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Old 04-23-2015, 04:39 AM   #1
Trojan97
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Default Realtor wants additional commission?

I've never had to oversee a sale of my home so I'm curious how commonplace it is for a realtor to be asking for additional commission in the conditional offer.

Further info...
My mom lives in the prairies and has put her house up for sale in anticipation of moving back west in the next six months or so. She is on a very flexible timeline and has acquired a 3% realtor to handle the sale of her home to save herself some money since she can afford to be a bit patient.

Long story short, house has been listed at 399,999 which is quite fair given the quality of available homes currently in her marketplace and what her home has been appraised at. The market is obviously down but the same house last year, one block over sold for $418,000. In my moms case, the initial offer came in at 375k which was seen as a bit of an insult. That offer was countered with 395,500, with 395 flat being the lowest by mom will go.

This is where my gears start to grind. The other party has countered at 390,000 but new offer calls for an additional point of commission for the buyers realtor (so he'll make 2.5% on this sale instead of 1.5%). My mom has countered with two offers. 1) 395,000 and the standard 1.5% commission, 2) 399,000 and the realtor can have his 2.5% (interested party is also using him to sell their current home).

The realtor for the other party generally makes the standard 5-6% commission and is apparently known in the area for telling his clients "he is worth it" when he negotiates these added percentages on his commission when he is selling homes involving 3% sellers. In our case, my mom is prepared to lose the sale rather than be pressed by this guy.

This sudden request for an additional percentage point with this 390k offer screams money grab to me and I find it rather greasy that this realtor has added it to the offer when there was nothing about an increased commission in the initial 375k offer. Like I said, it has pissed off my mom enough where she's already said she will refuse to negotiate with anyone represented by this guy in the future should this deal fall thru. I thought that was maybe a bit dramatic on her part but I have since found a realtor review site that has multiple complaints about the guy for this exact same reason.

So I ask, how common is it for a buyers realtor to ask for additional commission from the seller of the home in a situation like this? It's certainly left us with a bad taste in our mouth, but we are also admittedly naive towards the inner workings of the business.

Last edited by Trojan97; 04-23-2015 at 04:42 AM.
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Old 04-23-2015, 08:38 AM   #2
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When we purchased our home the seller was using a discount brokerage and when we had put in our offer to purchase I made sure to have my realtor bump up his commission as a part of the offer.
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Old 04-23-2015, 08:59 AM   #3
Travis Munroe
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It is quite common and IMO one of the major distractions of these discount brokerages.
If the timeline you state is correct, it was done wrong (again IMO)
I just had a case like this and explained in advance to the buyer that I show them every single property whether I am being offered a penny or 3.5/1.5. What I do ask is that before submitting an offer, I get permission to ask for the same commission I receive on over 90% of my deals.
The client had absolutely no problem with it and had done her own research on the different types of representation you can get as a buyer.
We ended up writing on a property that was a discount brokerage and I went after the full commission before any offer was brought to the table. This allows me to make it clear that the commission is irrelevant to negotiations and I do not want to hear it brought up during negotiations (as the OP's realtor did giving different options).
The seller agreed, we submit our offer and the seller was willing to budge 0.25% off their purchase price. We laughed it off knowing they will never get that and moved on.

Technically speaking, the buyer brokerage document that is to be signed before the realtor and client go out will outline what that realtor is making in commissions and if there is a short fall, it is the responsibility of the buyer. I have my own views on this document and I will keep it to myself.
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Old 04-23-2015, 09:15 AM   #4
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Quote:
Originally Posted by Trojan97 View Post
I've never had to oversee a sale of my home so I'm curious how commonplace it is for a realtor to be asking for additional commission in the conditional offer.

Further info...
My mom lives in the prairies and has put her house up for sale in anticipation of moving back west in the next six months or so. She is on a very flexible timeline and has acquired a 3% realtor to handle the sale of her home to save herself some money since she can afford to be a bit patient.

Long story short, house has been listed at 399,999 which is quite fair given the quality of available homes currently in her marketplace and what her home has been appraised at. The market is obviously down but the same house last year, one block over sold for $418,000. In my moms case, the initial offer came in at 375k which was seen as a bit of an insult. That offer was countered with 395,500, with 395 flat being the lowest by mom will go.

This is where my gears start to grind. The other party has countered at 390,000 but new offer calls for an additional point of commission for the buyers realtor (so he'll make 2.5% on this sale instead of 1.5%). My mom has countered with two offers. 1) 395,000 and the standard 1.5% commission, 2) 399,000 and the realtor can have his 2.5% (interested party is also using him to sell their current home).

The realtor for the other party generally makes the standard 5-6% commission and is apparently known in the area for telling his clients "he is worth it" when he negotiates these added percentages on his commission when he is selling homes involving 3% sellers. In our case, my mom is prepared to lose the sale rather than be pressed by this guy.

This sudden request for an additional percentage point with this 390k offer screams money grab to me and I find it rather greasy that this realtor has added it to the offer when there was nothing about an increased commission in the initial 375k offer. Like I said, it has pissed off my mom enough where she's already said she will refuse to negotiate with anyone represented by this guy in the future should this deal fall thru. I thought that was maybe a bit dramatic on her part but I have since found a realtor review site that has multiple complaints about the guy for this exact same reason.

So I ask, how common is it for a buyers realtor to ask for additional commission from the seller of the home in a situation like this? It's certainly left us with a bad taste in our mouth, but we are also admittedly naive towards the inner workings of the business.
I think you and your mom are getting way too butt-hurt. Her counter offer seems reasonable, but their initial offer was reasonable, too. Coming in at 6% below asking is not a low ball. I think they came in too high, personally. I would have been come in below that if I was the buyer. The fact that your mom is only willing to come down 1% means - to me - she is a bad negotiator and her asking price is too low relative to what she's will to give up the place for.

In this market she is crazy to not expect people to come in below asking. The buyers gave her a very serious offer, but she's acting like it's amateur hour. I don't blame the realtor for asking for more commission. I suspect your mom will be tough/time-consuming/annoying to deal with. I did like her counter offer, though. Let the buyers pay their realtor; I don't see any reason why she should (from her perspective). But she really needs to take her emotions out of this and just make the deal or not based on numbers. Hurt feelings over a sane offer is immature.
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Old 04-23-2015, 10:07 AM   #5
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The whole concept of the buyers real estate agent being "free" to the buyer is one of the systemic problems with the real estate model.

Really the buyer should be responsible for the fee to their agent and the seller is responsible for the their agent.

Then everyone knows the costs and what kind of representation they want to pay for.
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Old 04-23-2015, 11:36 AM   #6
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In the grand scheme of things, it balances out over the course of a lifetime (in most cases).
Chances are the seller is buying a home after and won't pay.

Although it shouldnt be the case, most buyers save up for their DP and it would be a huge financial burden to have to pay a commission.
A seller typically has equity to pay commissions.

When the seller sells, they need to go buy (again, in most cases) so they can look at is as if the commission they paid the buyers agent on their sale, this commission is simply their buyers agents commission which is paid in advance. Obviously that is not how it is outlined but it could be viewed that way.
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Old 04-23-2015, 11:47 AM   #7
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Quote:
Originally Posted by Realtor 1 View Post
In the grand scheme of things, it balances out over the course of a lifetime (in most cases).
Chances are the seller is buying a home after and won't pay.

Although it shouldnt be the case, most buyers save up for their DP and it would be a huge financial burden to have to pay a commission.
A seller typically has equity to pay commissions.

When the seller sells, they need to go buy (again, in most cases) so they can look at is as if the commission they paid the buyers agent on their sale, this commission is simply their buyers agents commission which is paid in advance. Obviously that is not how it is outlined but it could be viewed that way.
That's the sales pitch of it. But the problem is that the current system leaves the buyer unable to make a choice between paying for the services of a Realator or not. The cost of using is built in.

One person could be fine with just paying for a key service to view homes while others would want full market analysis and arrangement for bank and home inspections. The current system does not allow for this. Also if a buyer chooses not to buy effectively wasting the realtors time the Realator (and all other buyers and sellers) pay for this.
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Old 04-23-2015, 12:31 PM   #8
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I just sold using 2% (very good experience) and the sellers realtor requested standard commission as part of the initial offer. Our realtor suggested accepting the commission agreement and focus on getting the best price possible. It worked out very well.

I do understand the OP's issue with having the commission agreement added in after the first offer, but ultimately everything is up for negotiation.

And Realtor1, I do respect your professional commitment to show any property regardless of brokerage. However trying to disconnect commission from the rest of the negotiation is a nice thought, but unrealistic. If the market was back to being a sellers market, then you taking $5000 out of my pocket is going to be an issue, like it or not. In the current market however, there is more negotiation room as a buyer usually and along with that is more leverage to get full commission. But there is no question that a buyer would factor the commission schedule into the price negotiation from their end. Though I do understand why you would want to frame it as such to your buying clients.

I don't mean to be harsh in any way, and also completely understand why any realtor would prefer a higher commission. I like getting paid more too.

Last edited by Ryan Coke; 04-23-2015 at 12:34 PM.
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Old 04-23-2015, 01:47 PM   #9
Trojan97
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Thanks to all for their responses! as I said, I'm still in my first property and have yet to have to through the process of selling so this has been interesting to follow and has been eye opening. The opinions are much appreciated!
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