Metro Detroit Real Estate Homes For Sale

Commissions are based on the listing contract between the seller and the listing agent, the contract for purchase is between the buyer and the seller.

Commissions are not part of the purchase contract no matter how much this buyer wants it to be.

This is crazy for the potential buyer to expect you to give up your commission. Does he work for free?!? What happened with this transaction?

B

Cathy - Great post.  It has happened to us sooo many times where a buyer will come to us and want the deal to go through us with a demand for a lower commission if his deal is accepted.  As the previous comment was made, the commission is an agreement between the listing agent and the seller.  Sometimes, we may have an agreed upon amount if we do dual agency or it still may be a full commission.  

What is a pet peeve here is that you took the time to show the house to this buyer and did what you needed to do to get them into the position to make an offer on the property and then wanting to go in that direction.  The better way would have been a communication of the intent and to ask you directly what their options were.  There is sooo much work that still goes into the equation.  If the buyer represents themselves, you basically end up representing them anyway through the whole process, mortgage, title, inspection... etc.   I would think that the buyers that "want to do it on their own" will eventually see the light and have an ephiphany that they will get that great or better deal if they had a buyers agent that was working for them, whether it be buyers agency or dual agency.

The bank isn't going to credit the buyer the commission, ridiculous. First of all I would never have given said buyer any contract to fill in on their own. You need to meet them and have them sign with you present. Then you could have explained our listing contracts work.

Not being asked is the thing that gets me here. Who the heck do they think they are? But, if it is signed, sealed and delivered, I would have them to EVERYTHING necessary to make it close. After all you ARE not representing them.

It takes all kinds, doesn't it?

One of the worst things we tell buyers, is that the seller pay the buyers' agent.  We should be telling them that the listing broker pays the buyer's agent.  The public always thinks they're saving the seller money by going alone when the seller has already agreed to the commission amount they're paying.

Andrew:  I was so surprised when I saw it as it had never happened to me before.  I was so glad I showed it to the owner of our company who said the same thing - the commission is between the seller and the broker and it gave me the ability to address it.

Betina:  The second part of the story is one of my next posts.  It was an unusual situation all around and is still in negotiation.

Cathy,

I too agree that I would have never given him a contract to fill in.

Cathy

You can not negotiate commission in the offer or counter offers. the commission has been previously negotiated and contractually agreed upon between seller and listing agent. Now on a short sale you may not be able to double pop the commission but your fiduciary responsibility is to accept the highest offer. In my office we will not accept a contract where the buyer or buyers agent negotiates the commission in the offer. We return the offer and explain that commission can not be a part of the offer sheet.

As others mentioned, the commission is not negotiable in the offer. On the off chance that the buyer was able to get an offer like this accepted, I'd be afraid to see what they would come up with when it was time to negotiate repairs after the inspection.

Hi  Cathy!
I do agree with a few of the other comments on this subject.  It would never occur to me to give the buyer a contract.  It is an invitation to fill it out incorrectly, which is what happened.

If I understand your story correctly, the buyer did not ask for your portion of the commission...only the part that his agent, if he had one, would have gotten.  I always find this approach facinating.  Why do buyers think that if they either don't have representation at all, or use the listing agent, they should have some right to the buyers side commission.  What buyers don't seem to understand is that it is twice the liability, twice the work and more than twice the time.  I blame it on ignorance as to how the system works.  Maybe if they understood it more, they would understand why this is upsetting.

*As a side note, you may want to make this a "Members Only" on such a sensitive subject....just a thought.

Wow, can't say I've ever heard of something like this.  I'll be watching for an update on the result of the negotiations.

its unfortunate that there are people with that sort of ethical behavior

His telling you that he has his own form tipped me off on what was to come.  I bet you $5 he had an attorney give him advice on how to start the process of purchasing the home without his own represenation. 

Live and learn Cathy.  That's all you can do from this point on.

Great subject, Cathy!  I'm eager to see how things are progressing with this customer.  We've done a very poor job as an industry at reinforcing our "value" to the consumer.  They understand very little about us, and the fact that we have so many "players" in the industry now (many of whom "call" themselves agents, yet really do nothing that hints at agency or representation...and who actually tell buyers to do exactly what this buyer did) how is the consumer to know the difference.  Buyers "believe" our job is to find them a house; sellers "believe" our job is to find them a buyer.  Both don't understand that the "finding" part is just that....PART of our job.  We need to do a better job at educating the publlic and DIFFERENTIATING ourselves.

Keep us posted!

We are seeing more of this with virtual agents.  Buyers are duped into thinking they can do this...but the listing contract sets commission.

Hmmm the thing that is a concern is that the commission is not his business, only the sales price.  Are you required to present an offer from a person who is not represented by a Realtor?  Or are you only required to present offers from other agents?  Check out your legal position.  The seller has hired you and agreed to a commission for both listing & selling agent which is negotiable ONLY with the listing broker and the seller.

From another perspective, If the seller (bank in this case) was willing to deal with the general public in an unrepresented manner, would they list with a Realtor?  Isn't the job of a Realtor is to execute the sales process in a legal manner and bring it to close as clean and clear of potential problems as is possible?  Does the bank want to put themselves in a liability position?  Or do they want to stay clear of this sort of thing?   

This is a very interesting post and it would be great to see how it all works out! 

Consumers just don't understand that the commission arrangements are specified in a contract between the seller and listing agent, and they have no say.  Wait.  That's in theory... They do, in reality. 

I sold my own listing recently and the seller blackmailed me and my broker, saying they would not even LOOK at an offer we brought them without first modifying the listing to say we would be paid only the listing side if they accepted an offer from the buyer we brought them.  The buyer fully understood that we represented the seller and did not represent him in any way, but opted not to work wth another agent. 

Well, I'm going to start with the contract form.  E&O insurance usually requires that agents and brokers use only board approved forms.  So, even if the law doesn't require a board approved form, my E&O does and, therefore, so do I.

As for giving up the selling side of the commission, that's why many consumers are not working with an agent.  They continue to believe that they will get a better deal if there is no commission to an agent representing them.

Fact is, they are too often correct. 

Sellers, especially banks, look at the net proceeds.  So do builders.  So do FSBO sellers.  We like to think and tell folks that it doesn't make any difference, but I've seen too many cases where it did make a difference. 

In times where I have sold my own listing over the years, I do discount the selling commission and reduce the buyer's agency split. 

It's the bottom line to the seller that sells real estate.

Cathy: I really do want to know what happened as I am the listing agent for my first short sale. I am working through an attorney who will present the offer. It is true that the commission is between agent and seller, but it confounds me that buyers won't want legal representation. Let me know how this turns out. Janice Roosevelt, Ecobroker, ABR, ePRO Keller Williams - Licensed in PA & DE

Dear Cathy,

I think this is very interesting and I am wondering if this is possibly a past real estate professional.  You are in Michigan and we all know how many people got out of the business...I can't wait to read your conclusion.  That is my guess...he was in the business and got out and now he thinks he can represent himself.

If that is not what happened I would love to know what caused him to have such feelings about our industry.

In Pennsylvania, the seller always pays the commission, or in this case, the lender for the seller.  The buyer services to the buyer from the Realtor are of course free to the buyer.  I think it is best not to get into that discussion with the buyer, other than it is free to him.

Then you negotiate the best deal for your buyer.

Thanks.  Great post

Don

The commission agreement is between the seller and the listing broker. It is technically the listing broker who offers out the commission to the buyer's agent, although listing contracts spell out the percentage of the commission that the listing agent will earn and the percentage the buyer's agent will earn.

Very interesting how the clause in the offer is worded because it makes it attempts to make it clear that in this transaction, there is no buyer's agent. So what does happen to the commission to the buyer's agent in this case? I wonder if the man who put in the offer is an attorney...

It is disappointing not to earn a buyer's commission in this case. However, the end result is as if there were a buyer's agent on the other side; the listing agent earns only the listing side of the commission. The trick is, as all real estate agents know, that problems arise in every transaction that often require the listing agent and the buyer's agent to work together to solve.

Very interesting post, Cathy. There is a lot to think about here. It will take me a while to mull it over to see how I feel about it. I would be disappointed not to earn both sides of the commission, too, and yet I'm not sure that I can blame the buyer for not wanting representation. Don't get me wrong, I don't think that buying a property without representation is a good thing to do, but it should be an option for a buyer.

Wasn't he crafty!  I am just going to assume that the Seller went with the highest offer and this guy did not get the house.

The nature of our business...ya never know what each day will bring.

Keep smiling!

Debbie

I have had this happen a time or two, a buyer says that they represent themselves, and that they want to save the commission.  I told the last buyer who brought this up that the commission has already been negotiated between the seller and their broker and he wouldn't be saving anything.  I also encouraged him to get his own buyer's agent (and he did!) as it was free to him.  I could just tell from the outset that he would be trouble and I wanted somebody else to deal with him.

I think this has got to be some late night 'save money buying a house' advice he has heard.  I don't intend to play this game with them.  I gladly encourage them to go elsewhere and see if they can find another agent who will bite.

I would like to hear how this turns out.  I too hope another offer is accepted, not this guy's.

Sarah Rummage
Nashville TN

If buyer nor seller is a licensed RE agent by law they have no right to commission. I'm not sure of the law in other states but in SC you cannot collect a commission on the sale of Real Estate without a Broker and a licensed agent. Is your buyer a licensed agent?

Of course, this happens all the time! I really like Jerry's comment that we should say that 'the listing BROKER pays the selling BROKER' not that the seller pays the buyer's agent. Potentially very powerful turn of phrase. It's a shame it happened with a SS too - I am sure you had more trouble negotiating the commission back into the deal with them than you would have with an owner. Good Luck!

What did your seller say? I have sellers that would be so hurt by that statement that they probably wouldn't even negotiate with the buyers.

Hi Cathy:

Yes...dealing with the public, isn't it fun sometimes!  I appreciate the post, you're giving the rest of us a heads-up when dealing with buyers.

I'm not familiar with the real estate laws in Michigan.  Did you contact your local board and ran the scenario past them?

As many have posted here already (and is true in NJ) the commission is dictated by the listing agreement...but we still need to remember however, that commissions are negotiable.

Looking for some more to this story...

Do you have any proof that YOU showed these buyers the property? 

Are these buyers getting the deal?

If these buyers do get the deal, you may have a case...

Good luck,

I've got $5 that says this guy is a ______graduate (fill in the blank with the latest no-money-down, how-to-buy-foreclosures guru)!

OK so perhaps you found the only "smart" guy in MI? Doubt it. Some know so much!

The total listing commission is paid to listing agent from seller. The listing agreement specifies how much commission, if any, the listing broker will pay a buyers agent or a sub-agent. The absence of a buyers agent does not reduce the amount of commission agreed to between the seller and the listing agent.

I recall the first time a buyer asked me to give them the part of the commission for the buyer. I was really shocked by that... now I guess some expect it. You have a contract with the seller, not them.

I read your post this way;

You represent the seller..  some random person wants to make an offer and the amount that would have gone to THEIR agent they want to go to the bank or the seller. What is the concern there? Or are you referring to getting both sides of the deal?

sorry I may have read it wrong.

Cathy:

We have a company in this area that offer sellers and buyers a rebate if they work with them. Yes, a seller recently said that he would not list with me because i did not want to rebate part of my commission to him. I have heard this from others such as buyers also that feel that they should get part of the commission. HUD offers often reflect a commission reduction by the agents.

Hi Cathy: Consumers don't know how real estate works -- which is why they hire us.

The commission should not be discussed in the contract for a variety of reasons, one of which is because the real estate brokers are not parties to the contract. A buyer could write that she wants her agent to do somersaults across the lawn on closing day, but since the agent is not a party to the contract, the agent is not required to perform that particular circus act.

Thats an interesting story, particularly about writing into the contract the buyers commission being deducted.  Buyers or sellers never touch a contract here in New York City.  The attorney writes the contracts.  I think their is a huge misconception that if a buyer is unrepresented that part of the commission will become negotiable.

This type of thing happens to me all the time.  I get calls from people wanting to see a listing and say they aren't working with an agent.  Most of the time I tell them that means they have no representation in the transaction.  Then it comes out that their cousin, uncle, aunt, etc. will actually be the one writing the offer.  But that person doesn't have a Supra key or is out of town today, yada yada.  Then, when the offer finally does come in, it's on the wrong forms, poorly written, no pre-approval and a lowball offer.  On the outside chance that it's agreed to, repairs are a huge issue (they want everything done) and the other agent confides that he/she is giving up most of the buyer's agent commission. Maybe I have become jaded, but most of the time, it isn't worth the trouble.

Many great comments. Many buyers don't place any value on Real Estate Agents (for many reasons some valid, some not so much) and the services we perform.  Some are just cheap and others sell there best friend for a wooden nickel.  Great post thank you.....

This buyer is presuming that if they "rebate" the buyer's side commission to the seller (or in this case the bank), that they seller will look more favorably on their offer.

while the buyer has no authority to change the agreement between the listing agency and the seller, this method of putting pressure on the seller can be effective. I have seen it done where the unrepresented buyer wants the buyer's side commission credited to the buyer... but this is the first time I've heard of them saying they want it credited back to the seller/bank.

While there will be a little more work in the deal for Cathy, if the bank should accept this offer, because there is no agent on the buyer's side... it is far from double the work... and therefore difficult to say that you've "earned" the double commission.  Maybe a compromised could be reached, in "splitting" the buyer-side commission.  In today's marketplace, for those savvy buyers (who may or may not be a recent graduate of the real-estate-flavour of the month club), they have nothing to lose by asking.

And I would have a hard time standing in the way of this deal, as a representative of the seller, solely because it would interfere with my own ability to "double-side" the commission.

We've all worked with less than "stellar" buyer's agents who've done zero to earn their side of the commission, leaving us holding the entire workload.  This isn't substantially different.

Cathy - Great post. I have not had a problem like this yet. After reading all the comments it will help me with handling something like this.

This has happened to me in the pricey hip areas of town where young buyers want to live. I tell them that the commission has already been negotiated and I'd be happy to submit their offer. As the comment above states, some people would sell their best friend fora wooden nickle.

I believe that Elizabeth is riight when  she  said:

The commission should not be discussed in the contract for a variety of reasons, one of which is because the real estate brokers are not parties to the contract.

In North Carolina commission can not be part of the Offer at all- as the contract is between the buyer and seller, and there is a separate contract between the seller and the listing broker.  Before the seller negotiated the Offer he'd have to renegotiate the contract between himself and the listing agent- probably not happening.

I also liked what Jerry said-

One of the worst things we tell buyers, is that the seller pay the buyers' agent.  We should be telling them that the listing broker pays the buyer's agent.  The public always thinks they're saving the seller money by going alone when the seller has already agreed to the commission amount they're paying.

We often use that line that the seller pays us as the buyers agent- I will be changing it to the lising agent pays us.

Can't wait to read Part 2 and see what happens.

In Illinois, it's illegal and unethical for a buyer's agent to make "commission" a part of the purchase agreement.  But I'm not sure that would apply when the purchase agreement is made by a non-agent.  The untrained public is not held to the same standard as we are.

I am seeing this more and more.  Sign calls from buyers who are calling only listing agents of the properties they are interested in.  Some of these people are highly educated but think they can save money representing themselves.  Guess what?  They can in most cases.  Buyers are in the drivers seat here.   I still don't understand why these buyers think they are better off unrepresented.  With a good agent they would probably get a better deal anyway.  I even had a buyer (and a friend) who I showed several properties to.  She called me one day and said meet me at such and such house in 10 minutes.  She had called the listing agent and asked her if she would cut her commission if buyer came unrepresented.  Agent said no so she called me to meet her there at the last minute.  What are they thinking!

Lenn said it all so I won't repeat it.  I think the commission should be reduced because the buyer is NOT being represented - and as you point out, the seller's agent cannot even counsel with regard to the offering price and other terms.  There will be more pressure in this regard from the consumers and we may not be ready to address these objections.

I've given buyers a contract to review but never to fill out.  Who knows what they would decide to put in? 

What a jerk! Hopefully, your seller and the bank will not be tempted by him. He is probably not represented because he is such a jerk. I run away from people like him. Life is too short.

We have created this situation by advertising that the seller pays the buyer's broker/agent thus we work for free. Get out of that mentality. Buyer's brokers can and do often charge a fee for representation. I know I do! So I never work for free.

However, the goal is to SELL THE HOUSE and represent the seller. How can you achieve that goal?

Present the offer(s) to the seller and explain the situation. Let him choose.

if he wants to work with this guy (who already seems like a P-I-T-A) you must do what you can to make the deal work for the seller. If that means giving up the other half, do it. However, I'd advise the buyer to hire an attorney to represent him as he is unrepresented, and he'll need someone to guide him through the process.

I'd put that advice in writing. Then I'd move forward. If the seller chooses to pay you the full percentage, be thankful.

While it's true the Listing Contract is between Seller & BRoker, it's your job to get the seller highest/best price and the house sold.

If you had known this up front it would have been helpful. Instead the buyers didn't mind using your time or effort in getting their offer together. I'd bill them for my time. An attorney or doctor would.

I've had buyers at open houses broach this subject as to why they don't want to use a Realtor. I tell them ...

• The commission is determined by the listing contract. The seller pays the listing broker for marketing the home and for finding a ready/willing/able buyer to buy the home. It says nothing about the need to represent the buyer in order to receive the entire commission.
• In Ohio, only a licensed agent or broker can be paid for selling property. Therefore, paying a buyer because they aren't being represented by a licensed agent/broker, is against the law.
• I also ask how they plan to write a contract, get into the home to do their inspections & walk-thru's (no keypad), write up a request to remedy & negotiate that? They should hire a lawyer for each of those steps, so need to consider the expense of paying the lawyer for all that time. As we know, lawyers don't have keypads, nor are they going to actually leave their office to go the home to advise on the remedies or a walk-thru.

I know they think the listing agent is going to do all that work for them - for free! They just haven't thought it through and don't really understand the entire process.

This is definitely a bad situation. Now that is in your lap it's tough. Hopefully, it doesn't set a precedent with the bank that you will work for half price if you submit another offer without a buyer's agent. I would take the path of least resistance and work with th ebank to sell the home.

In the future, I would advise any buyers that listing commissions are not negotiable and that the offers stand on their own merit. As a listing agent, you are exposed to law suits and taking a risk without the reward of compensation is difficult to swallow. It's buyers like these who are the first to call an attorney. Make sure you get all other coorespondence in writing and take copious notes. Protect yourself from buyers like this.

I once showed my own listing and a week later an agent submitted an offer for the same people. The agent's office was 75 miles away and he was a nightmare. He got paid and made the situation worse. I should have taken it to arbitration, but the point is, at least you don't have to deal with a bad agent making things worse.

I know it's tough. Do the best you can and good karma is yours!

I don't think I would ever let a buyer fill in their own contract. If you didn't allow that to happen would it have gotten to the point you are at? Not sure but I would suspect if the buyer was in your presence they would not have tried to pull this and if they did you would have been able to counter it much easier in person.

first off- congrats on the feature and the great post! 

i think that a majority of buyers honestly don't understand everything involved in the process.  and when they come to put in an offer where they are not represented, they are very wary of the Realtor who IS involved.  So they are not very likely to believe anything that the Realtor may tell them.

i do think this is unfortunate for the un-represented buyer because they don't understand that then the listing agent will have MORE control over the outcome rather than less due to the fact that there isn't another agent on the other side working in their best interest.

hard to talk people into, though.  like i said before, they are extra wary of the Realtor because of their pre-conceived notions on how things work.

the buyer shouldnt care who gets what commission. he needs to worry about negotiating the price of the home, thats it. in addition, his offer was poorly written. i think what he was trying to say is that he wants a price reduction due to no buyers agent commission. the way he wrote it, he is still paying a buyers agent commission, he just wants it to go to the seller/bank. sounds stupid to me.

This post really got an early morning rise out of me!

First, only the listing agent's broker and the seller can change the terms of the commission arrangement, but heck you can't blame him for trying.

Well, actually, I can blame him for trying!  I think I would be less incensed should he have tried to have a conversation with you regarding the situation, but to put it in the contract without discussing it with you and then expect YOU to work with him in getting him the home! hmmmmmmmmmmphh! (did I spell that correctly?)

Interesting post.  Waiting for the next post for an update.

Not knowing the practice and laws in your area, I can only speak in a general sense.

1.)  The buyer isn't your client, so negotiate for your client.

2.)  The Seller (Bank) may require specific paperwork or representation, demand that the Buyer have these, at a least, they'll need legal representation.

3.)  The Buyer normally doesn't negotiate a listing contract, in your reply or counter state that the original listing agreement stands.

4.)  Ask for Agency Disclosures, if applicable.

5.)  If the buyer comes back to you asking for advice, remind them that you presently only have a relationship with the Seller and would require a signed Agency contract with them before you could hold substansive conversations with them.

6.)  Be interesting what your client and client's attorneys have to say.

Good Luck!

This is usually my response to such things.  I am SO GLAD that my commissions are not open to the negotaite.  Either way I can't believe that someone would ask a Realtor to work for free.  Too bad there is not a system that would allow a set commission for buyers and sellers agents.  I am interested to see how this one ended for you Cathy!

Buyer does not dictate what you and the seller negotiate. 

I had a BUYER'S AGENT submit an offer recently, with an addendum stating the compensation they wanted. Their company had a minimum commission and she wasn't happy with the co-broke. I replied in writing to the broker that the LC was between the Listing Broker & the Seller. Co-broke was published in the MLS before agent showed the home. I don't care what their minimum fee is--they can get it from their buyer but not me!

Cathy, I believe that human GREED is a big problem in our industry on all sides:  sellers, buyers, agents, lenders, investors.  In this situation, they are eyeing your commission as part of their potential downpayment.

Join my NEW group for professionals who work from their home office at http://activerain.com/groups/virtualoffice

Regina P. Brown
Allison James Estates & Homes
www.ReginaBrown.AllisonJamesInc.com

Lots of great answers here and excellent insight.  I too am curious what would have happened had you met with the buyer in person. The buyer would have had to bring it up to you in order for it be in the contract, which at the very least would have started a discussion.  On the other hand that may have been worse as he would have caught you off guard.

Cathy, I recently negotiated a short sale.....my list and my sale.....with full commission.  After working for over a month on the sale, the buyer has no idea how much time and effort goes in to the offer.  I have had buyers try to negotiate the commission too.  My answer is:  commission is always paid by the sellers and the amount has already been negotiated.  Thanks for posting a great article.

Cathy- I too will be watching for updates on how this situation pans out. I think I would be spending some time going through my board approved purchase and sale agreement, and would be picking out the boiler plate language that would protect me, then would put that language along with language suggested by my broker, in an addendum for the buyers to sign. While fillling out those forms can seem tedious to us/some at times, the language that's there is there for a reason- to protect us, the real estate professional, as well as the public. I, for one, love contract paperwork!

I agree with everyone here that has said to take notes for your file. From what I can see, I think the buyer has been less than forthright with you so far, and I would be very careful to dot my Is and cross my Ts on this one.

Good luck!

Cathy:  In theory your buyer has a valid approach to buying a short sale. Probably a seminar strategy.

The listing on a short sale is between the listing broker and the owner, not the lender. The lender aproves the sale re/terms and price which includes compensation. (from our net sheet).

 No one knows what the final number is until an offer is authorized by the lender. (after a long wait). The buyer wants to improve the chance of success by 1.5% +-.

We have enough trouble representing our client (the seller) and the bank without becoming a dual agent in the transaction.

In a short sale I think it is almost impossible.

The buyer is seeing it like it is: a percentage of the commission, which is in the price of the house that HE will purchase/finance, is going "unused"- no benefit to him, yet part of the tab. My guess is that this will pop up more and more, like it (or not). Very interesting.

Absurd. The buyer has nothing to do between a contract between the seller and their listing agent. I know that I have been involved with transactions in the past where the agents on either side of a transaction did little for which they should be paid but that really has nothing to do with the situation. Thanks for bringing up a good subject for discussion!

Cathy - It is just sad that people try to take advantage of someone working for a living!
We see this kind of thing often. It usually doesn't work and the banks are smart enough to know that if there is not an agent representing the buyer the chances that the transaction will go through is very very slim.

It is very common here in the Seattle Area, but I'm not sure it would work with a short sale.  The bank may not like that oney going to the buyer.

It is very common here in the Seattle Area, but I'm not sure it would work with a short sale.  The bank may not like that oney going to the buyer.

Cathy, I think this happens quite a lot, and when buyers come unrepresented, I explain to them exactly how it works and suggest they may want to consider getting represented.  There are probably lots of agents who would forego their selling side fee to get something sold, but it's got to be a case by case business decision.

Cathy: First of all.. If you already represent the sell, why would you want to drop to a facilitator status ? How would you seller feel if you tell them at the listing that you represent them and them when a buyer comes along, you want to be a facilitator. You can still write the offer for the buyer and represent your seller. This is where your confirmation of agency come into play.

Now... as for the purpose of this post.. I too have had a similar situation. I had a buyer call from the sign, after a discussion, I find the buyer is pre-approved so I agree to meet the buyer at the home. I first tell the buyer that I represent the seller and ask if he is working with an agent. He goes on to tell me that he is not and does not want to be rep rented which is fine. He goes on to tell me he wants to offer ( X ) based on his research. This however is less than what the seller paid for the home. He also went as far to say that I could only receive the listing commission and not the buyers commission. Of course we presented and offer that went into like 4 counter offers and never agreed upon and acceptable sales price.

During this process, my agency agreement which this buyer did sign stated that I represented the seller only. One thing many buyers don't understand is the fact that the seller dictates the commission to be paid by a seperate agreement.

i personally think you should smack these people around a bit... ... but anyway shouldn't you get the full commission since they are "unrepresented" and that would mean you're still working for the seller and not them anyway, so you stick it to them for the sake of the seller's profit?

This is absolutely absurd!

Hi Cathy - There has been some fabulous responses here to your post, and I've enjoyed reading them as well as thinking several of them through. I am anticipating your next post when you tell still more about it.

Hi Cathy, 

I, too, am interested in the outcome of this situation.  I am very curious about a buyer using their own contract or even filling out the official and approved board contract on their own. 

Some Buyers...I have met them all...or atleast I feel like I have!  So he thinks he will get a better buy if he states this in his offer...

I have had a buyer do this when they were actually working with another Realtor...it was not very nice...The other Realtor (another Company)...I really liked the other Realtor too ...  showed the new listing I had... then she brought a low ball offer on it...we went back and forth for a week or so and never could come to terms...then about 2 weeks later I got a call from this buyer... he states to me he wanted to make an offer on the house and he just did not have good terms with the other Realtor, as she would just not do negotiating on his behalf...so he wanted to write the offer with me the listing agent...his exact words were... you might be more apt to negotiate on the commissions so I can get this house...well of course I called the other Realtor right away and she said they really did not work well together...and for me to go ahead and work with him, she would not be upset... so I did and we did get an offer finally accepted...and yes the commission did go from 5% to 4% to make it all work...so he got his way...but I also PAID Jeannie the other Realtor a 25% referral on the closing... she was Happy, Seller was Happy, Buyer was Happy (if anything can ever make these type of people Happy!)  I was Happy...and this was ONE BUYER I just could not put on my follow up list...I sometimes just have to leave some people off that follow up list!  A Realtor just has to do what a Realtor has to do!  And sometimes it is just not worth it to work with some people!

Move On!  

I get calls from buyers occasionally who only want to work with the listing agent.  They, as mentioned above, feel they will get a better deal. 

I sometimes show 6 homes in a day to a buyer.  I can't imagine the headache of arranging showings with 6 different listing agents.  My head would swim. 

Buyers - pick an knowledgeable agent you trust (and get along with).  You'll save time, money (most of the time), gas, gray hair and the headaches. 

Why is the public so confused, they all know the car salesman represents the dealer and the defense attorney the defendant and the prosecuting attorney the law, why is the public so confused about agents?  I believe it is the responsibility of the NAR to do some serious public education advertising!

I can't wait to see how it all turns out.  It's irritating and uncomfortable but most of us can learn from it!

Oh my gosh. I'm shocked that this yahoo pulled that.  Looking forward to hearing how this turns out. You have gathered some great comments here!  Hang in there!  I would next time possibly have them meet me so I could explain the process....(Not that this guy feels like he needs any help, lol). 

Cathy, as you know, the Listing Agreement is between you and the Seller, and the the PA is between the buyer and the seller.  You'll have to keep up posted!

Waiting to hear the outcome from this one.

Thanks for sharing.

You must give us an update.

I know that it has been said here, but the buyer is trying to make himself subject to a contract to which he is not subject...  He is not a party to the listing agreement... and further, in many states it might be illegal to pay a commission to someone without a license...

It is so sad to see this happen. It just one more example of how little the consumer understands our business.  This guy certainly takes the cake, asking you to show the home and then thinking he can withhold your commission.

I wonder how he would feel if you showed up at his place of work and demanded his pay be given to his boss or you?

kk

Wow, how many ways to lose a commission is there. I enjoyed reading all the comments though. I remember wen commissions were pretty much non negotiable. Me oh my how the Internet has changed the way we and consumers do or think about business.

Cathy, what a great post. I have learned a lot from the other agents commenting. I do the loan side and we see crazy things as well. If you asked them to work for free they would think you were nuts. I ask customers if they get testy I politely ask them if they could give up one of their checks? They look at me like I'm nuts. I tell them that is what your asking me to do. This doesn't happen very often but as soon as you think it won't happen to you it does. Great Blog.

Interesting situation. The buyer seems not to be too aware that you are going to be doing the work of 2 agents-- in a dual agency you can't advise , true, but you will end up doing extra work for sure. All the best.

Great Post Cathy:  Seems in the last couple of days I also read something in a post about ethics:  If I remember correctly, in the NAR Ethics Course, commissions are not part of a offer !  It is only in the listing agreement between the Listing Broker and the Seller.  I would also be interested to see how this all unfolds.  I think buyer has or previously had a RE License (If this was the case where was their ethics) or been reading to many articles on how to negotiate a offer.  Not true where ever his theory came from.

I've not heard of an agent giving a buyer a blank form to fill out before.  And if they do independently decide on the offer terms and fill out the contract, they really aren't being represented.  And I would not want the responsibility of having my name on a contract I did not complete.  It's a bummer they couldn't just be up front with you from the beginning.

Interesting situation and I enjoyed reading all the comments - nothing for me to add.

I can't wait to see the update on this one - what is happening now?

Buyers who make this type of mistake, often make several others. 

HI Cathy, What a dilemma!  I don't know the rules in your state, but in California there are so many pages of disclosures and other paperwork involved in a transaction from both the seller and the buyer that you do have a lot more work as a listing agent working with an unrepresented buyer.  If they will expect you to help them through it all, you do deserve commission for that. 

This buyer is not a party to the listing agreement and cannot change the terms of that agreement, but the question is:  if you submit this offer, will the bank insist that you amend your agreement with them in order to close the deal?  I'd say it will likely depend on your relationship with this bank.  In any event, if you have several offers, you will have to present them all, and see what happens.  You might even tell the bank that they wrote that not understanding that they had no right to interfere in your relationship with the bank.

Cathy, very nicely written.  I have seen others broach the subject and it comes off bitter and confrontational.  You did a great job of explaining the benefits.  Just a shame people think there is so little to a transaction that it's all about them or the offer.  Then they loose the house because they misjudged the situation, which they OFTEN do, as a little bit of knowledge is sometimes not such a good thing.  It gives them a false sense of how it works.  Thanks for putting it out there in a thoughtful and kind way.  I am hoping those that need it are reading.

It's unfortunate that some people outsmart themselves.  This buyer foolishly gave up your services --- services he will be paying for anyway.

This is so bizarre I am beginning to believe it is still another one of the fabricated situations on  "agency" designed to press every ones hot buttons.

As REALTORS we are only allowed to "fill in the blanks" of our purchase agreements that have been generated by attorneys in order that they may be legally binding. I can't imagine a REALTOR sending an on-line form to someone whose actions have already raised several red flags and then advise him to "edit and fill in his terms". <I have an online form that I can send and he can edit and fill in his terms etc.>  I have to wonder why you would advise him that he can edit it?

Secondly, you represent the seller, and now are giving "client level service" to an unrepresented buyer? Very strange indeed. <I did send a CMA to support our recent price reduction and sent a copy to the buyer for his use. > He needed a CMA to support a price reduction??? What??

Surely you are making this up? <I write this for two reasons:  first to see if other agents have had this happen and how they handled the situation - or would handle it if/when it does happen.  Secondly I write this for buyers who may read this post. >

<The second part of the story is one of my next posts.  It was an unusual situation all around and is still in negotiation>

Waiting for second part...

We do quite a bit of
Short Sales..,that's a new one...and I would guess as others have that a DIY offer may include some things that are not legal....and that is how I would present it to the buyer....in addition to the fact that short sales have about 30 times more paperwork and if you double pop it,...you have earned every penny a few times over....Happy Holidays !

First of all - great post.  We'll be very curious to see how this turns out.  We have run into a lot of crazy people so I guess nothing surprises us anymore!  Isn't that a shame??  Best of luck.

First thing I thought about was that it is illegal for anyone not licensed to receive a commision on any real estate sale in the State of Florida. I do not know the laws in your state.

great post. i wonder if you corrected the buyer and let him know that he had no control over the commission and that his lender probably wouldn't let him receive that money. plus he's not a licensed agent so can't receive commission anyway. did your seller choose an offer?

Tough situation indeed.  In Colorado, commissions are strictly prohibited from being discussed in the contract itself.  By doing so, an agent makes themselves a party to the contract and opens themselves up to additional liability.  Hardly seems worth-while -- especially given the fact that the mention of commission significantly reduces yours.

Seems like it would be more appropriate to just strike that paragraph.

the buyer has no say in how commissions are offered, split or any other way. It is not part of a contract between buyer and seller..... period.

Okay...let's take another type of commission based job.  A car salesman or a bridal salon salesperson or a boutique, etc....   Would a buyer seriously consider making a purchase contingent upon that salesperson giving up part of their commission?  No.  The underlying problem here is really not the commission, it is the public's perception that realtors do not deserve one.  We all need to educate the public about what it is that we do in the course of marketing properties.  As many of us know, realtor "wannabees" who enter the profession thinking it's easy  money usually leave very soon thereafter ;)

Margaret - very interesting story about being blackmailed by the seller.  I do *HOPE* that you stuck to the original listing contract and took that seller to court.  The seller really thought they could renegotiate the original contract simply because of who brought an offer?

I know you will find this amusing, but I woke up this morning thinking of this post! I can't get this trouble he caused for you off my mind...it's really irked me!

To everyone who posted a comment.  I usually respond to each one - but have never had a featured post and was amazed at all the comments - THANK YOU!  I read them all and appreciated each and every one.  I learned ways to handle this is the future, I felt validated by what I went through and was appreciated the stories others have gone through.  I was very compelled to complete Buyer Wants Agent's Commission Past 2 sooner than later.  I did mark it members only as it had a few more details that I thought best kept private and it was not of the educational nature that I tried to provide for buyers who may read this and think this way.  There is a lot of information available - right, wrong and in-between - be in communication and check it out - Realtorsdo provide a service far beyond what most people understand and appreciate. 

And to Lizette:  I hope this sequel settles your mind and you make up with sweet thoughts - I was touched and amused.

I have also seen stuff like this commission cutting b.s. written into offers.  I have counseled the seller to just write a counter offer with the terms and conditions they want, including deletion of the offending paragraph.  I have never had the potential buyer actually agree to a contract.  They are just wasting our time.

Our job is to present all offers, even if they are terrible and written on a napkin!  Then our job is to negotiate the best possible deal for the seller (and in this case, the bank).  Let the buyer be unrepresented.  It will serve them right.

I haven't read all the comments, but here's my take.  I've had a very similar situation, in which an unrepresented buyer asked me to write an offer and reduce my commission to make it work.  I very politely, yet directly, informed this buyer that the sales commission is an agreement between me and my seller and that I would not discuss that commisssion with him (buyer).  I then told him that he needed to submit whatever offer he felt was fair and any possible adjustment of commission would be between me and the seller and has no affect on his purchase price.  It worked out find, I sold the house, and did not reduce my commission.  After all, I end up taking on twice the liability and twice the work when I have to handle both sides of a transaction, right?  So why should I take the same money I would if they were represented, yet do twice the work and take on twice the liability?

This is just one more example of how LITTLE the public understands what we do. They don't understand how the system works. They just think we're overpaid for doing very little.

Your buyer's representation agreement should cover you.  Do not submit the offer and remind them about the buyer's representation agreement.

Agents should never ever ever ever ever work with a buyer without a buyer's representation agreement.  Heck, you hire a lawyer, and they want a retainer and an agreement.  Many are now putting a fee in the agreement in case the buyer does not buy.  The going rate I have seen has been $500 or thereabouts.......

The # 1 reasons buyers do this? They don't have money.  Over the years I have found this is an an "Empty barrell!"  They make a lot of noise rolling down hill.

Cathy,

What a great blog.  I have not been in this situation yet but in this market you never know.  The flurry of comments has also been very interesting especially because different states have different rules and show what a hot topic this is. It was my understanding that non licensees could not get any financial kick backs from any transactions.  However, agents can offer rebates on the commission to buyers.  This blog made me more aware of the different approaches and possible solutions.  I am fairly new to blogging but can see how addicting it can be with the wealth of information and experience that it provides.

This always gets me fired up. Commissions are not part of the purchase contract. They have no right to think that they can get a better deal do to this. This is were buyers think they know the interworking of Real Estate. They have no business in our business, I would like to come to there place of employment and negotiate.

Hi Cathy,

I'm intrigued by you post partly because I do quite a lot of short sales in and around Denver but also because it seems to shine a light on some common mistakes that reflect poorly on our industry. 

 Of course we all know that the commission is negotiated between Seller and Listing broker.  It may even be that you are not authorized to negotiate your commission only your managing broker is. 

 Any of us who have sold homes for years has run into those who believe we get paid too much for limited effort.  You know what?  That may be true.  It certainly may be true for someone who e-mails a blank contract off to some one and lets them fill in the blanks.  You indicated that you "read" this couple so well that you decided not to follow up with them.  I've heard about this "reading" before and to me it sounds more like you qualified them and they didn't fit the parameters of someone who you were willing to invest time with.  I can certainly appreciate that.  In fact I strongly urge my agents to qualify their prospects before spending time with them.

However, I wonder if you think you would have had a better experience if you invited the husband and his wife to join you at your office to go through the purchase process.  Perhaps teach them how you and the Seller came up with the listed price, discussed the various required documents and the state approved form for writing an offer, explain at length what occurs during the short-sale negotiation and lay the foundation for a long and challenging escrow.  A planned presentation goes a long way to overcome the most common objections and in building your image as a trusted advisor.

Even a know-it-all buyer deserves to have best-in-class service and/or representation since they may be the most susceptible to being duped.   Or, as may have happened in this case, they may have erred in the completion of the form or at a minimum omitted some customary approaches to the various blanks.  If the couple refused to come to your office I think a better approach would have been to seek out other alternatives such as other times for the meeting or perhaps meeting at their house.   I am assuming you signed the offer at some point acknowledging that you were the agent who wrote it.  Certainly this approach marginalized your credibility, and probably voided your e/o insurance.  It most likely is a violation of your office policy manual.  If nothing else it perpetuated the Buyers' belief that you as an agent did very little if anything to earn a commission.

 The variety of replies with a slant toward preserving the commission, in my humble opinion, is misdirected.  We as an association need to remember the value that we bring to the public.  Concern about the public being too smart or that the commission is non of their concern, or worse, Sara Homan's position that maybe you only have to present the offer if it comes from a REALTOR® is mind boggling.  We are paid to protect the public through our education, our processes and our skill.  Furthermore, to pretend that there is some secret formula that occurs behind the scenes that the uneducated public doesn't know anything about but should respect paying a fat commission for is dangerous.  With technology advancing and adding much needed transparency to our industry we need to continue striving to add value in our representation.  It should not be up to the public to guess whether we add value or not-we should prove it each and every time we have an opportunity to earn some business.  Frankly, that's what the public expects and if we don't do it we get paid what we deserve.

Bob Maiocco

A buyer who creates his own offer can write anything he wants to.  I certainly question the wisdom of providing a blank form for him to do that on, but regardless, as the listing broker, there should be no question that you have to present his offer.  I seem to remember more than one comment indicating that you had some leeway here, however I think the requirement to present all offers provides for little if any gray area in that regard, and I am confident that it is a requirement regardless of your state of residence.  I can't imagine thinking there would be something special about this offer that would enable one to exclude it from the category "ALL".

Sure the buyer needs to be educated, (beyond the education he has gotten at the hands of the lastest no-money-down guru) but as a member of the public and a consumer, and not a licensed real estate professional, or one guided by such a person, you have no control here, and an emotional reaction to the language of the offer doesn't make a lot of sense.

So you have an offer in front of your seller that suggests (he can demand all he wants, as most before me have made abundantly clear, he has no authority to actually dictate what your seller pays in commission) the commission be reduced or redirected.  It would seem to me that the buyer's choice to add that language would have the effect of sparking a discussion between you and your seller about your commission.  So, he has accomplished at least a part of his goal--bringing the issue of there being no cooperating broker with whom to share that "HUGE" commission into the discussion.  Protecting both 'sides' of the commission, if that is your goal, becomes a function of your skill at demonstrating your value to your seller--doesn't it?

Not to labor the point too much, but this post doesn't past the acid test of Agency law. Realtors owe clients "confidentiality". (one of the components of Real Estate 101 under the acronym of either"ACCOLD". or "OLDCAR.)

 At one point we see: "Betina:  The second part of the story is one of my next posts.  It was an unusual situation all around and is still in negotiation." If indeed still under negotiation, wouldn't it be easy for any person local to the area to check active, or pending listings to identify which short sale property is under discussion?

Else where on this board we see: "For those that felt I should change the post to members only:  This was resolved at the time of the post and not in active negotiation..."

Which is it? Still in negotiation as stated at time of post, or resolved a few days later as of 12/01? Regardless... "Class, how long do we owe confidentiality to our clients? What is the statute of limitations involving confidentiality to our clients? Is there a point at which we are free to blog about it for the world to see, and tell that our clients were in bankruptcy?"

This was obviously a made up post, particularly evident by the long lecture to potential buyers that they need to be truthful. Red flags were indeed popping up everywhere.

By the way, I have read every comment through at least two times, and have lost a lot of "thought time" over it as well. I have seen too many posts here about Agency whereby if true, there was a breach of confidentiality. Most of the times the writers confessed that it was made up "in order to prove a point".

Dave:  I agree that my job is to present all offers.  Part 2 concludes the story that we pulled the listing off the market so there were no counters.

Ryan:  Very professional and succinct verbage to tell a buyer if I find myself in a similar situation again.  Thanks.

Erica:  There is so much information out there that the public can easily misunderstand and think they can go it alone.

Tim:  There is no buyer representation contract as we area a designated agency.  Our office has started charging an administrative fee - most are doing it now.

Jim:  Definitely challenging times with money.  Right now everyone wants to save it where they can.

Anja:  Welcome to ActiveRain.  I would not be where I am today in my business without AR--there really is a WEALTH of knowledge and generosity.  Thanks for commenting and Happy Blogging.

Trevor:  This is definitely a hot topic by all the comments and I think many consumers think they don't need us with all the information on the Internet.  I think most end up appreciating what we do.

Bob:  Thanks for the long comment and for finally including your name.  I may be naive about sending a blank contract (at the time) and my post "Part 2" explains my thinking a bit -  although I don't defend it.  I learned much with the comments.  I did want to work with them so my "reading" meant something different--in this case they really didn't want my help and I did not want to "push".  While commission is why I am in the business, I want to always leave people with a professional opinion of our profession and of myself.  If it's only about the money, I wouldn't want to be in this business.  Thanks for your comments.

Cathy - That is quite a situation.  It amazes me what some people will do!

I haven't run into this one yet.  I find it amazing what people will do to manipulate things; maybe it's a good thing you didn't have to work with them as a buyer's agent.