DID YOU KNOW? Most sellers will pay their real estate agent a 6% commission, and usually half of that is shared with the buyer’s agent. Interestingly, if the buyer doesn’t have an agent, the seller’s agent can often keep the entire 6% commission.
MY OPINION… if the buyer doesn’t have an agent (avoiding the need to pay a commission to a buyer’s agent), the seller’s agent should be paid a 3% commission, and the purchase price should be reduced by 3% - after all, the seller will net the same amount for the house, and the seller’s agent will still get the 3% commission he or she was expecting. Obviously, buying a house is very significant, and the decision to do it without an agent should be made carefully. Among other things, you’ll want to be sure you have a good feel for home values in the current market so you don’t end up paying more than you need to.
A RECOMMENDATION: If you find a house on your own (without a real estate agent, as more and more buyers do), and the seller is represented by a real estate agent, try to negotiate a lower purchase price based on the saved commission as discussed above. If the seller or seller’s agent is unwilling to reduce the price, consider the alternative approach outlined below. Part of the 6% commission that the seller has already agreed to pay can, and should, end up in your pocket – after all, you performed the search and found the house. I can represent you as your real estate agent, provide expert assistance from contract to closing, and then rebate all but 1% of the buyer’s agent commission to you. By taking this approach a significant cash rebate can be paid to you promptly after closing on the purchase of your house.
HERE’S HOW IT WORKS:
1. You hire me as your buyer’s agent. I’m a licensed real estate agent with Logical Move LLC, a Utah real estate brokerage. I have 15 years of experience with real estate transactions and I’ve helped hundreds of clients buy and sell property.
2. I provide the following limited services to you (to be clear, I’m not a full-service agent and therefore I won’t be the right fit for everyone).
a) Real Estate Purchase Contract. Discuss transaction terms, strategy and recommendations with you and prepare all necessary contract documents (offers, counter-offers, addenda, etc.) between you and the seller in accordance with your objectives. Monitor compliance with contractual obligations.
b) Title Insurance. Coordinate with the title company to open an escrow account, hold the earnest money deposit, and provide the title commitment. Review the title report and list of exceptions and consult with you regarding any title concerns or issues that need to be resolved before closing.
c) Settlement and Closing. Review the closing costs and settlement statement for accuracy, review the warranty deed and escrow closing documents and coordinate with the title company to ensure that all closing requirements are completed.
d) Consultation. Discuss the purchase process with you, keep track of relevant dates and deadlines, provide advice, answer your questions and provide guidance until the transaction is complete.
3. When the transaction closes and the buyer’s agent commission is paid, I keep one percent (1%) and rebate the rest of it to you. As noted above, in most transactions the buyer’s agent commission is 3% of the purchase price. This means that if you buy a house for $400,000, I keep $4,000 (1%) and rebate $8,000 (2%) to you. Again, my 1% commission and your 2% rebate are both paid for by the seller.
Commission rebates or refunds make it easier to buy a house and are allowed under Utah law and encouraged by the U.S. Department of Justice. In addition, the IRS has issued a private letter ruling regarding commission rebates, stating that “a payment or credit at closing … represents an adjustment to the purchase price of the home and generally is not includible in a purchaser’s gross income.”