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How do real estate commission rates work for selling and buying a property?


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#61 MarkoJ

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Posted 07 December 2018 - 10:11 PM

Interesting. My best guess then is that real estate dollars dont seem like real money to most people. For two reasons: because the amounts are so high that 1-3% of a million bucks feels negligible-- its just not a sum of cash that people are used to dealing with. So they don't think rationally.

and because many buyers and sellers are riding high on massive tax free equity gains. Why not splurge on $30k for "peace of mind" if you've made $600k in equity over the course of the last 20 years.

 

I agree about the real money. If people had to pay for real estate fees up-front guaranteed they would be much lower; however, the fees come out on the back-end of the sale so you are right it just doesn't feel "real" to most people.

 

It is funny how much people will haggle for a 30k kitchen (where material, labour, install, etc. is a huge portion of the cost) but they won't haggle over a 30k commission where the inputs are professional photos, floorplan, and a few other small things that altogether add up to less than $500.


Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#62 LJ

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Posted 08 December 2018 - 01:08 AM

That’s a great suggestion for the seller but it doesn’t solve the issue of a buyer showing up with an agent.

What happens when the seller has no agent, but the buyer does?

Easy, buyer pays the agent whatever they agree on.


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#63 LeoVictoria

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Posted 08 December 2018 - 03:44 AM

Easy, buyer pays the agent whatever they agree on.


Yeah, pretty common with fee agreements.

#64 Mike K.

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Posted 08 December 2018 - 09:30 AM

How common is that practice?

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#65 tjv

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Posted 08 December 2018 - 10:12 AM

 but they won't haggle over a 30k commission where the inputs are professional photos, floorplan, and a few other small things that altogether add up to less than $500.

I completely agree, but I have found most salesman period won't budge on their rates and are set in stone.  I remember my dad was selling his boat years ago and the salesman was urging my dad to take this offer about 20k less then asking. My dad's response was sure but you can take some off your commission if its that good.  Lets just say there was no agreement.

 

There are some good arguments here about how many do it yourself/alternate type products have come of age in the last 15 or so years:  Uber, stock trading, Airbnb, airline tickets,  etc, etc.  Why not real estate transactions?  You don't have to go online to buy your stocks, etc you can call your broker, it just costs more


Edited by tjv, 08 December 2018 - 10:13 AM.


#66 davidN

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Posted 08 December 2018 - 10:17 AM

We have bought and sold a number of properties in different areas of North America.

 

We have found, time and time again, no matter the agent, the location, the style or the price of the property the  old adage rings true - "pay peanuts, get monkeys"



#67 Mike K.

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Posted 08 December 2018 - 10:28 AM

Buying a house is not the most complicated thing in the world, but it’s also not as easy or straight forward as buying a plane ticket or hailing a rideshare. Even comparing the two to real-estate just seems totally bananas.

Look at the differences of opinion, the questionable information (or misinformation), and the theoretical exchange a whole bunch of us just had. We couldn’t even decide whether to submit a deposit before or after conditions are lifted and half the time I don’t think the responses recognized the difference between a buyer’s and seller’s agent. The debate was all over the place and apparently everyone’s an expert.

Why “wouldn’t” you want to ensure someone is looking over your shoulder when buying a $1 million asset? Why would you want make the process as difficult and stressful as it can possibly be by defying normal practices and not wanting an agent’s assistance ...free of charge!? It doesn’t make sense. For many buying a house is very stressful and the process can be complicated. Marko can attest to what I had to go through and my process was relatively straight forward but had I done it alone I suspect the deal would have collapsed.

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#68 tjv

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Posted 08 December 2018 - 10:50 AM

^you have to hire a real estate lawyer anyway, any questions just give him/her a call like when do I have to give the deposit, etc

 

The bank is going to order an appraisal regardless, they will want to see an inspection report, the lawyer will review any covenants, ROW's etc

 

To me its super easy.  Just like you can pay $6.95 to buy stock or you can call and place the trade over the phone $40 or you can do all the leg work yourself in buying a home.  Remember the commission on a $1 million house is around $30-35k (yes I know its split between 2 agents), that's a lot of money.  Its your choice and if you want to spend that money go right ahead



#69 Mike K.

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Posted 08 December 2018 - 11:08 AM

Remember the commission on a $1 million house is around $30-35k (yes I know its split between 2 agents), that's a lot of money. Its your choice and if you want to spend that money go right ahead


I need to point out once again that buying a home with an agent costs the buyer nothing.

In fact, if you use an agent like Marko he’ll literally pay “you” half of his commission, or $8,750 going by your calculation above.

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#70 tjv

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Posted 08 December 2018 - 11:15 AM

^and I need to point out that a buyer doing it properly can get a massive refund if they do it alone or alone with a lawyer!  Your way is "free" and my way gets me a nice cheque for 15+k on a $1 million house.  Must be nice to have 15+k to throw around



#71 dasmo

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Posted 08 December 2018 - 07:09 PM

^what is this refund you are talking about?

#72 Matt R.

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Posted 08 December 2018 - 08:34 PM

First time was a normal realtor arrangement, second was a private sale without any realtors - simple enough, but it was an easy agreement, it was the mortgage broker that had to hustle. Third time the house wasn’t even listed yet. The seller had no agent but we were introduced by a realtor friend who took a commission or finders fee from the seller.

Second and third time we were able to negotiate a lower price because there were no realtor fees to pay. Process is simple enough I think but I have some smart friends and was able to draw on their experiences for some guidance.

Matt.

#73 dasmo

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Posted 08 December 2018 - 10:23 PM

Ive also bought twice without a Realtor. Sold once without. The first time I bought with a Realtor she was telling me I was offering to little! Had to tell her to just make the offer.... I ended up getting the place.

#74 tjv

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Posted 08 December 2018 - 10:37 PM

^what is this refund you are talking about?

your lawyer acts as your realtor buys the house on your behalf, they get their "commission" and then write the cheque right to you less maybe 1 hour of their time.  A nice 15k cheque to celebrate your new house!  I've written about this here before in detail

 

I've also threatened the above and the sellers realtor knew what I was doing so instead just immediately deducted the value of the house by half the commission after we reached a final price



#75 Matt R.

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Posted 08 December 2018 - 11:07 PM

We have yet to sell anything but it would take a LOT of convincing for me to want to pay five figures for a realtor, or some extenuating circumstances or a massive windfall!

Matt.

#76 MarkoJ

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Posted 09 December 2018 - 12:11 AM

your lawyer acts as your realtor buys the house on your behalf, they get their "commission" and then write the cheque right to you less maybe 1 hour of their time.  A nice 15k cheque to celebrate your new house!  I've written about this here before in detail

 

I've also threatened the above and the sellers realtor knew what I was doing so instead just immediately deducted the value of the house by half the commission after we reached a final price

 

First of all, the listing REALTOR® cannot simply deduct the value of the home if the commission is less and he or she cannot legally disclose to the buyer if they are taking less commission on a double-end as the listing contract is confidential between the REALTOR® and the seller.

 

Sure, it is a solid strategy to make an unrepresented offer for various reasons like the listing realtor might decrease the commission to seller so MAYBE seller is willing to negotiate more, or he or she might NOT decrease the commission but may be more motivated to make the deal happen. 

 

However, to think that you will automatically get half the gross commission off the price is not how it plays out in real life.

 

As far as the lawyer approach I've represented over 20-25ish lawyers in my career and I know in theory they could try to claim the commission but I've actually never seen it in real life. No half decent real estate lawyer is going to get into that much legal liability to give the commission back to the buyer. Listings also have the clause below which pretty much eliminates lawyers as it would be difficult to find a lawyer to go make the physical introduction to each property.

 

"Buyer agent must physically introduce Buyer to property or Co-op fee reduced to $1,000."


Marko Juras, REALTOR® & Associate Broker | Gold MLS® 2011-2018 | Fair Realty

www.MarkoJuras.com - MLS® from $899 and $1,000 cash back for buyers | www.834sales.com & www.promontoryforsale.com - Building(s) specialist 

Looking at Condo Pre-Sales in Victoria? Save Thousands!

 

 


#77 tjv

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Posted 09 December 2018 - 09:09 AM

1)  The sellers realtor I dealt with did it and simply deducted half the commission.  The sellers were sitting right next to me in their realtors office

 

If you get a really stubborn realtor, then here is what you do:

 

2)  How it plays out with a lawyer as an example "hey Bob, its Jim when are you headed home today?  5:30pm?  perfect, do you mind swinging by 1234 Fairfield on the way home, I want to buy it as you as the agent."  At 5:30:01 the lawyer shows up and says that's the house, at 5:30:10 the lawyer drives away

 

If you have a good relationship with a lawyer they won't even charge you.

 

Savings 15k to me on that example!  I encourage everyone to do it, but you don't have to either, I am simply pointing out options.



#78 dasmo

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Posted 09 December 2018 - 10:39 AM

That’s way over complicated. I’ve only ever offered 20-15% less than ask and gotten at least 10% without any complicated constructions. Either the seller and their agent are willing to negotiate or not. Whatever they decide is up to them. I’m without an agent so the option to reduce commission is there and their choice.

#79 Mike K.

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Posted 09 December 2018 - 10:52 AM

Over the last 2-3 years if you offered even 5% under asking you’d get laughed out of the process. That’s starting to change now, though.

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#80 tjv

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Posted 09 December 2018 - 11:08 AM

^speaking of that, anyone have any projections for 2019?  As of right now I am guessing flat to maybe a slight decrease in prices say 5%.  Some may think that is a lot but SFH prices were down 1.8% in November compared to October

 

I know in my mortgage business I am already calculating a heavy cushion, but rates are coming down so its hard to get the interest rate I demand



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