There’s always something to howl about.

How not to divorce the real estate commissions: L.A. buyer figures out who pays the commissions but seems not to grasp the nature of the listing agreement

Via Freakonomics, the L.A. Land weblog at the Los Angeles Times has a shaggy-dog story about a buyer who came up with a brand new way to shoot herself in the foot: Pay all the commissions herself, regardless of the terms of the listing agreement and the HUD-1 procedures currently in place:

I thought it would be Super Smart to restructure the traditional home purchase offer. Traditionally, when you buy a house you just give the purchase money to the seller and the seller pays the 5% commission out of that. But when you think about it, you are agreeing to pay 5% more for the house, and that translates to a bigger down payment, a bigger mortgage and bigger property taxes every year. So I figured it would be brilliant to subtract the 5% off the purchase price and pay the agents’ commissions separately myself. Seems like no big deal, right? Wrong.

She actually worked it out to honest math, which is more than lenders and title companies can do. But of course the sellers couldn’t go along with this, even if they had wanted to, without being released from the listing agreement.

Per the purchase contract, the buyer would pay 5% of the full purchase price outside of escrow (a RESPA violation?), and the seller would pay an additional 5% at the closing table, per the terms of the listing contract. The agents might well have hated this idea — it is stoopid, after all — but not for financial reasons. Double-dips all around! Who could object?

Even so, just because the buyer made a thoughtless mistake — no doubt against the better advice of her agent — this doesn’t mean she’s wrong. Except in a short sale, the buyer pays for everything that gets paid for at the closing table. It would be a boon to consumers to make our processes reflect this fact.

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