Back to looking yourself: In six months Jim took me through maybe ten houses. I didn’t sweat the commissions, though, because the seller paid it (I know, everyone pays it…but I didn’t feel it). I still feel I got my 3% worth with Jim’s negotiating skills.

When it comes time to sell, I will be more discriminating on the fee structure. I sold my house in NOVa on a fee-for service contract. The listing agent broke down what he did and charged either his rate or his assistant’s rate, the same way lawyers and tradesmen do. It worked out to 1.9% of the sale price. I paid $1k up front, $1k after the second month it was listed, and the balance when it sold (4 months after listing in my case).

I still had to pay the 3% to the buyer’s agent. Maybe buyers will be paying their own agents by then?

I chose my listing agent based on his excellent blog, by the way, and he linked me up with my next buyer’s agent, another blogger.

There will always be a place for the traditional 3%- think of out-of-town buyers who have one weekend to find a house and don’t know the area, or non-tech savvy people who don’t have the time or interest in searching themselves. I know your time is valuable that you spend searching MyCAAR, and moving twice costs time, stress, and money as well (I rented here for six months before buying). the thing I liked about Merv, by seller’s agent, was that he offered every option.

Info on the fee structure he’s pioneering is here, although Merv himself is retired: http://choice3realty.com/our_services/000002.html

BTW, a colleague I referred to Jim paid Jim per hour to write a contract for a house he found and was ready to buy.

I would pay finder fees for leading me to a property that wasn’t publicly on the market and I closed the deal due to the intro.

I personally don’t need an agent to tell me what price to offer, fill out a purchase order, or to handle a negotiation for me.

But on the flip side, I don’t waste a buyer agent’s time either. I don’t ask them to drive me around, tell me about the local area, or arrange viewings for me. I do all of this myself.

That’s why when I make an offer, I make it clear that in my purchase order that I will not be requesting half of the listing agents commission (normally reserved for the Buyers Agent) and I would expect that they would be providing that back to the seller.

All that being said, I do like your model that you crafted should a person want to use a Buyer’s Agent. The only problem I can foresee is that how do you prevent an unscrupulous Buyer Agent from collecting deposits from a variety of Buyers and then really representing you versus other buyers. In addition you have to worry about if the dream house you wanted was sold to one of the other Buyers for this Buyer Agent how do you deal with the hurt feelings because you already compensated this person to find that house.

My question to you is if you already know what you can and cannot afford to pay; you know what house will and will not make you happy; and you can find all the houses on caar.com; why do you need an agent to help you find a house?

Since you don’t use buyer agents, it’s probably a pure hypo here but…

Would you pay a buyer’s agent separately, up-front (at least partially, to compensate for his time), if you then knew that any proceeds from the sale went back to you (or to the seller to reduce the price, which is the same thing)?

The key is to make sure that your agent is financially tied to you, rather than to the seller.

-rsh

Who do you think makes up the stupid laws? The Realtor Association has a very strong lobbying group to do this. Why? Because the objective of the lobbying group is to protect the system and the commission frame work as is.

I am not an attorney, but I do believe that rebating commissions is NOT against the law in Virginia. I have seen a company called http://www.readyrealestate.com that does just that in Northern Virginia. They give back 1% of the purchase price in commissions back to the buyer.

In some states I have seen Sellers only getting charged 1% by the listing agent with a 3% towards the buyer agent.

You can contract anyway you see fit. The Buyer Agent is always going to get paid out their proceeds from your purchase. An example I have seen used is as follows:

SPECIAL TERMS
“Buyer’s agent shall credit Buyer 20% of 3% of the sales price at recordation through escrow for Buyer’s closing costs.”

I am sure your attorney could write one up that addresses how you would like to proceed. Harder part is to get an agent to break the status quo and give you your money back!

It isn’t shocking that some states have stupid laws. Most laws are. Stupid, that is.

I suppose you can create workarounds in a gray/black economy kind of way.

“Hey, so I can’t refund you this $4,500 because it’s against the damn law. But why don’t you come see me a couple of months after you’ve moved in, and uh… do some home improvement work that might cost… oh, let’s say… $4,500?”

And FWIW, man… if you can’t afford to pay a professional some dollars to do a $300K transaction… maybe you shouldn’t be in the market? Renting isn’t evil.

Jim -

You know what might be fun: publish a “starbuck’s style” price list.

Buyer’s Rep – $4,500 (Tall), $6,000 (Grande), $7,500 (Venti)

etc.

-rsh

Thanks for stopping by and for the kind words. To be brief to your question – yes. Absolutely I would work for something like you outlined above, or a hybrid of any of the above. One I have done recently is hourly fee up to contract, and then x percent from contract to close, paid by the buyer and not the seller.

Our world needs help and change.

… I do want to point out that it strikes me as the height of folly for any buyer to trust representation by someone who isn’t on my payroll. Would you trust a lawyer getting paid by the guy you’re suing? So why would anyone trust an agent getting compensated by the seller?

No sh*t. Buyers are starting to get this, sellers are starting to get this, even a handful of Realtors – but what I’ve found is that the status quo is so remarkably strong and entrenched it’s going to take a generation or three, or God help us, an act of Congress, to fix this.

Daniel – on the “destroying the MLS” red herring – yep, I’ve heard it too. But here’s a question I put forth on that NAR MLS Group I was on (and got put into the final report, I think) – why not have an MLS based on cooperation, but not necessarily compensation?

1 – Divorce Commissions
2 – Eliminate single agent dual agency
3 – Live happily ever after.

(in fairness, many attorneys are paid in exactly the way you describe– by the person/business they are suing. They work on contingency with their client. The difference is that their compensation is negotiated with their client, and not determined by the party being sued)

I dream about buyer agency arrangements like that. They are just that, however, dreams. Most clients don’t have the cash to commit. They want the agent to assume all the transactional risk.

The other impediment to the type of arrangement you describe is that rebating of commission is illegal in some states. As stupid as that sounds, it is true.

The thing that I want more than anything in real estate agency is for the buyer to pay the buyer’s agent’s commission, and the seller to pay the seller’s agent’s commissions.

I can’t, for the life of me, figure out why this can’t happen. I have been given the reason that it would destroy the MLS because the MLS exists for broker cooperation, the core of which is the offer of compensation from broker to broker. That is a lame excuse.

There are too many smart people in the world for the commission structure to remain the way that it is.

First, Jim — congratulations to you, and much luck to your endeavors.

Second, Jim — has anyone ever told you that you kinda look and sound in that video like Maximus Decimus Meridius? Just sayin’

Third, Scott’s direct question has been answered by Daniel, but I do want to point out that it strikes me as the height of folly for any buyer to trust representation by someone who isn’t on my payroll. Would you trust a lawyer getting paid by the guy you’re suing? So why would anyone trust an agent getting compensated by the seller?

Exceptional people like Daniel may care little about his financial incentives (or have bigger picture incentives in mind) in representing a guy who isn’t paying him, but I don’t think that’s particularly wise.

If I’m ever in the market again to buy a house, I would seek to retain a paid buyer’s agent on an hourly basis or on a project basis (“$5,000 for the transaction”), and figure out a way to have the 3% buyer’s commission be paid to me. (For example, if the flat rate is less than 3%, my agent refunds me the over; if it’s less, then I pay up to full directly.)

Would this work?

I agree to pay $6,000 total to my buyer rep. $2,000 up front, $2,000 when we go into contract, and $2,000 at closing. From me.

The 3% buyer’s agent commission comes to $4,000. I’ve already paid $4,000 and owe another $2,000 to my agent. My agent keeps $2K of the $4K, and refunds me $2K. Or…

The commission comes to $1,500. I’ve already paid $4K, and owe $2K to my agent. I write a check for $500 to my agent.

Would either of those work for buyer agents?

-rsh

Thanks for the insightful comments. I regret being so late to the conversation, but Daniel has pretty much said everything I have been thinking.

Divorcing the commissions is a challenge that must be mounted by consumers and forward-thinking Realtors, and must be done hand-in-hand with eliminating Dual Agency.

Scott –

Does the hourly fee structure speak to what you’re proposing? It appears that you don’t need the “chauffeur” and “identifying” components of a Realtor’s offerings, but may benefit from comps and context.

To the “selling out the client for $750″ – I called Daniel and asked him to get out of my head, as that is the exact number and example I was going to use.

To that point, here is my example – I regard each buyer client with whom I work as at least three transactions*

1 – When I sell them a house
2 – When I sell it for them when they move/trade up or down
3 – When they refer friend or family to me.

Anything I may gain from not negotiating the best price/deal (it’s not always about price) is not worth my clients’ doubting my loyalty or dedication to them … and that’s yet another reason I don’t believe single agent dual agency is good for the consumer or the profession.

* I don’t think of people as “transactions” but as people, but for the purpose of this comment …

Thank you for the kind words. I always enjoy lively discussion, especially when it is done in a respectful manner.

I’m glad you liked the post on real estate search. The company that I was referring to in the post, OnBoard Informatics, has this really cool search tool called “Navigator” that makes available tons of interesting information that folks might find relevant in their real estate search. I am one of the agents testing it for them.

If you get a chance, I would appreciate it if you could run in through its paces and give me some feedback: http://budurl.com/navigator

I know that the folks at OnBoard would greatly appreciate any feedback from consumers. You can email me at Daniel[at]RealEstateZebra.com

Didn’t want to highjack the comment thread there, so I will close by saying– divorce the commissions, then eliminate single-agent dual-agency!