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Repeat after me: Mr. Realtor, what do you charge?

This is my real estate column from today’s Arizona Republic (permanent link). Today should be a fun day. My editor told me that, in respose to last week’s column, a Realtor called him, threatening to turn me in to the Arizona Department of Real Estate. I can’t imagine what the violation might be, but the hearing would be a hoot.

 
Repeat after me: Mr. Realtor, what do you charge?

Want to foment a revolution in residential real estate? It’s easy to do. Just learn these five simple words: “How much do you charge?”

Sellers have known that question forever. It’s often the first thing they say at a listing appointment. They understand that they are hiring a Realtor for representation and marketing, and they want to know how much it’s going to cost them.

Historically, buyers have not understood that they, too, pay for representation. Realtors have always insisted that the seller pays all sales commissions, even though every dollar on the closing table is brought there by the buyer.

Unless the seller is taking a loss, the buyer pays for absolutely everything. That’s true not just for houses, but everything.

When you buy a bottle of Pepsi, the marketing and advertising costs are not paid by PepsiCo. They’re paid by you as a part of the purchase price.

In just about every other line of business, vendors roll out the red carpet for buyers because they know that buyers make the world go around.

Not so in residential real estate. We baby buyers, telling them tender, loving lies: “Buyer representation is free.” “I’m paid by the seller.” “My services cost you nothing.”

All of this is false. The cost for buyer representation is rolled into the purchase price, just as the cost of marketing and advertising is rolled into your bottle of Pepsi.

There is a difference, though. If you would have bought the Pepsi anyway, you can’t ask Pepsi to scale back its marketing costs.

But if you’re hiring a buyer’s agent to help you buy a home you have already decided to purchase, you should practice those five simple words: “How much do you charge?”

If you’re buying a new build, the builder may be paying “your” agent a huge commission. You should negotiate to make sure that you receive any funds over a reasonable rate.

The price you pay for a buyer’s agent should be proportionate to your needs. But you will not get to a more reasonable buyer’s agent’s commission without mastering those five little words: “How much do you charge?”

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  • 13 comments

    13 Comments so far

    1. [...] BloodhoundRealty.com Home Page There’s always something to howl about « Repeat after me: Mr. Realtor, what do you charge? [...]

    2. [...] Agent Commission September 29, 2006 I was reading Greg’s newest article on Buyer Agent Commissions and thought it might add more information to both his readers and ours, to run a “PointCounter Point” kind of discussion. So I have his article up side by side and will touch on some of the points where I either disagree with Greg, or have something to add. [...]

    3. For Sale by Owner Center September 29th, 2006 2:36 pm

      Hello Greg,

      Great post. I’ve touched on this several times here and here on my blog. It’s the dirty little secret that nobody in the real estate community wants to talk about. It’s funny because the little lie is even encourage by the NAR’s wonderful code of ethics..

      Standard of Practice 12-2

      REALTORS? may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR? to obtain a benefit from a third party is clearly disclosed at the same time. (Amended 1/97)

      I’m glad you are that a agent has had the nuts to address because nobody wants to discuss it with the FSBO community.

    4. Greg Swann September 29th, 2006 3:55 pm

      > I’m glad you are that a agent has had the nuts to address because nobody wants to discuss it with the FSBO community.

      There’s more coming. But I’ve already written quite a bit on this topic.

      I think FSBO sellers hold the key to blasting the whole thing wide open…

    5. Jonathan Dalton September 29th, 2006 4:08 pm

      It seems this is written from the perspective that most Realtors will be afraid and/or unwilling to answer the question.

      I have no more issue validating the commission I receive for my buyers than I do in justifying the commission I charge when I take a listing.

      What unrepresented sellers (so named because all homes are sold by their owners, whether represented or not) don’t want to hear is many buyers, when faced with the compensation coming out of their pocket rather than being wrapped into the sales price, lose interest in a home.

      The spin is the big bad agents aren’t showing these homes. I’m happy show the home of an unrepresented seller if my buyer is willing to pay my commission. If they are not, we move on to others. It’s just that simple.

    6. [...] Ardell raises some questions at Rain City Guide about my column in this morning’s paper on negotiating the buyer’s agent’s commission. I’m going to address some of her remarks here, but my fullest statement on the topic is quite a bit more comprehensive. In the newspaper, I get 350 words a week, with the result that I am splitting this one topic over 5 (or possibly more) weeks. I’m thinking, too, that we should create a category for these weblog posts, because both Cathy and I are writing quite a bit on the subject. [...]

    7. Jason Leister September 30th, 2006 1:39 pm

      Greg,

      Great job. Your opinion, clearly communicated with no apologies. How refreshing in an age when everyone is so busy trying to appeal to everyone else.

      Hopefully your decision to take such a public stand on an obviously controversial issue like this will help convince more Realtors® (the ones that agree) to take advantage of the huge marketing opportunity that being one of the first to “tell it like it is” creates.

    8. [...] The For Sale By Owner Center has further thoughts on negotiating commissions for buyer representation. [...]

    9. [...] Ask, as Greg Swann writes in his article, Repeat After Me, Mr. Realtor, What do you charge? I write my agreements up front with clients so they know what my commission is and don’t have to ask later on. If you’ve signed a buyer agency agreement with an agent, then ask when you’re putting in an offer. The commission is listed in the MLS so it’s a really easy question to answer. [...]

    10. Joanne May 24th, 2007 7:48 am

      As a seller listing on craigslist and America’s Choice, I am seeing potential buyers that are naive and confused. They don’t understand that here in NY it’s the attorneys who protect your interests in a real estate transaction; the agents don’t do much that a buyer or seller can’t do themselves these days, and without the MLS. Yet it’s the buyers who are brainwashed into using buyers agents and insisting their agent’s interests (in commissions) be protected, even when they find a home themselves. If these people were selling used cars, up-front disclosure would have been legislated long ago.

    11. [...] as Greg Swann writes in his article, Repeat After Me, Mr. Realtor, What do you charge?  I write my agreements up front with clients so they know what my commission is and don’t [...]

    12. It is absolutely correct that buyers pay for everything. While it may appear that a seller is paying for commissions on paper, it is really the buyer who pays for it through the sales price.

      So, why all this procuring cause non-sense from listing agents? If the buyer wants their own buyer broker, so it should be.

    13. Susan Zanzonico July 19th, 2008 7:18 am

      Old post, but this is one of those topics that will live on. I also share my commission information if asked. I have no problem with that and feel as justified receiving commission on the buy side as on the listing side.