is doing. In the US from 2007-2010, realtors were signing all sorts of deals like this.

Be realistic about what you are asking for. You want them to sell you the property for less then they are asking for it, and you want to insert yourself into the seller-realtor relationship and tell them how to split up the proceeds, when they already have a contract establishing that. On top of that, while the realtor would get the same amount at closing, they would have had to do all the work normally split between two agents (arranging papers, escrow, and title transfer, etc). Why would that be appealing to them unless you are the only interested buyer?

Answer 5

The real estate agent industry is a cartel. They seek to keep fees high even as their services are becoming less and less necessary. To that end, traditional sellers' agents will laugh at your attempt to negotiate their fee. They can do this quite simply because the industry is designed so the vast majority of people think of buyer's agents as "free" even when they are anything but free.

That being said, the only way to do what you're trying to do is to find a buyer's agent who will rebate to you a portion of the commission they receive. It is extremely extremely unlikely you'll get a seller's agent to play ball especially once they know you're interested. You can check out redfin which connects people to RE agents that rebate commissions but the buyer's cut isn't that high. Your best bet, IMO, is to contact agents in your area before you go shopping to see what kind of rebate you can negotiate with them.

A word of caution, if you look at a house without your own agent, instead asking the seller's agent to show the house they will claim procuring cause and you'll be sunk. In other words, once they claim procuring cause, you can't, later, go back and get a discount broker to get the commission to rebate to you.

Answer 6

We initially attempted to do this when we bought our house and found the listing agents "resistant" to say the least. For a variety of reasons (not just the commission), we ultimately decided to hire a buyer's agent, but we focused on buyer's agents that would pass some of their commission back to us. We used Redfin, but I think there may be others now.

One "gotcha" even on this, is that, if you're getting a mortgage, the mortgage company may also have something to say about this situation. We had to apply the agent's rebate to our closing costs, we could not take it away in cash.

Answer 7

I recently sold some property in which I structured the agreement with my realtor such that I would pay the normal 6% commission, 3% to each agent if the buyer came from another agent. If my selling agent found his own buyer, he would get 4.5% commission. As a seller it's possible to negotiate such deals before the house goes on the market.

If you are selling another property you could similarly structure such a deal where your selling agent picks up the commission from buying the new place and agrees to reduce the commission on the place that you are selling leaving you in a better position than if you bought unrepresented.

As an unrepresented buyer, you only have negotiating power insofar as the market allows. The seller's agent gains nothing from what you propose, so unless they expect trouble moving the house, waiting to see what other offers arise is certainly an option. If they are having trouble moving the house then just reduce your offer and see what happens.

When I pick a selling price the main factor is that I want to attract enough buyers that I can sell it quickly. Interest payments do add up. Selling a house involves more than just listing it for sale. I have a good relationship with my agent and have done multiple deals with him. I am willing to pay him because I believe it benefits me to do so. I wouldn't risk that relationship just to close a deal with an unrepresented buyer. That unrepresented buyer would allow for a reduced commission to 4.5% though in the contract I mentioned above.

Answer 8

The way to do this is to make your best offer and let the seller and his/her agent do the negotiation between them. If you try to build in the discount in your offer, you will come across as cheap.

Answer 9

You said: "should I make a side contract with the realtor to pay me the commission at closing?"

I would imagine that in most (if not all) states, that is illegal. This is because selling real estate is an activity that requires passing an exam on real estate laws and obtaining a state-issued license. You are not "bringing a buyer" because you are not an agent.

If you decide to go directly to the Realtor that has the listing, there is a possibility that the agent might agree to lowering their commission in order to make the sale. However, the agent is entitled to both sides of the commission because they bear all the administrative and marketing costs of the transaction.

The listing agent might choose to enter into a "dual agency" agreement where they would have to fairly represent both sides, but they cannot reveal information that would be helpful to you as a buyer (e.g., why the seller is choosing to sell, other material facts about the property that are not public knowledge, etc.). If there is no written "dual agency" agreement, then the listing agent ONLY represents the seller.

In either scenario, you lose the benefit of a full fiduciary relationship with an agent. So if you choose to deal directly with the listing agent, you are making one of the biggest purchases of your lifetime WITHOUT the benefit of professional representation. Do you really want that?

Put another way: would you use your spouse's attorney in a divorce so that you could save money?

Answer 10

You should consider using a lawyer as your agent. We once talked to one who was willing to act as our agent for a fixed fee. Not all attorneys can do it where we live, but there are plenty that can. We ended up going another route, but since then we have found a seller's agent that charges us a fixed fee of one thousand dollars (a great deal for us). We are using her again right now.

It's all about the contract. Whatever you can legally negotiate is possible - which is yet another reason to consider finding a real estate attorney.

Answer 11

There is no reason to try to build a commission discount into the contract when you are not represented by a buyer's agent.

Make your offer is 3% lower than it would be otherwise. Then the seller's agent becomes your best ally. He knows he'll get the whole commission, so it's in his best interest to make the deal happen. Even if he believes another unrepresented buyer will come along, the difference in his commission will be minuscule and probably not worth his time.

If you get the price you offered, does it matter whose pocket the discount came out of?

On the other hand, if you enter negotiations that stall at an amount less than half of the commission, then mention a discounted commission. At that point the deal is so close that the seller and agent may be able to bridge the gap themselves.

Answer 12

My dad, an attorney, does this all the time. He makes offers for properties with the proviso that all real estate commissions are negotiated, and paid by, the seller. In California, agents must present all offers to the seller. It never seems to be an issue, at least for him. Of course, he presents himself as a substantial and competent buyer.

Answer 13

I don't see any incentive for the agent to do this. I don't think it's a useful argument.

Answer 14

This is a moot point. Its easier to just negotiate a lower price, whether agents are involved or not. Ultimately it still all boils down to what you and the seller agree on. If the seller is unwilling to negotiate through offers to buy then its probably better to walk away.