Buyer's Agent

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Sim

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: How does a buyer agent get paid ?
From: Sim'
Date: 28 Feb 2001
Time: 09:24:58

I think that the buyers agent (if they were any good) would take a look at your list of requirements and have enough knowledge of your target area to say to you fairly quickly "I don't think I'm going to be able to help you" and not charge you any money.

Of course, if they try and fail, who is responsible ? They could always take the "no purchase, no charge" approach, but they still have to earn a living.

Maybe a split... smaller up-front fee to retain their services, followed by a larger, fixed fee when the deal is succefully completed ?

Then again I work in the Information Technology services industry where we have several charging models. In my experience, when dealing with smaller companies on smaller projects, they really want fixed price, as they need to keep a close eye on costs. Larger companies and larger projects (especially where the outcome is not known) tend to be more favorable towards time-and-materials, where we simply charge on a dollar-per-hour basis (pushing lawyer rates these days !!).

If the buyers agents were to think of themselves as professionals performing a service (such as preparing a report detailing potential properties that meet a particular specification), then they would be quite justified in charging an hourly rate for their time, even if their report came out saying "no properties matched your specifications".

Of course the biggest problem here is that if their target audience is individual investors (particularly those too scared to do it themselves), they would probably not find too many people willing to take the risk of letting them charge by the hour (like a big company vs small company !!).

I'd be interested to hear from more of the buyers agents in the audience about their individual charging strategies... although I'm sure some of them would be reluctant to disclose this information in a public forum, so I guess we will never know without asking them directly

Sim'

 

[WebBoard]

Ross

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: How does a buyer agent get paid ?
From: Ross (Gold Coast Buyer Agent)
Date: 28 Feb 2001
Time: 16:50:28

Hi Sim,

Sim said, "I think that the buyers agent (if they were any good) would take a look at your list of requirements and have enough knowledge of your target area to say to you fairly quickly "I don't think I'm going to be able to help you" and not charge you any money."

Correct.

I had a guy last week say... Ross I want vacant waterfront land around $300,000 for investment purposes. I want it to appreciate in value by x%. I hate tenants, etc, etc.

I only needed to make 2 calls to make $9,000. But instead... I had to argue the mechanics of investing. (HEATED DEBATE !!!) Then I sent him to the northen end of the gold coast. (i.e. Growth corridor... undeveloped land.)

Then I told my waterfront seller agent friend to SELL him something. And wammo... He said, "Sorry I'm not buying waterfront land now... I'm buying in ???????????."

I made zippo. But a least he was back on track.


Sim also said, "I'd be interested to hear from more of the buyers agents in the audience about their individual charging strategies... although I'm sure some of them would be reluctant to disclose this information in a public forum, so I guess we will never know without asking them directly "


Well... I'll tell you how it works in the USA first. In the US, buyers HATE "menu of services" and "fee for service" and "non-contingency fees". Absolutely hate them! Almost everybody prefers a fixed percent rate (%) of the purchase price.

(* Please remember, in the US the residential fee is 6% inside the purchase price. That's 3% for the listing agent and 3% for the selling/buying agent.)

In Australia, most buyer agents charge a percentage fee outside the purchase price. And charge 1% to negotiate or 2% search/negotiate. (Gross real estate commission 4 to 5%.)

But some charge inside the purchase price. Therefore... there is NO ADDITIONAL COST to the buyer.

For example, the listing agent gets 1.5 to 2% and the buying agent gets 1.5%. (Gross transaction cost = 3 to 3.5%.) Payment is a "special condition" on the Contract of Sale. And all commissions come from the total purchase price...

PLEASE NOTE - Rough example only.

Ross Sondergeld ~ Buyer Agent

Buyerside Real Estate... on the Gold Coast

 

[WebBoard]

The Wife

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: How does a buyer agent get paid ?
From: The Wife
Date: 28 Feb 2001
Time: 17:22:10

umm...this was one of my questions...

Do you give advice on what to buy where?

And what do you base you're advice on?

 

[WebBoard]

Mike

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: How does a buyer agent get paid ?
From: Mike
Date: 01 Mar 2001
Time: 02:37:32

Hi All,

Can I crash this party? Just adding fuel to the fire with this excerpt (on page 119) from a book by Peter G. Miller titled Successful Real Estate Investing (What other kind of investing is there?).

Most buyer-brokerage transactions today are financed this way: Broker Daniels lists the Reeves house for $200K. Broker Dennis, acting as a buyer's broker, makes an offer on the property which is accepted. Part of the purchase offer stipulates that if the deal is accepted, then Dennis is to receive the commission amount that would otherwise be paid to a co-operating broker - half the $12K fee in this case. (Me again: In this example, the transaction fee is 6% of the purchase price and may be split between the listing agent and other sub-agents, if a buyer's agent is not involved. However, if a buyer's agent is involved, he/she takes 3% which leaves 3% for the listing agent's team. The vendor doesn't lose as they would pay 6%, anyway. The buyer doesn't pay a fee to the buyer's agent. Back to the book...)

The prevailing method of financing buyer-brokerage fees is both practical and commonplace. It is also flawed, because as the property value rises, so does the fee paid to both the listing broker and the buyer's broker. In the case of the listing broker, a bigger fee is acceptable because a larger commission is a byproduct of a higher price, precisely what the seller wants.

For buyers, however, higher prices are not a goal. Rather than fool with overt conflicts of interest (no matter how minor), a better approach works like this: Broker Dennis, a buyer broker, submits an offer to purchase the Reeves house. The offer is for a given price and includes a variety of terms and conditions. One condition is that, at closing, vendor Reeves will give a credit to the buyer equal to 3% of the purchase price.

If vendor Reeves accepts the deal brought in by broker Dennis, then Reeves will have to work out a payment for the listing broker, because the deal will otherwise be too heavy with brokerage fees. Whatever Reeves and his broker work out is a matter between them, something that should have been considered in advance in case a buyer broker entered the picture.

As to the purhaser, he or she is getting credit at closing, money that can be used to pay a buyer broker, settlement charges, or whatever. If the credit is more than the buyer brokerage fee, then the difference goes to the purchaser.

Me again: I think the author is saying that, although the outcomes are similar, buyer broker Dennis is seen to be acting independently of the listing broker by inserting the 3% credit in the contract for sale which goes directly to the buyer. In this case, the buyer's agent doesn't automatically get the 3%, but a figure which has been negotiated beforehand and may be less.

To counterpoint this whole debate, I'd also like to know what fee structure Flippers employ since they are in competition with Buyer's agents for the Investor market. As I see it, buyer's agents will find something the investor has stipulated they want, but with Flippers, you take what they have to offer, since they buy in bulk. Are the fee structures similar? Why should the microscope be on just buyer's agents? If we have to make a choice between the two it might be based on fees.

Regards, Mike