A real estate transaction is complicated because of many reasons, and those reasons are not because of the real estate agent. It's just as complicated if you sell your house privately. Those reasons have to do with state laws and with our litigeous society.

Good answer Joe.
May I ask a very stupid question: Why is a real estate transaction so complicated? Why can't it be simple like purchasing a car? Why are there so many different people involved in the transaction? I can understand title insurance, you are buying the peace of mind that no one has a claim to your property. But everything else just complicates the process. I can pay for a home inspector to check out the place for defects and a surveyor to make sure I am getting the property I am paying for on my own. I know its a very naive question, but it seem like there is so much bureaucracy involved that it adds so much money to buy and sell a house. I don't mean to ask such a simple question, but the whole process seems suspect. It reminds me of the movie "The Firm" when they talk about over billing..."It has happened for so long that no one even questions it anymore" No blasting your profession, just trying to understand it...

I can't help but jump in here even though I don't sell in Jersey. You mention the DYI shows and classes at Home Depot. They are becoming more and more popular because people love them and they make a lot of money for the sponsors putting them on. Same holds true with all the poker tornament shows but, few people are quitting their job to play poker as a means of support. Maybe it is a buyer's market in your area but it seems that you are a buyer who has not bought a house yet. Why is that? Different states have different laws about rebates or money back to the seller or buyer. It becomes more tricky with the buyer because of RESPA laws which govern the mortgage industry. Lately, state governing bodies are looking differently at things especially if there is a benefit to the principle in the transaction (the buyer or the seller). In otherwords, with full disclosure and consent of all parties involved you may be able to receive a portion of the broker fee back. However, if you are going to get a mortgage YOU may be in violation of your mortgage because when you apply, you are stating that it is going to the purchase of the house when, in fact, some of it is going into your pocket.
A better way to do this is to first get pre-approved for a mortgage. Not on-line. Sit down with a loan officer and get fully approved. Next, get a good real estate agent to work for you as a buyer's agent and find the perfect house for you before someone else finds it. At that point, ask your agent if you can structure an offer with seller contributions where the seller will contribute to a portion of your closing costs.
Then, move in and be happy!

I can't blame you for trying, no. :)
So you would use the listing agent to see the house, and then Refin to negotiate the deal? Agents in my area put terminology in the MLS notes regarding a practice such as this. The ends up being twice the work for the listing agent with 1/2 the pay.

JR,

To answer your question: "How do you see the inside?" Open houses, listing agents, FSBO, etc. Use "Redfin" when the listing agent asks if you have an agent, or give them the name of the agent who you have made a deal with. Its not that hard to look inside a home.

Forgive me if I use the wrong terminology, but rebates, reduced fees, kickbacks, or negotiations aside, as a buyer or seller, we are looking to maximize our buying or selling potential. Fees that we have to pay, reduce our leverage. That is why there are a ton of DIY TV show, books, and free classes at Home Depot. People who do not have that much money are just trying to stretch their dollar...can't blame a guy for trying can you???

Thanks Marc for the clarification. While rebates are illegal, there are quite a few firms willing to provide varied levels of services for reduced fees - consumers simply need to be sure they understand what they are and are NOT getting from the agent that provides reduced fees.

JR,
If I found a house then you wouldn't have to preview them, bring the family there, inspect it, etc. That saves you time and time equals money.
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How are you going to get inside without the agent?
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I can come to your house to put in a pool. But if you dig the hole, haul the dirt away, that will save me time, and I will charge you much less then if you didn't help. An accountant will charge x and hour to do my taxes. If I bring all my paperwork to him, organized and in order, he will spend less time on it and that therefore cost me less. A contractor will charge me x to redo my kitchen, but if I do the demo work, and haul the junk away, it will save him time and cost me less.
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Right, so in other words, you will not discount the work you do.

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My point is that time equals money. I like it when my customers save me time, and I pass the savings onto them.
What would you prefer: to spend hours driving around different neighborhoods, over a few weeks (or longer) looking at scores of homes, or a buyer who comes to you and says "I want to buy the house on 123 Main St. Here is what I am willing to pay, similar homes sold for x, and I have secured financing."
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How did you see the inside? Are you going to buy it without seeing the inside?

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I didn't mean to disrespect an agent. You provide a necessary service. I even said a good agent is worth their weight in gold. And I mean it.
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Thank you. I'm still not understanding this process of looking at pictures of houses and somehow ruling them out without actually seeing the inside of them. I don't equate my adding up my deductions for my accountant with selecting a home. Once you get inside you may find it isn't suitable. You will not negotiate it yourself. I am paid for results, by the seller. My buyers already find view houses on the web. Many times there's a house they don't want to go to, but once we get there, it's just what they're looking for. I know I will not convince you and that's fine. But I do not kick back my salary. Perhaps in the future someone will come up with a model to replace my services. If they do, I will adjust to it.

No such thing as "the going rate"
I imagine you also know that commissions are always negotiable -- everywhere.
That said, I've seen online services offering 75% commission rebates.
Sounds like us Georgia, Florida or South Carolina Realtors better make sure
we are earning our commissions. The question that was originally asked here
will be asked over and over again -- more & more frequently until it's a major part of the business.

Thomas,

In New Jersey this is expressly illegal. If we rebate, we lose our license. There are several other states like this also:

Alabama, Alaska, Kansas, Louisiana, Mississippi, Missouri, Montana, North Dakota, Oklahoma, Oregon, and Tennessee.

(I guess these agents have not heard that a whole new breed of brokerages are coming)
Yes I heard of them they were called....Foxtons?

So what is the going Rebate in Georgia, Florida, or South Carolina for a buyer who finds their own home?

NJ Newbie - there are definitely realtors and companies that will share and/or rebate a portion of their commission. Be sure to understand what the realtor will and will not do for you in terms of service level. There are some full service firms that will provide a reduced fee - in general, many reduced fee brokers may not necessarily provide the same level of service to you - be sure to understand what services are important to you when evaluating the use of a realtor - for example, some reduced fee brokers/agents will not negotiate on your behalf or provide the detailed analysis that may be required.

It is not uncommon during the negotiation to ask a seller to provide a credit at closing to assist a buyer in covering closing costs. Most lenders allow for credits as much as 3% to 5% to be used to cover closing costs - above and beyond that may violate HUD requirements.

Some food for thought.

Chuck, I agree with you. We make deals like that down here in Georgia. If you go find the house & we're just representing you in the transaction, we will negotiate our fee. Your logic in the most recent post is consistent with our position -- time is money. I run a very successful boutique brokerage, so it's not like we're desperate for the business. It just makes sense to look at the total business case. I can't speak to the law in NJ, but it's perfectly legal in many states. Check outhttp:// www.buysiderealty.com orhttp:// www.redfin.com (I guess these agents have not heard that a whole new breed of brokerages are coming)

JR,

If I found a house then you wouldn't have to preview them, bring the family there, inspect it, etc. That saves you time and time equals money.

I can come to your house to put in a pool. But if you dig the hole, haul the dirt away, that will save me time, and I will charge you much less then if you didn't help. An accountant will charge x and hour to do my taxes. If I bring all my paperwork to him, organized and in order, he will spend less time on it and that therefore cost me less. A contractor will charge me x to redo my kitchen, but if I do the demo work, and haul the junk away, it will save him time and cost me less.

My point is that time equals money. I like it when my customers save me time, and I pass the savings onto them.

What would you prefer: to spend hours driving around different neighborhoods, over a few weeks (or longer) looking at scores of homes, or a buyer who comes to you and says "I want to buy the house on 123 Main St. Here is what I am willing to pay, similar homes sold for x, and I have secured financing."

I didn't mean to disrespect an agent. You provide a necessary service. I even said a good agent is worth their weight in gold. And I mean it.

Chuck wrote:
Seems you hit a nerve with many of the Professionals. [[SNIP]]However, the process of going from house to house is time consuming, and I would think that a buyers agent would be "appreciative" if they didn't have to do that, and were able to spend the time on other aspects of real estate.
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Chuck? What do you do for a living? Will you share your salary with me because you're appreciative I bought your product? NJ Newbie hasn't told me he'd be so appreciate and give me part of his salary either. You say the process of going house to house is time consuming. So is all the looking for the houses that are suitable for you, and previewing them so that when a buying comes along that the house would be perfect for, we know it. So is the negotiation, the inspection and appraisal, the bringing the family to see the house, too, all that is time consuming also. I'm very appreciative when a buyer makes an offer, but I can't think of any other field where anyone would even suggest the worker rebate their salary.

Rebates are illegal in NJ, so no it won't happen.

If rebates were legal, the vast majority of Realtors would not be willing to do this. But, you would find a few that might. Most of the Realtors who would do this will do so because they need to in order to get business.

If it were legal in NJ, it would be possible to find an agent who would offer a rebate and do a great job. Consumers sometimes think they got a deal, when they didn't. I have been in transactions when the other side was represented by a weak agent, but neither the agent or the consumer knew what they left on the table. The savings garnered in the deal you propose may come with a hefty price tag, also.

If it were legal, I am sure there would be some agents in NJ who would take you up. And, you might just find one who did a great job for a reduced fee. I hear the public speak often that they speak with several agents before finding a good one. Statistically, how many agents, then, would one need to talk with in order to find a great one who would also share commission....i.e. forfeit their paycheck.

Our society teaches us that if we are good at our jobs, and accomplish our goals, that we should earn less, not more. Traveling along that path of conventional wisdom, does it not then stand to reason that a confident agent who values themselves and takes pride in the work they deliver may not be willing to cut their income?

Here's a few similar examples:

As a business owner, I might think about hiring a less expensive attorney, but I trust the one I have. Sure, I wish his fees were lower, but given a choice of changing attorneys or paying his fees, I pay him. Someone else might choose the alternate atttorney.

Each buyer (in states that allow rebates) may choose the business strategy that works best for them. In choosing, there are always trade-offs, and the risk that the cost may be greater than the savings is a very real possibility. For those who are confident that they can minimize the risk, that model might be right for them.

Choice is a wonderful thing.

No. it is not a realistic expectation. It is not part of the deal.

Look for sellers that are offering percentage points -or- Make your offer and try to get it as part make it part of the deal. there are many incentives that sellers are offering at this time.

Let's say you fix transmissions and work for Aamco, Can I bring my car for a new transmission andt hen the Friday afterwards, come to you at your job when you get paid and you give back me part of your weekly paycheck because you only get to fix one trasmission a month? nope, You are not giving me anything are you? But If I looked in the paper and brought in a coupon for 25% off any transmission job and the employer gave it to me... I made a good deal.

NJ,

Seems you hit a nerve with many of the Professionals. I had a similar questions. I thought that if I did the legwork to find a place then I could "pay" the buyers agent less. (Yes, I know the seller "pays" for both the buyers and sellers agent, but EVERYTHING is negotiable.) Many buyer agents will say that they do much more than just find homes, and I believe them. However, the process of going from house to house is time consuming, and I would think that a buyers agent would be "appreciative" if they didn't have to do that, and were able to spend the time on other aspects of real estate.

Maybe instead of trying to share their commission, you could give them extra motivation...tell an agent you will pay them 1k for every 10K they can reduce the sales price. Agents have a lot of pride in their ability to sell a house more than a FSBO and buy a house for less than the average homebuyer can.

A good agent is worth his/her weight in gold...good luck finding one.

As a Professional, absolutely not! My Broker and I share, we are both licensed. The Buyer is my client and I am there to serve and protect their interest. There are not licensed and it is illegal and immoral to share with a buyer.

That being said, yes I am sure you will find someone who will do that, in fact there are several companies listed in the other posts. Think of it this way....if a professional Realtor is so willing to share/reduce their commission, what will they do when it's time to negotiate for you?

Hi NJ,

I have to agree with Tiffany also. A good agent who guards you from overpaying by helping you decide upon the proper offer based on current market data is worth far more than the amount you would save from a commission cut by a mediocre agent. In addition to that, additional savings can be realized when a strong agent finds weakness in a seller that you can take advantage of as a buyer.

If you combine a strong buyer (a buyer who is not afraid to lose a house), with a strong agent (an agent who is not afraid to lose a deal), you are going to achieve your goal - getting a great house for a great price.

-Marc

Why should I share my paycheck with a buyer? Will they be sharing something with me? Commissions are what we use to buy food to eat and make our house and car payments. They are our salary. Do you share your salary with people you just met?

"Are there Realtors that are willing to share a portion of their commission?"

Share? Sharing (or "To Share"); to make joint use of resources (such as food or money), or to "give something away"

I am not sure if Panhandling is also illegal in New York, However you may want to try standing in front of a bank on the 1st & 15th of each month with a sign that says. " I am trying to buy a house, will you SHARE your paycheck with me"

When you ask an agent to give up part of their commision are you expecting a lower level of service?

It is something that is typically negotiable between a buyer and an agent, however I would worry about an agent that did not have enough business going on that they were willing to give up part of their commission. I think that you would be better off finding an agent that was a great negotiator on your behalf, and one that could get the sellers to end up paying all or a portion of your closing costs in addition to what ever price you negotiate.

However, commission rebates are considered an illegal inducement in New Jersey. Redfin and ZipRealty cannot operate in NJ with this model.

-Marc

There are several buyers agencies that use that exact model... Redfin and ZipRealty both rebate a portion of their commission back to the buyer.

In this market there is so much choice for consumers, it's almost scary!! Ain't this a great country?