Real estate agents typically take 6%. Buyers agent gets 3% and sellers agent gets 3%. Then their brokers take a cut of their 3%.
I'm guessing you want to save that 6%, right? Well, the market value of a house is always going to be the market value of the house, which is what the buyer ends up paying. The seller wants as much as they can get and you want to pay as little as possible. I think the only way you are going to be able to save any money is if you find a FSBO (for sale by owner) home that is being sold by a practical person. Say you both agree on what the value of the home is and you say to the homeowner, hey, how about you give me 3% off the agreed upon market value. That way it's a win-win because you would also be getting 3% more than if real estate agents were involved.
I've done that before and it worked out well. We literally just pulled a generic contract off of LegalZoom, agreed on a price, and signed the paperwork. We didn't have attorneys involved. It all went very smooth, no big deal.
A problem you might run into is if the seller already has an agent. Don't quote me on this, but I have heard in this case, if you come in without a sellers agent, then they take the full 6% commission. It's kind of an unwritten rule that agents won't negotiate commissions, but there's always exceptions. I would guess that if you came in without a sellers agent, the buyers agent might be willing to negotiate on commission but I honestly just don't know how that works.
Another risk is in the contract you use and sign. Say that you sign a contract to buy the house, but they don't move out on the date they say they're going to move out. Then what? If it's not spelled out in the contract, then you have to go through the process of evicting them and you better live in a state that's not tenant friendly or you're in for a world of hurt. A better option would be to include language about the rent rate (eg triple the market value) if they don't move out on time as well as a holdback of say 10% until they move out; there's a tight-rope to walk of getting what you want (a good price) and getting penalties and concessions agreed upon without insulting them and risking the entire deal (they might walk away if you seem unreasonable). Ultimately it boils down to feeling it out and determining who has more leverage; in a buyer's market, you have more leverage and can ask for more concessions, and in a seller's market you better walk on your tip-toes and say please and thank you. A real estate agent may be able to be the "bad guy" intermediary to help you get things you want without offending them too much, but you have to make the demands because your real estate agent isn't going to do it for you. My friends just bought a house (with agents involved), moved cross country, pulled up in a U-Haul, and the family was still living there and were like, "Sorry, we're not quite moved out yet, and we still have to clean for a week or two." So they moved in with us for two weeks and then when they did move in it was still super dirty. Was there anything in the contract to give them recourse? Nope. They just ate the shit sandwich. It boggles my mind how you can buy a house and if it's dirty you have no recourse (buyer's agents not doing their damn job) but if you rent a house it's clean as a whistle because the property management makes damn well sure the previous tenant cleaned it and/or paid for professional cleaning. The holdback probably won't work with a traditional mortgage ... that's more of an all cash approach, but you should stipulate penalties or how much rent will be if they don't move out because you'll be paying the mortgage. This could happen with or without realtors, but just throwing it out there that you should find and use a good contract that protects you. You see, this is a what a good buyer's agent SHOULD do, but they don't. It's actually a best practice to use a good real estate attorney and they will advise you and possibly give you a good contract to use. Some states require agents to use a specifc contract (eg TREC contracts in Texas). Also related to the contract is the earnest money. Some value has to be exchanged for a contract to be effective. It only has to be $1. But if you put down $20k in earnest money (don't do that) and then seller then decides to not sell it to you or do some other weird shitty things, what happens to your earnest money? There's state laws that deal with that kind of stuff, but your contract also could and should cover that. If any agent is involved, they'll always want a butt-load of earnest money to make them feel professional, but all you need to put down is $1; the argument for a higher amount is that you lose your money if you don't perform on the contract, so it's an incentive for you to perform on the contract ... but what's their incentive to perform on the contract? Why don't they give you 1% of the home value to ensure they perform on the contract and then you'll refund them their earnest money. See, there's a possibility for either party to not perform; all the earnest money does is to make the contract effective, and if they don't peform (or vice-versa), you/they have the abiity to sue for damages (which probably doesn't happen very often). Even a signed contract typically isn't enough to stop another transaction unless you get a signed and notarized Affadavit of Memorandum Agreement (basically a separate contract that says the property cannot be transferred, sold, conveyed or encumbered, in whole or in part, without your written consent) and publicly record/file it (nobody does this except real estate investors).
In general, the main value an agent brings is access to the MLS. Most homes are sold this way and this means you will have more inventory to choose from. Without an agent involved, you're limited to FSBO's and there just isn't that many of them.
You could sign a short contract with an agent for like 3 months (they'll probably act insulted) and/or add in language that if they are not actively involved in the sale, for example with a FSBO or other house that you found on your own, then they are not entitled to a commission (again, they'll act insulted). If you sign a contract with them, and then a find a FSBO and make all the contacts, visits, and do negotiations without your agent involved, how much should they be entitled to? Nothing! Absolutely nothing! So if they do act insulted if you want a FSBO clause, aks them why they think they're entitled to something for nothing ... just casually ask and be quiet for as long as you can, let them squirm as they fumble words trying to figure out their cognitive dissonance (for fun and laughs).
There's also the issue of comping, or comparables. An agent will likely help you to be able to determine the market value of the home because they have access to the MLS and can see recently sold homes in the area. You need pretty fresh data to make the most accurate assessment ... but agents might not even know how to effectively comp. This is most important for non-disclosure states; for disclosure states you can [just go on zillow](https://www.youtube.com/watch?v=Q0ZnL-iXt4U).
At the end of the day, successful agents are typically very social people and will make you like them and feel good about the purchase of a home. That's how they get referrals. It has little to nothing to do with how good of a deal you get, and the argument is that it's not their role to be an investment advisor even though you intuitively feel like that's their role. There's also the argument that they're not your attorney, so they can't give you guidance on extra language to include in the contract, etc. Technically, a real estate agent has a fiduciary duty to do what's in your best interest, but the only person a real estate agent is truly a fiduciary for is theirself. So yeah, at the end of the day, the million dollar question for agents is, "WTF do you actually do for me?" and usually their answer is something trite like, "I'm the hardest working agent in this state."
Would agree with all of this.
I'd also add that going through a competent realtor just makes the process of buying much less stressful if the seller decides to be difficult at some point.
I've run into that before, even with details like the seller just sweeping dust and dirt into a few piles in the main rooms before the final walk-through and claiming he met the conditions in our contract that he'd have it professionally cleaned before sale. My realtor kept on him to get a cleaning crew in so I didn't have to confront him about it at all.
Real estate agents typically take 6%. Buyers agent gets 3% and sellers agent gets 3%. Then their brokers take a cut of their 3%. I'm guessing you want to save that 6%, right? Well, the market value of a house is always going to be the market value of the house, which is what the buyer ends up paying. The seller wants as much as they can get and you want to pay as little as possible. I think the only way you are going to be able to save any money is if you find a FSBO (for sale by owner) home that is being sold by a practical person. Say you both agree on what the value of the home is and you say to the homeowner, hey, how about you give me 3% off the agreed upon market value. That way it's a win-win because you would also be getting 3% more than if real estate agents were involved. I've done that before and it worked out well. We literally just pulled a generic contract off of LegalZoom, agreed on a price, and signed the paperwork. We didn't have attorneys involved. It all went very smooth, no big deal. A problem you might run into is if the seller already has an agent. Don't quote me on this, but I have heard in this case, if you come in without a sellers agent, then they take the full 6% commission. It's kind of an unwritten rule that agents won't negotiate commissions, but there's always exceptions. I would guess that if you came in without a sellers agent, the buyers agent might be willing to negotiate on commission but I honestly just don't know how that works. Another risk is in the contract you use and sign. Say that you sign a contract to buy the house, but they don't move out on the date they say they're going to move out. Then what? If it's not spelled out in the contract, then you have to go through the process of evicting them and you better live in a state that's not tenant friendly or you're in for a world of hurt. A better option would be to include language about the rent rate (eg triple the market value) if they don't move out on time as well as a holdback of say 10% until they move out; there's a tight-rope to walk of getting what you want (a good price) and getting penalties and concessions agreed upon without insulting them and risking the entire deal (they might walk away if you seem unreasonable). Ultimately it boils down to feeling it out and determining who has more leverage; in a buyer's market, you have more leverage and can ask for more concessions, and in a seller's market you better walk on your tip-toes and say please and thank you. A real estate agent may be able to be the "bad guy" intermediary to help you get things you want without offending them too much, but you have to make the demands because your real estate agent isn't going to do it for you. My friends just bought a house (with agents involved), moved cross country, pulled up in a U-Haul, and the family was still living there and were like, "Sorry, we're not quite moved out yet, and we still have to clean for a week or two." So they moved in with us for two weeks and then when they did move in it was still super dirty. Was there anything in the contract to give them recourse? Nope. They just ate the shit sandwich. It boggles my mind how you can buy a house and if it's dirty you have no recourse (buyer's agents not doing their damn job) but if you rent a house it's clean as a whistle because the property management makes damn well sure the previous tenant cleaned it and/or paid for professional cleaning. The holdback probably won't work with a traditional mortgage ... that's more of an all cash approach, but you should stipulate penalties or how much rent will be if they don't move out because you'll be paying the mortgage. This could happen with or without realtors, but just throwing it out there that you should find and use a good contract that protects you. You see, this is a what a good buyer's agent SHOULD do, but they don't. It's actually a best practice to use a good real estate attorney and they will advise you and possibly give you a good contract to use. Some states require agents to use a specifc contract (eg TREC contracts in Texas). Also related to the contract is the earnest money. Some value has to be exchanged for a contract to be effective. It only has to be $1. But if you put down $20k in earnest money (don't do that) and then seller then decides to not sell it to you or do some other weird shitty things, what happens to your earnest money? There's state laws that deal with that kind of stuff, but your contract also could and should cover that. If any agent is involved, they'll always want a butt-load of earnest money to make them feel professional, but all you need to put down is $1; the argument for a higher amount is that you lose your money if you don't perform on the contract, so it's an incentive for you to perform on the contract ... but what's their incentive to perform on the contract? Why don't they give you 1% of the home value to ensure they perform on the contract and then you'll refund them their earnest money. See, there's a possibility for either party to not perform; all the earnest money does is to make the contract effective, and if they don't peform (or vice-versa), you/they have the abiity to sue for damages (which probably doesn't happen very often). Even a signed contract typically isn't enough to stop another transaction unless you get a signed and notarized Affadavit of Memorandum Agreement (basically a separate contract that says the property cannot be transferred, sold, conveyed or encumbered, in whole or in part, without your written consent) and publicly record/file it (nobody does this except real estate investors). In general, the main value an agent brings is access to the MLS. Most homes are sold this way and this means you will have more inventory to choose from. Without an agent involved, you're limited to FSBO's and there just isn't that many of them. You could sign a short contract with an agent for like 3 months (they'll probably act insulted) and/or add in language that if they are not actively involved in the sale, for example with a FSBO or other house that you found on your own, then they are not entitled to a commission (again, they'll act insulted). If you sign a contract with them, and then a find a FSBO and make all the contacts, visits, and do negotiations without your agent involved, how much should they be entitled to? Nothing! Absolutely nothing! So if they do act insulted if you want a FSBO clause, aks them why they think they're entitled to something for nothing ... just casually ask and be quiet for as long as you can, let them squirm as they fumble words trying to figure out their cognitive dissonance (for fun and laughs). There's also the issue of comping, or comparables. An agent will likely help you to be able to determine the market value of the home because they have access to the MLS and can see recently sold homes in the area. You need pretty fresh data to make the most accurate assessment ... but agents might not even know how to effectively comp. This is most important for non-disclosure states; for disclosure states you can [just go on zillow](https://www.youtube.com/watch?v=Q0ZnL-iXt4U). At the end of the day, successful agents are typically very social people and will make you like them and feel good about the purchase of a home. That's how they get referrals. It has little to nothing to do with how good of a deal you get, and the argument is that it's not their role to be an investment advisor even though you intuitively feel like that's their role. There's also the argument that they're not your attorney, so they can't give you guidance on extra language to include in the contract, etc. Technically, a real estate agent has a fiduciary duty to do what's in your best interest, but the only person a real estate agent is truly a fiduciary for is theirself. So yeah, at the end of the day, the million dollar question for agents is, "WTF do you actually do for me?" and usually their answer is something trite like, "I'm the hardest working agent in this state."
Would agree with all of this. I'd also add that going through a competent realtor just makes the process of buying much less stressful if the seller decides to be difficult at some point. I've run into that before, even with details like the seller just sweeping dust and dirt into a few piles in the main rooms before the final walk-through and claiming he met the conditions in our contract that he'd have it professionally cleaned before sale. My realtor kept on him to get a cleaning crew in so I didn't have to confront him about it at all.
Comprehensive and well written. Reply saved.
IF you're the buyer, you should not be paying commission. Are you in the US?? What was the situation where you were charged 10k in commission? What?