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Should agents ever give commission dollars to close a deal?

When a deal comes down to the wire and the buyer can’t come up with the surprise fees at closing, should an agent pitch in, or walk away?

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taxes money

taxes money

When Agents Foot the Bill

I saw a post on a blog roll the other day entitled, “I Bought a House for My Client.” It made me think about all the times that we’ve bought things for our clients. I’m not talking about promotional materials, lunches, gift cards, houseplants, or the occasional Christmas card. I’m talking about all the times when a real estate agent is asked to contribute a portion of his or her commission in order to close the deal.

For example, you are ready to close, the numbers are tight and a state tax lien for a few grand appears on the title. This tax lien has to be paid in order to get the deal closed. Some agents kick in a little bit of dough in order to help with that. Others watch the deal fry over the missing two grand.

Commission Is Complex

Sometimes homebuyers and home sellers do not understand that the commission is shared between the agent and the brokerage, and that many agents only earn a small percentage of the total commission. Many consumers are unaware that depending upon where the agent hangs his (or her hat) and the experience level of the agent, the brokerage portion may be up to fifty percent, not to mention errors and omissions insurance, and sometimes even franchise fees. Then, on top of that, the real estate agent will have to pay taxes on his or her portion of those earnings

Other times, the homebuyer or home seller perceives that the agent will earn what appears to be a large sum of money. The thing about commission, though, is that it is only paid when the deal closes. Realtors® and real estate agents do a lot of things up front free of charge. They conduct meetings, create contracts, hold open houses, order promotional pieces, post homes on multiple sites across the Internet—all without collecting a dime. And, if the home doesn’t sell or if the buyer decides not to purchase, all of these things have been completed free of charge.

Agent Contributions at Closing

The question remains: should an agent contribute a portion of his commission in order to get a transaction closed? Should he or she pay for the home warranty or settlement fees or even the moving truck?

It’s a really tough call and each transaction and situation is unique. On the one hand, when you cut your commission, you devalue your role—not only for yourself but also for all of the other Realtors®. And, if you are helping a buyer or seller with the most expensive purchase or sale of his or her life, you should be compensated accordingly. But, on the other had, if the transaction is about to close, and it’s a matter of the transaction closing or not, you may opt to earn less versus earning nothing at all.

The key is to always check with your broker with respect to the office policy on reducing commission, and also to set expectations accordingly. If you show the seller or buyer a net sheet so that he or she understands the expenses of the transaction early on and you confirm that these fees are acceptable, you’ll find that this will make for a much smoother real estate transaction.

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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4 Comments

4 Comments

  1. VickiMoore

    October 15, 2013 at 1:45 pm

    Yep, I agree. Never say never. Each situation is different.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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