UPDATE: Buyer's broker wants me to pay 7% commission... - Posted by Justin-IL

Posted by Chenel Moore on January 29, 2000 at 11:45:01:

OK, This is my take. I am an agent in MD. Relax. Enjoy the game. That’s what the broker is playing. Remember, he is counting his proceeds just as you are counting yours. He offered you a 7% commission rate with a very weak package. His buyers have only been prequalified. As you were informed that means nothing.
You need the LOAN APPROVED for any type of deal to transpire. So he is definitely playing a game with you.

You have had some very good advice, but ONE thing you cannot do. You cannot contact the buyers later on without getting involved into a little bit of a legal mess. Legally, they have a buyer’s broker representation agreement that if they decide to buy any of the houses that the broker showed them (yours included) during their contractual term, then a commission is due. Now here is where you can get yourself into trouble, although the buyers signed the agreement and legally they owe the commission, if this broker were to sue someone, the rule of thumb is to sue the person who has the money, i.e. the seller or you. Brokers don’t waste their time suing people that don’t have money. So they rarely sue buyers. Legally you can always countersue and all that good stuff, but who wants to be involved in a potential legal mess? Not us investors, that’s for sure.

As with any contract violation possibilities, I recommend that you consult with your real estate attorney over this matter if you want to cut the broker out of the agreement completely. Otherwise, I would just counteroffer as you were advised with 3% commission and NO closing assistance with the property to sell in as is condition with no home owners warranty. Legally you may or at least you should have to disclose or disclaim about the condition of the property. So you should make sure that you inform the buyers that they are buying in as is condition (just in case something pops up during a home inspection) with your disclosure or disclaimer that you have on the property.

UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by Justin-IL

Posted by Justin-IL on January 26, 2000 at 15:12:40:

This is an update to my on-going deal. A Hispanic couple who do not speak English came to my open house last Sunday.
I got a call today from their Realtor, and met him at his office. He presented me an offer for the full asking price, $80,000, less 1,000 in credits to the buyer. He wrote up the contract as him being listing and selling broker. He wants me to pay a 7% commission, which amounts to $5600. This just doesn’t seem right to me. I know he has to make his money somehow, but he has never even been inside of my house! The buyers found me, came to my open house, and had their Realtor write up the offer. So in essence, I will be “listing” my house with the Realtor right at closing so he can collect $5600. If I do decide to go this way, I’ll net around 68K, and since my purchase price is 61K, that’ll be a 7K profit.

I’m supposed to call him tonight with my answer to the offer; I’m going to tell him I’ll do the deal if he’ll take 4% commission (Thanks for the idea, Tim). If he balks at this, should I go through with this deal or say no? $5600 seems QUITE EXTREME since all he did was write up the contract, nothing else.

I could always go around him, but I’d rather not step on any toes, and I’m sure he’d kill the deal. This Realtor is an investor himself, (we talked about Robert Kiyosaki for a while.) So he might be someone good to have in my corner.

What do you think?

Justin Lee

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by TB(OK)

Posted by TB(OK) on January 27, 2000 at 13:35:10:

I had a agent do this with me and I just told them we would raise the price of the house by that much and it would not be a problem. Everybody was happy with this

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by BRnBA

Posted by BRnBA on January 27, 2000 at 24:27:42:

Justin, this is a realtors way of ‘getting in the back door’ and frankly, I don’t appreciate it. Personally, given the situation as you described it I’d tell him to take a hike. If the REALTOR brings ME a buyer I would feel different. In this case however, they were YOUR clients first. He is working for the buyer not you, plain and simple, but he’d like you to think otherwise and show your appreciation by a well placed commission. I just don’t buy it!

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by Dave T

Posted by Dave T on January 26, 2000 at 22:36:38:

I’ve had realtors try this with me as well. It seems that a FSBO is an agent’s opening to getting a listing while at the same time bringing a buyer to the table. This may work with unsophisticated sellers that may be desparate to sell their property. I always tell agents that I am the owner and acting as my own agent, but that if they bring me a buyer, I will pay the standard co-op fee (half the standard commission). Never had an agent refuse to submit an offer if they really had an interested buyer.

In your case, the buyer couple does not speak English!! By all means let the buyers be represented by their agent expecially since he must speak their language. Just tell the broker that you will give him a co-op fee but not a listing.

While the broker was not the procuring cause, since his clients attended your open house before the broker was in the picture, having a translator walk the buyers through the paperwork (immediately addressing any confusion and clearing up any misunderstandings) should be well worth the co-op fee.

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by Billm

Posted by Billm on January 26, 2000 at 19:20:05:

almost all retail buyers choose to go through a broker. Unless they’ve purchased several homes recently, the mistake potential is just too high. Since they chose to retain this broker, the broker should have some sort of “agency” agreement with the buyer… and their agreement probably states that his fee is a certain portion of the purchase price…paymen included in the price offered to seller.

The issue is- broker represents buyer- not you. you don’t 'list" with the broker. You simply acknowledge that a certain portion of the sales price includes the fee payable to the buyer’s broker.

If you can’t agree to the sales offered sales price then there simply is no deal. If you do agree, then the agreement clearly sets forth the amount due to the Buyer’s Broker, paid out of the sales proceeds. If you choose to counter the offer, you’re free to do so.

And you may suggest that as long as the buyers are being represented, you’ll choose your own broker to represent yourself… and pay him as you might mutually agree. That should set things “right”.


Thanks for the input guys… - Posted by Justin-IL

Posted by Justin-IL on January 26, 2000 at 18:02:35:

It is much appreciated. I called the Realtor back and told him that I wanted to speak with the buyers’ mortgage broker tomorrow. I’m going to find out exactly where they stand as far as FICO score, amount of downpayment, etc. If they are indeed pre-approved for the full purchase price, I’ll offer the Realtor a 2% “finders fee”. I’m going to tell him that if he wants more, he’ll have to get it from the buyers. If he balks at that, I won’t deal with him. I’ll contact the buyers and explain how their Realtor is being shady. I’ll try to strike a deal without him.

I have a showing tomorrow evening, I’ve got 3 people coming to look at it. One of them is the guy with the 468 FICO score. He wants the house bad, I can tell from talking to him.

Hopefully I can get some kind of deal signed with somebody!

Thanks everybody…


You can’t blame the fella for trying - Posted by Ron

Posted by Ron on January 26, 2000 at 16:58:43:


This is a common situation. I have sold several of my own FSBOs through buyer’s agents. The standard practice is that they get 1/2 of the normal commission (6 or 7 percent divided by two). That is what you should give him. He won’t be surprised if that is what you offer.

On the other hand, just as we try to maximize our profits, he does, too.

He may argue that he should get the full commission because he is doing the work of two realtors. In fact, the listing realtor does very little work beyond entering property info into the MLS system and (maybe) some marketing. At this stage of the sale, the large majority of the work belongs to the buyer’s agent, not the listing agent.

It is unlikely that he will force this issue.

Good luck.


Re: UPDATE: Buyer’s broker wants to take candy from a baby. - Posted by GL

Posted by GL on January 26, 2000 at 16:39:58:

Some important facts:

Unless you hired this broker and signed a contract with him, you owe him nothing. Legally, ethically, morally or any other way.

If the buyers engaged his services, they should pay him. How much? Whatever they agree to, or whatever they think his help is worth. That is between them.

If you tell him you will not pay him, and he tries to call off the deal, who cares? You know the buyers and can make a deal without him.

In fairness, if he has done a certain amount of work on the deal he deserves to get paid. But he should be paid by the buyers who sought him out and asked for his advice, and he should be paid a fee for his advice not a commission on the sale.

Grandpa Had A Saying About This - Posted by Hugh James

Posted by Hugh James on January 26, 2000 at 16:02:24:

Grandpa was a southern Illinois, small town real estate broker and auctioneer. When confronted with this kind of situation he used to say, “Son they may not be dirty but they sure are stinkin’ today.”

I know you want to work around this situation, and raising the price is a fair idea if the house will stand the appraisal. But as you point out, this is a BUYER’S broker…so shouldn’t the buyer pay him? I know these clients may not be deal savvy, but they came to your open house, talked to you–and then went to this agent for advice and to write an offer. If you wanted to pay a commission Justin, you could have listed with your own broker and steered clear of the marketing – in which case this guy would have to split the customary commission with your broker.

Bottom line: I just don’t like the smell of it. Having said that, if you can covert the bushel of lemons this agent is trying to pass your way into lemonade, then by all means do. I’ll tell you one thing though–I’d make it clear to this agent that you saw 'em first and since going to him was their choice they’ll have to be responsible for far and away the bulk of his commission either in cash or through a higher selling price. And be VERY careful in signing any agreement with this guy. I sense a shark in your midst. And don’t even let the blue sky factor (I may need him in the future) enter into your thinking. That’s classic Robert Ringer “Winning Through Intimidation” stuff.

Now go out and make a deal. America needs the business.

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by george

Posted by george on January 26, 2000 at 15:31:07:

Why not agree to the brokers 7% but make the price of the home 83k. The greedy broker will most likely convince his clients to go along.

468??? - Posted by Hugh James

Posted by Hugh James on January 27, 2000 at 07:27:02:

It’s worse than mine.

Just my two cents to add to what others have said. With a 468 he needs to understand that he’s looking almost certainly at 35% down. (Maximum 65% LTV.) If he has any open judgements a that will affect title they’ll have to be paid. (Many non-conforming lenders will waive on collections on these guys.) Fully document income and be willing to stand 12 to 14 per cent interest. If he can’t handle ALL these terms, then you’re all just joy riding around your house. Don’t even bother.

And let us know how this all turns out. I love these kinds of challenges.

Re: Thanks for the input guys… - Posted by Bill K. - FL

Posted by Bill K. - FL on January 26, 2000 at 20:44:32:

I wouldn’t pay him more than 3%. That’s all he would make if he sold a listing. Technically you don’t owe him anything. More importantly, when talking to the mortgage broker ask if the couple has submited any documentation for the loan (w-2s, tax returns,bank statements etc.) and if he has started the approval process. Pre approved in my book doesn’t mean much. We have mortgage people that say they are preapproved without even pulling credit. Or maybe just one bureau. Remember this, if the deal doesn’t close because your buyers are unable to qualify who loses the most? We have alot of problems down here with this. That is why I prefer to run all my buyers thru a mortgage professional I know especially when I will have to pay some of the buyers closing costs. Also be wary of title companies. They can add up extra costs very easily. Also I wouldn’t waste my time with the guy who has the 468 Fico unless he has a large down payment and realizes he is going to pay a high rate.

Re: UPDATE: Buyer’s broker wants to take candy from a baby. - Posted by Glenn OH

Posted by Glenn OH on January 26, 2000 at 17:03:43:

On my last home sale, I did a FSBO, but made it clear that brokers would be protected (for 1/2 commission). If you did not advertise this way, then offer him something like a 1 to 2% (commissions are negotiable by law) since he will have no advertising or showing expenses (I would explain it that way). W case, contact the buyers directly

I agree with this poster. (nt) - Posted by SusanL

Posted by SusanL on January 27, 2000 at 10:07:59:


Mine too…“dance with the one who brung you” - Posted by Ben

Posted by Ben on January 26, 2000 at 19:20:35:

I don’t know whether this double dealing is something new but I am hearing alot about it lately. A friend of mine was approached by a realtor who said he had a buyer for his property (property was not even listed) however unless my friend agreed to give him commish he would not even tell the buyer about it. My friend told him no and the realtor never informed his client of the potential deal. It is also a serious conflict of interest. As soon as you agree to give the buyer’s broker a commission he can no longer represent the buyer’s best interest.

Re: Grandpa Had A Saying About This - Posted by Jim Rayner

Posted by Jim Rayner on January 26, 2000 at 16:45:53:

I second this opinion justin don’t sell you deal or yourself short. i’d rather loan you the money interest free to get to atlanta than see you become a victim of this kind of outrageous activity by this broker. Realtors are a dime a dozen most of the time there are only a few that are of any great benefit to an an investor. Tell him to take hike or to go see the buyer they hired him.

Re: UPDATE: Buyer’s broker wants me to pay 7% commission… - Posted by Miloneco

Posted by Miloneco on January 26, 2000 at 19:09:20:

In Fairnes this fee should be split equally or if your broker is that greedy increase the sale price of the property.

Last sentence should be "worst case … " - Posted by Glenn OH

Posted by Glenn OH on January 26, 2000 at 17:05:39: