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Negotiate realtor commission? (Cinco Ranch)


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I'm thinking of getting a realtor to work with in Cinco Ranch as a buyer's agent (I have no house to sell).  How possible is it to negotiate a giveback of some of the standard 3% commission from such an agent,  how would I go about negotiating it (right off the bat or what?),  and how much giveback do you think I could get?  I'm paying cash,  so I'm saving the realtor a lot of time and work.  Any constructive comments would be very much appreciated.

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Thanks for your response,  Diggity.  Wouldn't paying cash 1) save the realtor from worrying if the financing is going to fall through (I think I've seen several houses come back on the market because of this) and 2) reduce the amount of paperwork required at closing?  Maybe time (for all concerned) could be saved at other points throughout the process, too.

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My experience has been that a good buyers agent is worth the 3% that the seller is going to pay. I guess you could get some agents that are hurting to give up some but I would think that most are not going to spend as much time helping you if they're not going to get the commission they are accustomed to. I guess that could work if you are going to do most of the legwork and just need the agent to help close the deal.

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An alternative to an agent, is to use a real estate attorney.  You pay the lawyer his hourly rate to get your deal done - no real estate agent needed.  However, depending on what that 3% equals in dollars, it could be less expensive to use an agent... also - many people use an attorney to review paperwork anyways since the agents clearly state that they aren't lawyers, and if anything goes wrong they aren't responsible.

 

YMMV

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1) save the realtor from worrying if the financing is going to fall through (I think I've seen several houses come back on the market because of this) and 2) reduce the amount of paperwork required at closing?  Maybe time (for all concerned) could be saved at other points throughout the process, too.

 

A good buyer's agent is going to make sure any client he works with is pre-qualified at the beginning of the process so neither party is wasting the other's time.  Does that mean contracts never fall out due to financing problems?  No...but it's very rare if you're working with qualified buyer's and good lenders.

 

As far as less paperwork at closing, yes the closing will take less time but we're talking about maybe an hour difference.  I think my time is valuable but I wouldn't put it at thousands of dollars an hour! :)

 

Anyway, like I said, anything is negotiable.  Some agents will work for less and other's won't.  It mainly depends on how busy they are.  In my experience, having buyer's in a strong seller's market is very tough because there is low inventory and a lot of competition so I wouldn't reduce my commission.

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  • 2 weeks later...

As an agent myself, I am very offended when I read entries such as this! Asking the agent to give up a portion of the commission on the buying end...really?! Localtraveler, what line of work are you in and how would you feel if a client asked you for a discount on your services? And you are not even paying the 3%!!

As far as the cash deal is concerned, I second diggity's opinion....a cash deal does not save the agent much time at closing, nor does it have much impact on the financing end of things giving that most competent and experienced agents make sure that their clients are prequalfied and in a position to purchase a home at the start of their interaction.

Localtraveler, you get what you pay for so don't whine if you find an agent to give you a "kick-back" and it turns out that you get "discounted" services in return!

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As an agent myself, I am very offended when I read entries such as this! Asking the agent to give up a portion of the commission on the buying end...really?

 

Typical entitled attitude of a real estate agent - they get pissy when they have to actually work for their commission...

 

The truth of the matter is that buying and selling homes is a business like any other... everything is negotiable.

 

Clearly "dane" won't do it (whoever "dane" is) - so they won't get your business... this agent just wants to lay back and go after the low hanging fruit.... also typical of real estate agent behavior - they're a lazy bunch.

 

The traditional commission schedule for residential real estate is silly... its typically 6% of the transaction - typically split between the selling and buying agent...and taken out of the final price of the home.... and they try this typical tactic of "oh well, the seller is paying the fee" which is absolutely BS since the money is all coming from the buyer... this is the old-school "pass the fee onto the consumer" tactic.

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Richardyoo: I'm not going to waste my time engaging in a pointless banter in response to your latest entry BUT I will say this; you should be ashamed of calling agents "entitled" and "lazy" simply because we feel it's right that we get paid an industry standard fee for services rendered!

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Big words from "anonymous dane"

 

But anonymous dane is right - as he pointed out, it is the *entire* residential real estate industry...  which happens to include the lazy and entitled agents...

 

I have met agents who are exceptions, but they are very very rare... and those agents have always adjusted their fees since they had the business acumen to understand the deal for what it is, instead of whining about how they "deserve" their "industry standard" fee or whatever they think they're entitled to.

 

Bottom line is that the "industry standard 6%" fee isn't paid by the seller - it may be agreed upon by the seller, but its ultimately paid for by the buyer... so negotiating those fees is totally reasonable... and since it can save you a bundle, its totally worth doing.... Last time I looked, even 1% off of the price of a house is a lot of money!  We live in a capitalistic society, so if one agent won't do it, there will be another who will.... keep looking, or just use a lawyer.

 

Using a lawyer also has the upside of making the deal completely transparent and completely unbiased... and unemotional... they don't care if you buy a house or not... This is also important - if you use a realtor to buy a house, that realtor is motivated to get you to buy a house - any house - as quickly as possible... since they only get paid if they get you to buy a house.  Since they (typically) get compensated on a percentage basis, they only get the best compensation when they get you to buy the most expensive house you can buy as quickly as possible. Ultimately, they are just sales people.  So their objective is to get you to literally fall in love with a house so you will pay top dollar for that house - this is straight out of econ 101. Lawyers, on the other hand are required to do whats best for their clients - and often times that means not buying a house at all.

 

This is the same exact reason why CarMAX has completely changed the used car sales process since their sales people are compensated a flat rate no matter what car you buy... so they don't care if you buy a Honda or a Mercedes - so long as you're a happy carmax customer... carmax has really made car buying (and selling) both fair and simple. this is not true for real estate agents - you interests are not aligned with their interests.

 

Edited by richardyoo
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At least lawyers have an ethics and other codes to go by! :D

 

A lawyer can complete any real estate transaction, but a real estate agent can't practice law nor do they typically have the negotiating acumen of your typical attorney - that should tell you something.

 

And attorneys require more education than a GED and some weekend vocational classes that any 18 year old can take... the bar to be a residential real estate agent is pretty low - or none existent really. The other night I had a waitress at a diner explain to me how she was planning on going into real estate because it was "good money and pretty easy"! oh boy.  :blink:

 

The real shame is that the excellent real estate agents I have found don't get nearly the recognition nor compensation they deserve because all these sleazy and sales oriented agents take the lime-light with their "highest producing agent" awards.

 

The real estate game is what it is... and its not about the buyer nor seller - they're just pawns.

Edited by richardyoo
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I am the only one in this thread who has offered any sort of constructive help in reducing this guys fees. All you anonymous real estate agents have done is try to convince this guy that your industry standard fees are some how justified.

 

Sadly, it is apparent that you have no idea what an internet troll really is, Miss "diggity"

Edited by richardyoo
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Richard I think you are onto something here. I suggest you get your sales license (only 180 classroom hours; they'll fly by) and offer sales services for, say 4%. You will have a lot of volume. And you will go broke, as have all the other so-called discounters. 

 

You can also try selling a cappuccino, or burgers for 99 cents. Over a long time, the costs and benefits of running any business get worked out, and for property in America under a million $, its around 6%. 

 

There are folks who can handle a FSBO or alternate online listing, that's fine. There is room for everybody. But the mainstream family doesn't tune their car any more, or roof their house, or grown their own food. 

 

I'm not a real estate agent.  BTW HAIF tends to have a lot of not-real-name posters. Its not considered a sin at this site. 

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OK, I'll bite.

 

 

I am the only one in this thread who has offered any sort of constructive help in reducing this guys fees

 

I guess you missed the part at the very beginning of the thread where I told him to ask the agent.  It's not really that tough.  

 

Also, your "constructive help" really isn't that constructive.  A real estate attorney can provide some valuable services, but they are mostly complimentary to the services an agent provides.  They aren't going to have knowledge of that particular market area, they won't be able to show you the homes, they won't be able to give you comparable sales and the listing agent won't even be obliged to pay them.

 

The idea that they may or may not have taken some negotiations class back in law school and this will somehow trump an experienced real estate agent is naive. You have to have current local knowledge of your particular market to be effective.  Attorneys aren't going to have that, unless they also happen to be brokers and happen to work that area consistently.

 

I won't deny there are a lot of crappy agents out there, but there are a lot of crappy lawyers too.  Does that mean I think lawyers are completely expendable?  No, I just seek out the ones I know to be valuable.

 

To suggest that any old real estate attorney has the tools and/or experience to replace an agent is inaccurate.  I would imagine if you asked a good real estate attorney, they would tell you the same thing.

 

As far as being "anonymous", I think my company name, which includes my last name, is a pretty decent amount of information.  I'm certainly not trying to hide behind my user name.

Edited by diggity
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First off, your implication that 180 hours of class is somehow some sort of challenge is silly... that equates to about half of a full-time college semester of class time. If anything, it reinforces that real estate agents have formal less training than practically any other vocational school you see ads for during the day on television.

 

Suggesting that "you'll go broke" lowering transaction fees by using examples of past failures is also non-sense... over 50% of all restaurant fail every year - more so if you're male... does that mean that its 100% certain that the diner you open will fail?  Absolutely not - this is less about the structure, and more about the operator. The demand is clearly there, its up to the operator to figure out how to make it work.

 

Don't think that I haven't considered getting a real estate license - a group of my buddies had already considered jumping into classes over at Champion until we discovered that it cost just a few hundred dollars to get a real estate deal done through a lawyer.

 

I agree that there's room for everybody - the point of this thread was to figure out way to lower the transactional fees to this guy's deal. But I don't think that using a lawyer to do the deal is anything like building your own house or fixing their own car.

 

Lastly, I also agree that its not a requirement to state your name online... but to me, it just shows the cowardliness in their statements online - its typical for people to have a big bark online, but only when they get to hide behind anonymity.

 

 

 

 

Edited by richardyoo
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 A real estate attorney can provide some valuable services, but they are mostly complimentary to the services an agent provides.  They aren't going to have knowledge of that particular market area, they won't be able to show you the homes, they won't be able to give you comparable sales and the listing agent won't even be obliged to pay them.

This doesn't change the fact that you have no fiduciary responsibility to your client - in fact, you'd never put that you do in writing - therefore you're not looking out for the best interest of your client. Your objective is to get a deal done - any deal - its the only way you get paid. You are financially incentivized to get your client to complete a transaction - thats why your compensation is called "commission". Your job is ultimately about salesmanship, regardless if you are a seller or buyers agent.

 

 

 

The idea that they may or may not have taken some negotiations class back in law school and this will somehow trump an experienced real estate agent is naive.

It is not naive - real estate agents actively try to get their clients to "fall in love" or "imagine living" in houses... there are books on this subject for real estate agents - this is a total negotiating no-no... and its something that will kill the buyers ability to get a good deal on a property since the buyer will stop thinking rationally and just start thinking emotionally... this emotional state is the real estate money-maker. Good negotiating discipline will get the client to chill out - something that lawyers advise all the time, and something a real estate agent would never quench since they want to get the deal done.

 

 

As far as being "anonymous", I think my company name, which includes my last name, is a pretty decent amount of information.

Such a passive-aggressive comment.

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You really seem to hate real estate agents, Richard. What is mysterious about Rose Team Realty? I'm sure you could find plenty of information just off of that. There was nothing whatsoever passive aggressive about that statement.

 

 

Good negotiating discipline will get the client to chill out - something that lawyers advise all the time, and something a real estate agent would never quench since they want to get the deal done.

 

Ahhh, but you said you considered becoming a real estate agent. So you considered becoming a person who just wants to get a deal done and doesn't care about his client? Why would you consider becoming something so contemptible? Or perhaps some agents actually care about their clients and your generalizations are a little too hasty and absolutist.

Edited by kylejack
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Richard, what you are missing here is that over the long term, when all factors are considered, it takes a dedicated professional to get through the details most real estate deals, and the yield to the industry, in order not to lose that dedication, is 6%. You may believe that the internet might change that cost regime, and perhaps it will someday. 

 

Its possible that you have seen a deal go through where the agent did very little work on that particular deal, and collected their commission, and you figured that they were making around $400/ hr, however that deal paid for all of the looky-loos who wasted the agent's time, checking out dozens of properties, failing to disclose credit problems etc.  Its commission sales. 

 

It might look like a lawyer could handle a relatively simple transaction, however many deals have contingencies (other house has to sell first etc), credit problems, estate stuff, and if the lawyer is billing an hourly fee and not a fixed one, the lawyer might not be a better deal. And if the deal craters, the lawyer will still have to be paid.  

 

An old agent saying is, "The work begins when the purchase contract is signed."

 

The FSBO rationale for the seller is, "I'm going to pocket the commission" or maybe "split the commission with the buyer." But how many people know how to open title, line up the mortgage, inspections, bids for repairs, and negotiate with the other party face to face? 

 

There is tremendous turnover in agents. The last bloodletting was after the 2008 collapse. 6% looks like a lot of money, until you factor in splits, and the fact that your savings from the good times need to tide you over the bad. Real estate is one of those 80/20 businesses. 80% of the volume is handled by 20% of the agents. Are the big producers overpaid? Get your license and take them on.

 

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I think you (Richard) have a valid point, that most agents are not looking out for the buyer. Even "buyer's agents" are really subbed to the listing agent. 

 

I'm not sure that a lawyer is the solution here, though. Is the lawyer going to drive around with a client all day Saturday looking at places? How is the lawyer going to know what is right for the client?

 

The true buyer's agent is still a theoretical proposition on most deals. All sorts of methods have been tried. Hourly fees. "Buyers agent" agreements. In California they have been wrestling with this situation for years. 

 

If you can come up with a workable model that makes money and looks out for the buyer, you will go down in history. You can call it "Yoo is Working for YOU!"  

 

More power to you, man. I don't like the pressure sales aspect either. 

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This doesn't change the fact that you have no fiduciary responsibility to your client - in fact, you'd never put that you do in writing - therefore you're not looking out for the best interest of your client.

 

I'm not sure where you are getting that.  Of course we have a fiduciary duty to our client.  That's one of the first things they talk about in those Champions courses you skipped.

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Its interesting - I've never seen the word "fiduciary" in writing in any sort of buyer's agent contract I've ever seen in Houston.

 

you can read Chapter 2 of this TREC course.  It's pretty fascinating stuff! 

 

http://www.cetc-net.com/tests/9elec/ethicsupdate3.0.pdf

 

This site takes some information from the TREC courses as well.  It spells things out a bit more:

 

http://www.exclusivebuyersagents.com/duties.htm

 

The "Information About Brokerage Services" form also does a good job of stating our duties to the client. 

Edited by diggity
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you can read Chapter 2 of this TREC course.  

I've actually seen this stuff... but it still isn't defined as a explicit fiduciary duty in any of the contracts - As in "I have a fiduciary duty to you." It always dances around it - which is suspicious. I mean, if it really is a fiduciary duty, the contract should just say it.

If you read this example of it

When a fiduciary duty is imposed, equity requires a different, arguably stricter, standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without knowledge and consent. A fiduciary ideally would not have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd" and that "the distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty."

So I suspect that a real estate agent can't truly act in fiduciary capacity since there's a conflict in the way they are compensated - and in turn, the verbiage is omitted from any contracts - otherwise, it would be in there - but its not since they are not actually acting in a fiduciary role. (regardless of what the training material says or what a particular agent "professionally" strives for).

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From http://dictionary.law.com/Default.aspx?selected=744

fiduciary

1) n. from the Latin fiducia, meaning "trust," a person (or a business like a bank or stock brokerage) who has the power and obligation to act for another (often called the beneficiary) under circumstances which require total trust, good faith and honesty. The most common is a trustee of a trust, but fiduciaries can include business advisers, attorneys, guardians, administrators of estates, real estate agents, bankers, stockbrokers, title companies or anyone who undertakes to assist someone who places complete confidence and trust in that person or company. Characteristically, the fiduciary has greater knowledge and expertise about the matters being handled. A fiduciary is held to a standard of conduct and trust above that of a stranger or of a casual business person. He/she/it must avoid "self-dealing" or "conflicts of interests" in which the potential benefit to the fiduciary is in conflict with what is best for the person who trusts him/her/it. For example, a stockbroker must consider the best investment for the client and not buy or sell on the basis of what brings him/her the highest commission. While a fiduciary and the beneficiary may join together in a business venture or a purchase of property, the best interest of the beneficiary must be primary, and absolute candor is required of the fiduciary. 2) adj. defining a situation or relationship in which a person is acting as a fiduciary for another.

Although it specifically mentions real estate agents as an example of someone in a fiduciary relationship, further down it states that the fiduciary must avoid self-dealing and conflicts of interest. If a buyers agent does the negotiating on the purchase price of a piece of real estate, he must make a good faith effort to get the lowest price for the property and likewise the sellers agent must make a good faith effort to get the highest price. In this case, though, the buyers agent has a personal interest in getting the deal done at the highest acceptable price as that will maximize his commission. It doesn't really matter what the commission % is (the original topic), as the higher the purchase price the higher the commission. The only way around this, to force those agents who might not be willing to put forth a good faith effort contrary to their own interests, is to find an agent who will work for a flat fee.

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Every time we've bought a house, our agent made it perfectly clear (on documents we had to sign) that he/she was being compensated by the seller, and that to earn that compensation, they had to act in the seller's best interest. The only way you can ensure the agent acts on your behalf is to pay them yourself. That may have changed since our last purchase in 2003.

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Every time we've bought a house, our agent made it perfectly clear (on documents we had to sign) that he/she was being compensated by the seller, and that to earn that compensation, they had to act in the seller's best interest. The only way you can ensure the agent acts on your behalf is to pay them yourself. That may have changed since our last purchase in 2003.

 

sounds like your agent was acting as a sub agent to the seller.  That was more common way back in the day but I doubt it was the case in 2003.

 

Again, read the Information About Brokerage Services.  It spells things out pretty clearly.

 

 

 

IF THE BROKER REPRESENTS THE BUYER:
The broker becomes the buyer’s agent by entering 
into an agreement to represent the buyer, usually 
through a written buyer representation agreement. A 
buyer’s agent can assist the owner but does not 
represent the owner and must place the interests of 
the buyer first. The owner should not tell a buyer’s 
agent anything the owner would not want the buyer 
to know because a buyer’s agent must disclose to the 
buyer any material information known to the agent.

 

 

https://www.trec.state.tx.us/pdf/contracts/op-k.pdf

Edited by diggity
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Each time that I have purchased a house, the agent has been extremely clear to me about the financial relationship and open about how their compensation is structured and that's with several different agents in different cities. A lawyer is an option, but I would recommend a reputable agent over a lawyer, because a reputable agent has a higher degree of knowledge in the subject area than a lawyer does as well as better knowledge of market conditions.

In terms of negotiating commission, I would recommend asking the question, but in fairness to the agent, I would ask the question early in the relationship. The answer is probably going to depend on the level of work that you are asking the agent to do. If you have a property identified and negotiated, you may be able to reduce the fee. If you're asking the agent to take you around to multiple areas and visit a large number of houses with prolonged negotiation and multiple offers, then it's probably not reasonable to ask for a reduction.

You're going to get good agents and bad agents, just like any other profession so I'd try to get a referral from someone you trust. A good reputation and the subsequent referrals are a great incentive for any agent and good ones will make sure that they maintain it.

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  • 3 weeks later...

Someone mentioned it above, but the internet has really changed this relationship.  You no longer need to look at 25 or more houses in person to find the one you want, because they are all online and you can look at great pictures of them.  There used to be real value added for a buyer's agent to pick good houses to show potential buyers, describe neighborhoods and schools, etc.  --  none of that is needed anymore.  Sure the buyer's agent may still have to show a few houses, but the value added by the buyer's agent has gone down significantly.  

 

What I would suggest doing is asking for a sliding scale commission.  If the agent shows you fewer than five houses, then he/she gets 1.5%; if the agent shows you 5 to 10, then he/she gets 2.0%; etc.   Obviously you can pick the number of showings and the percentages, but you can negotiate on a fair price.  Several friends have negotiated such deals with their agents recently.  

 

Good luck.  

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Someone mentioned it above, but the internet has really changed this relationship. You no longer need to look at 25 or more houses in person to find the one you want, because they are all online and you can look at great pictures of them. There used to be real value added for a buyer's agent to pick good houses to show potential buyers, describe neighborhoods and schools, etc. -- none of that is needed anymore. Sure the buyer's agent may still have to show a few houses, but the value added by the buyer's agent has gone down significantly.

We did it more or less this way when we moved to Houston from Atlanta back in 1999. We researched online while we were prepping for the move and at the top of my to-see list was a nice little house, about 2400 sqft, right on the fairway at a golf course, listed at $100k. I couldn't believe the deals to be had in Houston (housing in Atlanta at the time was much more expensive than Houston and probably still is). We found an agent and insisted he take us to see it. He wasn't sure that's what we should look at but took us anyway. Turned out it was in Innwood Forest and what we couldn't see from the picture was that all the windows had bars on them, as did many other homes we saw driving through the neighborhood.

Using the internet to find properties and focus your search is a great aid, but having an agent who knows the area inside and out can be well worth the commission. You just have to understand how he's getting paid and make sure you remain in control on the negotiations.

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  • 1 month later...

Can anyone clarify that by using a real estate attorney instead of realtor one can get the buyer's agent compensation back and simply pay the lawyer his/her fee based on their billing schedule. I remember seeing an old thread on HAIF that attorneys can only act as agens for themselves. If the "3% comisison" can be saved can someone PM me with attorney recomendations?

 

I've found a house that I want without an agent (listing agent showed it to me) and looking to see which route to go - attorney, discount/rebate agent or ...

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the short answer to your questoin is yes - but you'll need to consult with your attorney to work out the details on what you want to do.

 

I don't have a specific attorney to recommend, but you search should include "residential real estate attorney" - last time I did the research I found many... and any attorney will meet with you for free to listen to what you're trying to do an see if they can help you - if you don't like their advice, or you don't like them you're not obligated to use them.

 

I learned about this new company recently that solves most of the problems with commissions in the new era of real estate... even though they are doing this nationally, it turns out they are local to houston... 

 

https://jasonshouse.com/

 

 

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Hard working real estate agents earn there commissions. Good agents really should create an itemized list of each task or item they handled or facilitated in a deal. We purchased a home from an attourney that acted as their own agent and my wife, a realtor had to continue to remind them that a given task was actually their responsibility. Again your mileage may vary.

A good percentage of my wife's clients have come from people that have "fired" their previous realtors. There is a great amount of horrible real estate agents out there that think that they can get rich doing as little as possible. It's agents like these that make people question the commissions they have to pay.

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