Buyer's Commission For Attorneys

[uncertaintraveler]

Does anyone know of the rule or regulation that says an attorney, who represents themselves as the buyer (i.e., they are their own buyer's agent and does not use a realtor in any way) when purchasing a house, is entitled to the 3% buyer's commission that would have otherwise gone to the buyer's agent? I seem to recall hearing about the provision, but I can't find a specific citation to it anywhere. Anyone know where I might find the rule?

[ldogg]

hmmm... I wasn't aware of that as a rule, but rather as a negotiation tactic to knock 3% off the price of the home... be aware that some real estate firms do not allow you to purchase without a broker... I know Greenwood King is like that... they'll take that extra 3% and pocket it whereby rendering your efforts a waste...

[uncertaintraveler]

I think I first heard of the provision on the Greedy Associates Board, but its been ages since I last checked on whether the rule actually exists, if it ever did, and I don't feel like wading through all the statutes.

I do know, however, that when I looked at one place, the salesperson said that, specifically because I was an attorney, I would be entitled to the 3% commission that would otherwise go to a buyer's agent. So maybe the rule really does exist??

[RedScare]

There used to be a rule that attorneys could perform the duties of a real estate broker simply because they were licensed as an attorney. This entitled them to the buyer's commission. Approximately 5 years ago, the Legislature, perhaps because the Realtor lobby is more powerful than the attorney lobby (THAT would be surprising), amended the statute to allow an attorney to act as his or her OWN buyer's agent, but not as another's agent. Therefore, the attorney is entitled to the buyer's commission when purchasing property for himself, but cannot act as anyone else's agent unless he is licensed as a realtor or broker.

I have used this provision on 3 occasions to save the 3%, including my current house, which I bought in 2004. I acted as my secretary's agent in 1999, so the rule changed after that time, probably in 2001.

Not sure where the statute is, but I would guess the Real Estate Agent's Act, under the Occupation Code.

http://www.trec.state.tx.us/formslawspubs/..._codes/rela.asp

[ldogg]

Red...

well if I wanted to buy a house and save that 3% could I have an attorney friend do the contract but not take the commission?? I would think that would work right??

[RedScare]

As I understand it, a non-(real estate)licensed attorney can only be an agent for himself. If he is working as your agent, he must be a licensed broker, or an agent working for a broker. You'd be better off having a realtor friend sign off as buyer's agent and get the commission. That agent could then give the commission to you.

To be nice, you should warn any friend helping you in this manner, that the commission counts as self-employment income, so they should keep enough of it for taxes before giving you the rest.

Warning: I have never read the statute either, so I am not positive. However, I've been told several times that lawyers can't act as buyer's agent for others anymore, only when purchasing for themselves. And, I HAVE done this for myself.

[ldogg]

hmmmm.... in theory I could write up a contract myself though right?? I'm no lawyer but from my understanding you can still do a standard contract yourself... I guess I could have a lawyer friend look over it for free, but in submitting the contract the part covering commissions would show 3% to sellers agent and 0% to buyers....

I'll have to check on this some more... I can't stand the protectionist nature of the real estate business... it is really disgusting and bordering on anti-trust to me....

[uncertaintraveler]

I'm not so sure about that Red.....

I haven't read through all the statutes yet, and although there is a case (Sherman v. Bruton, 497 S.W.2d 316, Tex. Civ. App. 1973) holding that attorneys are not authorized to engage generally in the business of a real estate broker, this case appears to be interpreting a statute containing different language than the current statute. Furthermore, a more recent case, Elin v. Neal, 720 S.W.2d 224 (Tex. Civ. App. -- Houston [14th Dist.] 1986), holds that attorneys are exempt from the entire Real Estate License Act.

The current Real Estate License Act, at Chapter 1101 of the Texas Occupations Code, now reads, in relevant part:

This chapter does not apply to:

(1) an attorney licensed in any state

(Section 1101.005)

Accordingly, by statute, an attorney is exempted from the Chapter 1101 of the Texas Occupations Code, which, at Section 1101.001, is referred to as the Real Estate License Act. So I think it is reasonably safe to say that an attorney can represent themselves and get the commission.

Additionally, however, note that Section 1101.004 of the Texas Occupations Code (a/k/a The Real Estate License Act) says:

Sec. 1101.004. ACTING AS BROKER OR

SALESPERSON. A person acts as a broker or

salesperson under this chapter if the person, with the

expectation of receiving valuable consideration,

directly or indirectly performs or offers, attempts, or

agrees to perform for another person any act

described by Section 1101.002(1), as a part of a

transaction or as an entire transaction.

(V.A.C.S. Art. 6573a, Sec. 4 (part).)

Under an admittedly liberal reading of this provision, one could arguably have their friend be their broker so long as the friend, in so doing, did not have "the expectation of receiving valuable consideration" (i.e., pro-bono work). And, if they gave their friend the 3% commission after the transaction was completed, as a gift, I think there is a reasonable argument that no violation of the Real Estate License Act has occurred.

Furthermore, Section 1101.351 of the Texas Occupations Code (a/k/a The Real Estate License Act) says:

Sec. 1101.351. LICENSE REQUIRED.

(a)

Unless a person holds a license issued under this

chapter, the person may not:

(1) act as or represent that the person is a

broker or salesperson; or

(2) act as a residential rental locator.

Now, as I read all of these provisions, any person who is not a licensed attorney (or any unlicensed person who is acting as a broker with the expectation of receiving valuable consideration), cannot be a broker and receive the brokers commission. However, because attorneys may be totally exempted from the Real Estate License Act, I'm not sure how attorneys are prohibited from acting as a broker for another person....the way I read the statute, I think they could still get the commission.

But, again, I've not read through the entire statute yet so I could be missing something...

I'll have to check on this some more... I can't stand the protectionist nature of the real estate business... it is really disgusting and bordering on anti-trust to me....

I agree...and, apparently, so do some state attorneys general, who are in the early states of bringing antitrust actions against Realtors for the way the MLS services are run.

[ldogg]

I just want to buy a house without a buyers agent to save the 3%... no one needs to collect anything from my end... I can go to the selling agent and say I want to buy the house and do not plan on using a realtor.. therefore consider your asking price as being 3% less... right?

[RedScare]

Y'all did read my warning, right?

The contract between the seller and agent probably has some clause giving the agent all 6% if there is no buyer's agent. The 3% to a buyer's agent is a finder's fee to the buyer's agent for bringing the buyer to the sale. So, offering 3% less probably just reduces the seller's net from the sale, which the seller may reject.

You cannot change the contract between seller and agent, nor can you force the agent to renegotiate it. If you are a lawyer, or you have an agent friend who will give you some money back, you can game the system, so to speak. Otherwise, the seller must abide the contract, which means the agent gets all 6%.

[dalparadise]

I'm not an attorney, nor am I a Realtor. I have been licensed as a Realtor in the past.

My understanding is that the commission portion of the contract is regulated by the Texas Association of Realtors, meaning that only members (Realtors (copyrighted) or more precisely, brokers) may participate in commissions. Lawyers are certainly able to execute real estate contracts, but have no specific claim on commissions, as that is an agreement between two brokers.

Now, that said, you (lawyer or not) are always free to negotiate your price and if a 3% reduction is satisfactory, you are free to use that at a bargaining position as a buyer. You are also free to buy a home without buyer's agent or a lawyer.

One more thing to note -- the 6% commission is not regulated whatsoever. That's one reason why it can be specified the way it is. There is no legal definition for any compensation in a real estate contract. The listing agent may specify any amount he or she negotiates with the seller as the commission on a TAR contract.

That can be 0%, 50%...whatever. It's incumbent upon the buyer's agent to check to see what his or her commission, if any will be. I once listed a house for a 5% commision (2.5% to the buyer's agent) and he was halfway through the contract before he noticed it. Angrily, he told me he never would have brought his buyer to that home if he had known this. I told him that was hardly in the interest of his buyer. He was ticked off.

One more thing -- When I sold and bought my own home, the commissions for both deals were paid to my broker, as outlined in the contract and then rebated to me, as was my personal agreement with my broker. This is because only Brokers may participate in commissions, as is my understanding.

[rps324]

I don't know how other places do it, when I was at Karpas they had a company policy against paying anyone who was not a Broker, including Attorneys. Not saying it's right or wrong, it is just what they do. I am sure they are not the only one. If an Attorney buyer comes up and wants 3% off the price, don't expect it on a Karpas listing. They take the position that they have already negotiated their commission with the seller, and that is between them and the seller. They are not going back and renegotiating that.

[dalparadise]

They take the position that they have already negotiated their commission with the seller, and that is between them and the seller. They are not going back and renegotiating that.

Right...of course not -- but 3% is 3%. If an unrepresented individual or a lawyer came to you to purchase your listing and submitted a bid that was 3% lower than the asking price, your seller could still accept that offer and not change the commission arrangement. In fact, then Karpas would enter into an intermediary relationship in the deal and most likely assign a buyer's rep to the buyer from your office, thus keeping both sides of the deal in your office. Likely, you'd get a referral on the lucky agent's commission in addition to your 3%.

Again, commission is OPTIONAL. Just because everyone does 6% doesn't mean that's the rule. And since it's not governed, it ends up falling into your broker's discretion. Of course, they won't change a listing to knock off 3% in commissions and they can't rebate it to a non-Realtor

[ldogg]

Sickening the way realtors protect themselves so fiercely yet getting them to truly work for your best interests once they have the listing is like pulling teeth... its no wonder they get a bad rep... and most are deserving of it...

the way I see it the seller is looking at a cost of 6% to sell the house... they know this... so if the cost is 3% commission to selling agent and 3% reduction in price what is the problem?? it seems firms like Karpas and Greenwood-King etc.. are more interested in keeping realtors employed than doing what is right....

[rps324]

Sickening the way realtors protect themselves so fiercely yet getting them to truly work for your best interests once they have the listing is like pulling teeth... its no wonder they get a bad rep... and most are deserving of it...

the way I see it the seller is looking at a cost of 6% to sell the house... they know this... so if the cost is 3% commission to selling agent and 3% reduction in price what is the problem?? it seems firms like Karpas and Greenwood-King etc.. are more interested in keeping realtors employed than doing what is right....

How is getting paid their already agreed upon commission not doing what is right? Obviously there are certainly incompetent Realtors out there, just like there are quack Doctors, ambulance-chaising Lawyers and so forth. I don't think it is fair to make such sweeping statements about the whole industry.

One flaw in your plan is you have failed to account for the fact that if there is a reduction in commission paid by the seller, (many are less than 6%), then you have two people trying to save that same percentage amount, the buyer AND the seller.

It seems to me somewhat ironic that you want to take advantage of the most common commission structure to take a certain percentage off for yourself at the expense of the seller, but if that seller's expense goes to the person who they actually agreed to pay it to and who worked for it, it is suddenly "not doing what is right."

[ldogg]

How is getting paid their already agreed upon commission not doing what is right? Obviously there are certainly incompetent Realtors out there, just like there are quack Doctors, ambulance-chaising Lawyers and so forth. I don't think it is fair to make such sweeping statements about the whole industry.

Umm... because the selling agent agrees to only 3% not the full 6% (as is the norm)... that is why it isn't right.... and you may not think it is fair to make such sweeping generalizations, but then it is still my opinion and I can... from my experiences with them, most don't know a thing about negotiation... search the MLS, drive me around town, know the parts of town.. fine... but when negotiations occur most don't have a clue and just revert to standard accepted practices... as someone who negotiates contracts for a living that is garbage... obviously there are exceptions to the rule, but in my assessment MOST are clueless..

One flaw in your plan is you have failed to account for the fact that if there is a reduction in commission paid by the seller, (many are less than 6%), then you have two people trying to save that same percentage amount, the buyer AND the seller.

ummm.. how is that relevant??? my point is that if I did have a realtor to represent me on the purchase then he/she would expect 3%... if they've offered in the contract only 2% or 1.5% to buyers agent then fine... knock that much off the price... but a commission to the buyers agent is a real expense to the seller that I am willing to exchange for an equal reduction in price..

It seems to me somewhat ironic that you want to take advantage of the most common commission structure to take a certain percentage off for yourself at the expense of the seller, but if that seller's expense goes to the person who they actually agreed to pay it to and who worked for it, it is suddenly "not doing what is right."

explain that to me... is the buyers agent's commission added into the settlement costs to the seller at closing or not??? since it is, then that percentage off that I want IS an expense to the seller.... how does the selling agent keeping that percentage seem right in the context of the spirit of the 6% commission to sell a house?? out of spite if some realtor tells me that they won't reduce the 3% because they'll take the full 6% then I WILL call up a realtor to have them represent me and therefore reduce the selling agents commission back down... but then what did that accomplish?? well it accomplishes exactly what the real estate lobby wants it to accomplish.. it keeps more agents employed and earning commissions.... sounds pretty protectionist and anti-trust to me... and in the end the buyers wind up paying more for a house and market values are overinflated to account for commissions and we all wind up paying more property taxes.... lovely system we have here..

[rps324]

Umm... because the selling agent agrees to only 3% not the full 6% (as is the norm)... that is why it isn't right.... and you may not think it is fair to make such sweeping generalizations, but then it is still my opinion and I can... from my experiences with them, most don't know a thing about negotiation... search the MLS, drive me around town, know the parts of town.. fine... but when negotiations occur most don't have a clue and just revert to standard accepted practices... as someone who negotiates contracts for a living that is garbage... obviously there are exceptions to the rule, but in my assessment MOST are clueless..

ummm.. how is that relevant??? my point is that if I did have a realtor to represent me on the purchase then he/she would expect 3%... if they've offered in the contract only 2% or 1.5% to buyers agent then fine... knock that much off the price... but a commission to the buyers agent is a real expense to the seller that I am willing to exchange for an equal reduction in price..

explain that to me... is the buyers agent's commission added into the settlement costs to the seller at closing or not??? since it is, then that percentage off that I want IS an expense to the seller.... how does the selling agent keeping that percentage seem right in the context of the spirit of the 6% commission to sell a house?? out of spite if some realtor tells me that they won't reduce the 3% because they'll take the full 6% then I WILL call up a realtor to have them represent me and therefore reduce the selling agents commission back down... but then what did that accomplish?? well it accomplishes exactly what the real estate lobby wants it to accomplish.. it keeps more agents employed and earning commissions.... sounds pretty protectionist and anti-trust to me... and in the end the buyers wind up paying more for a house and market values are overinflated to account for commissions and we all wind up paying more property taxes.... lovely system we have here..

If I negotiate a commission of 6% on a listing. That is MY commission for selling the property. I negotiated 6%, not 3%. If I have to give 3% of my commission away in a transaction on a "co-op" deal then it is now MY business expense, not my sellers. It now comes out of MY selling commission of 6%, follow me?

The home will not sell unless it is priced properly. If you offer what amounts to a market price, less 3% because you don't have representation, why should that "savings" go to the buyer? Why should it not go to the seller? You are a self-professed outsider to the industry so you are not aware of the volume of work involved on both sides of a transaction. If it isn't going to benefit my seller, and it is only going to cause me to have to do spend more time and work taking up the slack on issues normally handled by the Buyer's agent, then explain to me the incentive to either me or my seller to sell their home at 3% below market?

The whole problem with your argument is you are acting as if the commission is one of the pieces "on the board", it's not. It has already been set and is between the Seller and the Agent, not you as a buyer.

[dalparadise]

If I negotiate a commission of 6% on a listing. That is MY commission for selling the property. I negotiated 6%, not 3%. If I have to give 3% of my commission away in a transaction on a "co-op" deal then it is now MY business expense, not my sellers. It now comes out of MY selling commission of 6%, follow me?

The home will not sell unless it is priced properly. If you offer what amounts to a market price, less 3% because you don't have representation, why should that "savings" go to the buyer? Why should it not go to the seller? You are a self-professed outsider to the industry so you are not aware of the volume of work involved on both sides of a transaction. If it isn't going to benefit my seller, and it is only going to cause me to have to do spend more time and work taking up the slack on issues normally handled by the Buyer's agent, then explain to me the incentive to either me or my seller to sell their home at 3% below market?

The whole problem with your argument is you are acting as if the commission is one of the pieces "on the board", it's not. It has already been set and is between the Seller and the Agent, not you as a buyer.

Exactly right. Furthermore, formal offers on properties happen on the first page of the contract. The commission isnt detailed between agents until much later and is not a negotiable part of the offer in a TAR contract. It's simply not in play, as you accurately state.

Often, it is a lot of money. It's also highly taxed and there's usually a split with the broker, too. Real estate agents can make a lot of money, but it's not easy. I do believe they earn their money as consultants, not necessarily as house hunters. Anyone can find a house or list one in the newspaper to sell. It takes a professional to work the market, price the home for maximum value, negotiate effectively, market smartly and consider the many details involved in closing a transaction. Plus, they have to do it during business hours, meaning this is often their only source of income.

As a seller, if you don't believe the commission proposed is fair for selling your home, negotiate a better deal when you list your property. As a buyer, however, the commission should be completely transparent to you. You have no claim on a cent of it, as you are not even paying for your agent's services.

[uncertaintraveler]

If I negotiate a commission of 6% on a listing. That is MY commission for selling the property. I negotiated 6%, not 3%. If I have to give 3% of my commission away in a transaction on a "co-op" deal then it is now MY business expense, not my sellers. It now comes out of MY selling commission of 6%, follow me?

The home will not sell unless it is priced properly. If you offer what amounts to a market price, less 3% because you don't have representation, why should that "savings" go to the buyer? Why should it not go to the seller? You are a self-professed outsider to the industry so you are not aware of the volume of work involved on both sides of a transaction. If it isn't going to benefit my seller, and it is only going to cause me to have to do spend more time and work taking up the slack on issues normally handled by the Buyer's agent, then explain to me the incentive to either me or my seller to sell their home at 3% below market?

The whole problem with your argument is you are acting as if the commission is one of the pieces "on the board", it's not. It has already been set and is between the Seller and the Agent, not you as a buyer.

I find this reasoning to be a bit much....

First, are you trying to argue that you negotiated a 6% commission without ever considering the possibility that the buyer's agent would make some claim for half of that? Really? Because if that is the case, then why don't realtors demand a 9% commission? Or 12%? That way, both the seller's and the buyer's agent can get a 6% commission. To me...it defies belief for you to argue that you "negotiated" a 6% commission and that, consequently, you don't have to share that with anyone, because...well, as we all know, you basically have to share the commission in order to entice buyer's agents to show your property.

Second, if you, as a agent/broker/realtor/whatever "have to give" (or choose to give) 3% of your commission to only certain members of society (i.e., the buyer's agent), but not to anyone else (i.e., those who aren't licensed brokers/realtors/agents/whatever), how is that justifiable from a legal or business standpoint? Legally, I don't think it is enough for you to say "well, that is how the statute is written." As I argued previously, it appears that attorneys are exempt, as are (possibly) certain other individuals who work in a pro bono capacity. And business-wise, it is a little short-sighted to be unwilling to split the commission with non-brokers/realators because, face it, it isn't like your listing is the only house on the market. Sure, all property is unique, but there are plenty of homes out there and (probably) plenty of people who would be willing to split the commission if it meant closing the deal.

Third, as a tangential comment, the whole "a home will not sell if it isn't priced properly" is a joke. As a practical matter, everyone knows that a house will sell regardless of the price--if you price a house valued at $200K for $100K, do you really think the house won't sell??? And, conversely, if you price a house valued at $100K for $200K, the house will still sell....it will probably just take a while to do so.

Fourth, why shouldn't the "savings" go to the buyer? You write as if you are willing to "rebate" 3% of your commission to the seller if the buyer doesn't have an agent. Somehow, I don't believe that is true. And just what is the volume of work involved on both sides of the transaction? In Texas, aren't most residential real estate transactions driven by abstract and title companies? So how much work does the seller's agent (or buyer's agent, for that matter) really do?

Fifth, you essentially admit that the commission is factored into the price of a home when determining its market value---which, in turn, raises all house prices above their real value. That's a little odd, don't you think? After all, isn't the market value of something (say, a share of stock) based on its intrinsic value (in the case of stock, (simplified, of course) the value is based on assets minus liabilities plus what you believe the future of the company is)---and not on what it costs to buy? Certainly, the value of a share of IBM is based on that formula, and the cost incurred in buying or selling the stock is never factored into its listed price on the NYSE. So why should a house be any different?

In sum, I'm not sure you make a good argument as to why your "negotiated" commission shouldn't be split. The whole system seems incredibly protectionist and incredibly inefficient.

As a buyer, however, the commission should be completely transparent to you. You have no claim on a cent of it, as you are not even paying for your agent's services.

If this is true, then why would a buyer's agent have any claim to the commission? Is the buyer's agent paying for the seller's agent services?

[ldogg]

If I negotiate a commission of 6% on a listing. That is MY commission for selling the property. I negotiated 6%, not 3%. If I have to give 3% of my commission away in a transaction on a "co-op" deal then it is now MY business expense, not my sellers. It now comes out of MY selling commission of 6%, follow me?

You're not giving anything away. Saying such is being dishonest. At closing the funds are distributed and you (your firm) earns 3% and the other gets 3%. You do NOT receive 6% and then have to redistribute, so you are not taxed on the 6%. Certainly sounds to me like you did not negotiatie yourself a 6% commission. My business is very much like yours only I'm in Int'l transportation. When I trade a cargo we have to state our commission and if there are any other brokers involved they tack on their commission. So by your argument if you have a contract for 6% cost to the seller for YOUR commissions and a buyers agent is involved and they want 3%, then it should be 9% total commission. But it doesn't work that way. Realtors full and well know to expect the 3%. To argue about the nuances of a contract written to only benefit yourself (or the industry) as being somehow right is to be completely dishonest with yourself and the public about the situation. My whole point is that if I were to act as my own realtor (licensed or not) I should be able to ask for that same 3% as a reduction in sales price instead of taking the commissions at closing. The NET to the seller is the SAME!!! And that is the point.

Don't give me the "work" line about earning the additional 3% for there not being a buyers agent. Not a whole lot of work goes into it and I've bought and sold multiple properties in the last few years. Negotiating terms of a contract will happen with a buyers agent or not, and beyond that a buyer can line up their own inspections, surveys, appraisals and coordinate with the title company. It isn't hard and isn't that time consuming, I've done it before.

The arguments are weak and lame. The only people who defend realtors contracts are realtors. They ARE protectionistic and nearly anti-trust and it is why many AGs are looking into lawsuits. You can bet your life that the next time I have to sell a house I'll be negotiating heavily the terms of the listing agreement with my agent. And if he doesn't like it he doesn't get the listing. Period.

[jscarbor]

If I were the listing agent I would certainly try and negotiate something with the buyer. I would also have buyer sign something saying they understand that they are not being represented, maybe the "information about brokerage services" is enough? probably not though if dealing with an attorney.=) However, I don't know about a full 3% reduction, maybe 2.5% would work? The reason is, the listing agent, whether you think so or not, is doing more work if you are not represented by a broker.

Here's an example of something I once did. I was a listing broker on a $5million building a few years ago. I had another broker say he knew of someone that was looking for a 1033 exchange property but he had another broker. My seller REALLY needed to sell this building, so I divided my commission by 3 instead of 2 just to get the deal done. It might have cost me some money but this was a good buyer and it was in the seller's best intrest for me to go this route so I did.

Now, residential is a little different. If one person doesn't like this house then I bet someone else will soon thereafter. It really doesn't hurt the seller to wait in many cases.

To summarize, In the end I would happily work something out with a buyer if thats the route they wanted to go.

Jscarbor

www.2percent2buyer.com

[jscarbor]

"from my experiences with them, most don't know a thing about negotiation... search the MLS, drive me around town, know the parts of town.. fine... but when negotiations occur most don't have a clue and just revert to standard accepted practices... as someone who negotiates contracts for a living that is garbage... obviously there are exceptions to the rule, but in my assessment MOST are clueless.."

And what's so hard about negotiating? I have dealt with plenty of realtors and generally they are very good at negotiating by being percieved to be bad. Just because one side wants to negotiate doesn't mean I do.

There's nothing to stop you from negotiating the price anyway. just negotiate. I would assume that you can state in the contract, if you want, that you are offering X amount becuase you wish to represent yourself. The realtor has to present the contract. Who care's if they (realtor) get 6% if in the end you NEGOTIATE what you want?

Jscarbor

www.2percent2buyer.com

[rps324]

You're not giving anything away. Saying such is being dishonest. At closing the funds are distributed and you (your firm) earns 3% and the other gets 3%. You do NOT receive 6% and then have to redistribute, so you are not taxed on the 6%. Certainly sounds to me like you did not negotiatie yourself a 6% commission. My business is very much like yours only I'm in Int'l transportation. When I trade a cargo we have to state our commission and if there are any other brokers involved they tack on their commission. So by your argument if you have a contract for 6% cost to the seller for YOUR commissions and a buyers agent is involved and they want 3%, then it should be 9% total commission. But it doesn't work that way. Realtors full and well know to expect the 3%. To argue about the nuances of a contract written to only benefit yourself (or the industry) as being somehow right is to be completely dishonest with yourself and the public about the situation. My whole point is that if I were to act as my own realtor (licensed or not) I should be able to ask for that same 3% as a reduction in sales price instead of taking the commissions at closing. The NET to the seller is the SAME!!! And that is the point.

Don't give me the "work" line about earning the additional 3% for there not being a buyers agent. Not a whole lot of work goes into it and I've bought and sold multiple properties in the last few years. Negotiating terms of a contract will happen with a buyers agent or not, and beyond that a buyer can line up their own inspections, surveys, appraisals and coordinate with the title company. It isn't hard and isn't that time consuming, I've done it before.

The arguments are weak and lame. The only people who defend realtors contracts are realtors. They ARE protectionistic and nearly anti-trust and it is why many AGs are looking into lawsuits. You can bet your life that the next time I have to sell a house I'll be negotiating heavily the terms of the listing agreement with my agent. And if he doesn't like it he doesn't get the listing. Period.

Saying such is not dishonest. Why do you assume my broker gets 3%? They don't, thank you very much.

The only thing that is dishonest is to expect compensation for a brokerage fee when you are not an agent and did no work for it. Even though you do not believe it, I do get paid for doing more than showing up with my license.

[rps324]

There's nothing to stop you from negotiating the price anyway. just negotiate. I would assume that you can state in the contract, if you want, that you are offering X amount becuase you wish to represent yourself. The realtor has to present the contract. Who care's if they (realtor) get 6% if in the end you NEGOTIATE what you want?

Jscarbor

www.2percent2buyer.com

Thank you! That is it in a nutshell.

[dalparadise]

"from my experiences with them, most don't know a thing about negotiation... search the MLS, drive me around town, know the parts of town.. fine... but when negotiations occur most don't have a clue and just revert to standard accepted practices... as someone who negotiates contracts for a living that is garbage... obviously there are exceptions to the rule, but in my assessment MOST are clueless.."

And what's so hard about negotiating? I have dealt with plenty of realtors and generally they are very good at negotiating by being percieved to be bad. Just because one side wants to negotiate doesn't mean I do.

There's nothing to stop you from negotiating the price anyway. just negotiate. I would assume that you can state in the contract, if you want, that you are offering X amount becuase you wish to represent yourself. The realtor has to present the contract. Who care's if they (realtor) get 6% if in the end you NEGOTIATE what you want?

Jscarbor

www.2percent2buyer.com

Precisely the point I made.

[dalparadise]

Note: Just to clarify, I am no longer a Realtor, nor do I represent clients in real estate transactions and this is not intended as specific real estate advice. This is my take on the business.

If this is true, then why would a buyer's agent have any claim to the commission? Is the buyer's agent paying for the seller's agent services?

I don't quite understand this question. The seller is paying a negotiated rate, or sometimes a flat fee to place his home into a pool of agents with a network of clients they represent, a marketing infrastructure (MLS), a governing body to facilitate smooth transactions and preferred methods of getting complicated contracts closed legally. It is not a public service. It is business.

If you would rather not participate in this process, that is your choice. You will avoid some commission charges, but incur legal expenses and costs of your own time to ensure your transaction is closed and recorded legally. You will also limit your choices to properties that are not part of this system and/or buyers who are left to their own devices to find you. If you are successful, great! But, it's a limiting proposition and the stories of failure outnumber successes, from what I've witnessed -- especially in Houston, where the HAR is very strong and efficient.

The argument about "everything will sell in time" is counterintuitive to the nature of this business. Real estate is often more about timing than it is price. Moving a property in time to close another, or to gain a tax advantage can be worth incurring extra costs to many smart sellers. It can also be advantageous to take a loss in some instances, where a payoff can be had in an accompanying transaction. There are countless variables in almost any transaction and no two are alike. Most importantly, real estate is a MARKET CONDITION, not a store, where values are easily determined.

I used to approach my listings by doing a thorough evaluation of their property and then determining how fast they really needed to sell, based on what they were trying to accomplish. Often, we'd speak of 30-60-90 day strategies and calculate what the pricing would be to facilitate the sale in the best time frame for their situation. It was very strategic and I believe was a great service to my clients.

One thing I offered them, as part of the commission they agreed to pay, was access to the MLS, a huge marketing system to put their home in front of thousands of other agents. In my entry into this system, I added that I was offering x% to any agent IN THIS GROUP who would bring me a good contract. That is the most effective way of selling a home today.

So, yes, it is protectionist -- that's the nature of this business. This very effective marketing machine with thousands of members and potential buyers is not a public service -- it is a closed loop regulated by the state for the legal protection of the integrity of the transactions. That's why only paying members of the "circle" who are specifically trained in and regulated to follow its rules may participate in the commissions. What makes it fair is that anyone is free to negotiate his terms. So, do so, if you choose.

[uncertaintraveler]

Dalparadise, you make a somewhat cogent rebuttal....until you say this:

That's why only paying members of the "circle" who are specifically trained in and regulated to follow its rules may participate in the commissions. What makes it fair is that anyone is free to negotiate his terms. So, do so, if you choose.

As noted previously in this thread, certain members of society (i.e., attorneys) don't have to be paying members of the "circle" in order to participate in the commissions, at least when they are the buyer. Because attorneys, who are not paying members of the "circle," and who are exempted from the pertinent statutes (for whatever reason...perhaps because they have been through three years of law school and probably took more than the basic property law class), it makes it a little difficult for realtors to argue that they, and they alone, may, and should, be allowed to participate in the commissions.

I don't think anyone would dispute that the seller's agent "deserves" a commission; what is at issue (I believe..) is what the buyer's agent, or the buyer itself, deserves. By artificially limiting--by statute--who is entitled to share in the commissions, realtors make it impossible for buyers to truly negotiate at least some aspect of the transaction (i.e., where what is arguably 3% of the purchase price for the house is credited). Now, I'm sure there are some who would say where the 3% goes is none of the buyer's concern. But when the buyer does not use a realtor or an agent, how is it not their concern? Why shouldn't they get the 3% that would have otherwise gone to an agent that the buyer didn't use? That's what I find to be wrong about the current system....

And, as an aside, I'm not sure you can say that the MLS system is really "the most effective way of selling a home today" when, by limiting who gets MLS access, realtors effectively limit the ways a home can be sold.

Perhaps the most effective way of selling a home today would be to allow anyone (who do not want to use a seller/listing agent) to put their house in the MLS database and, as a condition of using the MLS service, mandate that a certain percentage of the purchase price goes to the person (whether licensed or not) who offers the seller a good contract. That way, non-realtors/brokers are truly free to negotiate their own terms as to all parts of the deal and the playing field is truly level. And for all of the "special services" realtors offer, if the buyer and seller (who are otherwise not represented by anyone) so choose, they can hire a realtor for such "special services" on an a-la-carte or flat-fee basis (assuming a realtor would accept such a proposal---and I imagine they would), or they can go it alone and pull up the forms they need from the internet and fill them out themselves. Of course, I realize that this method would probably put a lot of realtors out of business....which might be why they don't want others to use what might be a truly effective way to sell a home.

[HeightsGuy]

And, as an aside, I'm not sure you can say that the MLS system is really "the most effective way of selling a home today" when, by limiting who gets MLS access, realtors effectively limit the ways a home can be sold.

That is the quote of the day. The Internet should have by now effectively neutered the real estate agent profession in the same way it neutered the travel agent profession. The Internet is about information, but somehow the real estate industry has managed, to date, to keep the keys to the MLS out of the average person's hands. It's only a matter of time til someone out there reinvents the way homes are sold using the Internet.

RE agents can argue til they're blue in the face at how much of a service they provide, but, if every for-sale property was listed in a central database with full access to everyone, there would be no need for buyers/sellers to give 6% of a sale to a "circle" of people who call themselves experts. Build honest parity into the MLS, and watch how far that 6% drops under competitive pressures. Don't believe me? Ask an ex-travel agent (who is now in a new line of work because they were priced out of that industry) what happened when people figured out they could book their own vacations through the Internet.......

[dalparadise]

That is the quote of the day. The Internet should have by now effectively neutered the real estate agent profession in the same way it neutered the travel agent profession. The Internet is about information, but somehow the real estate industry has managed, to date, to keep the keys to the MLS out of the average person's hands. It's only a matter of time til someone out there reinvents the way homes are sold using the Internet.

RE agents can argue til they're blue in the face at how much of a service they provide, but, if every for-sale property was listed in a central database with full access to everyone, there would be no need for buyers/sellers to give 6% of a sale to a "circle" of people who call themselves experts. Build honest parity into the MLS, and watch how far that 6% drops under competitive pressures. Don't believe me? Ask an ex-travel agent (who is now in a new line of work because they were priced out of that industry) what happened when people figured out they could book their own vacations through the Internet.......

Again, I think you guys miss my point. I should also state that I am not necessarily in favor of the system as it stands, though I do respect a Realtor's right to collect money for services rendered.

That is the core of the issue -- you see the "service" as the contract writing, house hunting, etc. It is not. The service is the MLS and the network itself. Why would Realtors "build parity" into this system when it's the very unique selling proposition they are marketing? The service Realtors provide is the marketing network that opens your home up to thousands of pre-qualified buyers. It is supported by an expensive commission structure that you must determine whether it is a good value or not.

For just over a year, I was a real estate agent. I wasn't crazy about my job, but worked my butt off to be a good one and to provide a value for my service. Through my due diligence and understanding of the market I never had a listing sit on the market more than 12 days -- including the sale of my own home -- much to the delight of my clients. No sale of mine ever drew less than 97% of asking price, either, even in very competitive neighborhoods. I listed about 6--7 homes and was a buyer's rep for another 4-5 in that year's span, so I'm by no means an expert, but I know I did a good job for my clients and earned my commissions.

Smart sellers want to sell their home for the maximum amount they can receive WITHIN A CERTAIN TIMEFRAME. This allows them to let the proceeds of the sale work in whatever ways they see fit, or it applies to tax advantages or timing to close another deal and get benefits, etc. It's just not as simple as you guys are making it out to be. And when you try to reduce it to simply making a deal on a single property for the lowest price possible, you will inevitibly leave money on the table.

Access to a network that can get your house sold in 12 days is worth a lot to some people. It might mean they beat a closing date on a new home that has a $10,000 allowance tied to it. Or, it might mean they beat a foreclosure or a tax deadline and accompanying penalties. Or, it might mean the a need for temporary housing or storage is not necessary, or perhaps their kids won't have to start a school year in a strange school. In every case I had, it meant that my commission was worth every cent.

I paid a lot to be a member of the TAR and NAR, as well as the MLS. Plus, I paid a broker's fee and paid for the database that contained my software for generating listings, arranging showings and filling out contracts. My broker also kept 30% of my commissions. Why on earth would I want to "build parity" into this private enterprise, thereby reducing my opportunities to aquire customers?

Why is it so hard to understand that the MLS is not a public service, but a tool of private business, sanctioned by state government?

PS-- try as they might -- attorneys are not allowed to participate in commissions unless they also have a real estate license, as far as I know. Many do, for that reason. They are completely within their rights to charge for their services, however. It's just not related to the TAR commission structure. Please correct me if I'm wrong on this.

[RedScare]

PS-- try as they might -- attorneys are not allowed to participate in commissions unless they also have a real estate license, as far as I know. Many do, for that reason. They are completely within their rights to charge for their services, however. It's just not related to the TAR commission structure. Please correct me if I'm wrong on this.

I stated much earlier in this thread that attorneys used to be able to act as brokers, but that has been drastically curtailed. We currently can only act as our own agent. I did it on my last home purchase in 2004, and received a nice 3% check at closing.

Interestingly, when I used an agent in 1999 to buy my first home inside the loop, he quickly stated that he would not work for me if I was going to ask for a cut of his commission. I let him have his full 3%, because I trusted his expertise on inner loop property, and he did a good job.

HeightsGuy, there already is a database for real estate forms. All of the realtors use them, too. It is the Texas Real Estate Commission website.

http://www.trec.state.tx.us/

If you know which forms to use and how to fill them out, you are free to use them, which brings up a good point on why there are and always will be realtors. Many people do not know how to use these legal forms. Others do not have the time. Some doubt their negotiating abilities. If you think you can do all of this on your own, there is no law or group to stop you.

MLS reminds me of the people who call my law office and proudly tell me that they are handling their own legal matter, then ask me how to file paperwork, what the law is on some matter, and sometimes even ask me for my forms. My forms are proprietary. Some legal document programs are very expensive. My legal expertise was amassed at great time and expense over 19 years...and this cheap bastard gets offended that I don't cheerfully give it away after he just suggested that any moron like himself can do it? I always politely tell them that the info he needs is available at the county law library and an intelligent person like himself should be able to find it. They usually reply that that is time consuming and I reply that that is why people pay me.

MLS is proprietary material owned by the realtors. It is a very valuable tool. Like my legal forms, it saves time. But, like my forms, you don't get to use it just because you realize how valuable it is.