Moral dilemma time for my wife and I. I’m working with the same agent to find a home and sell my own home. My wife and I have found all of the houses that we’ve walked through (approx 6 homes), but my agent has suggested properties to us, arranged for times with the sellers agents for us to see properties and handled all of the paperwork required to submit an offer on the one house we lost. So, she’s definitely done some work on the buying side. We’ve found another house that we want to put an offer in on. We found this house all by ourselves and were given a tour last weekend by the sellers (without my agent present). The sellers are selling this house themselves and are adamant about refusing to cover agent fees. As you can imagine, my agent is not warm to this property, but has been tactful when discussing it. We are poised to put an offer in, but my agent wants to contact the sellers to see if she can represent them in the transaction and capture 3%. I’ve basically told her that she’s out of her mind if she thinks that the sellers are gonna fork over the equivalent of $10K for filing a little paperwork. Furthermore, they've sold without and agent before and are comfortable with doing so. So assuming the sellers reject her representation, I’m to the point of discussing what if any commission exists for this sale and who covers it. It is not my intention to cut my agent out of the deal as she has done some work for me and will represent me in the purchase, but there’s no way this deal will go through if I have to cover 3% either. In other words, I want to pay for what I’m getting. Keep in my too that my agent and her company will get 6% from the sale of my house. What’s you take? Thanks for the input.

See if the seller will pay 1.5% and then you pay 1.5%.

There is no real moral dilemma - either you will see that your agent gets compensated for the work she did or not. (and keep in mind that she doesn't keep the entire 3%, depending on her office she will have to split anywhere from 5% to 50% with her broker.)

The commission does not go to cover "just a little paperwork."

Keep in mind that commissions need to cover an agent and broker's total costs involved in being open for business to legally be able to operate; not just the *actual cost* involved in *doing the paperwork* - from licensing to all sorts of fees and costs, software including the marketing involved in selling your home, and driving buyers (and you) around when necessary. These fees and costs need to be paid by the commissions taken in. Now when I fill up my van it costs me $67 (last summer is was just under $50 to fill up).

Also, unless your agent sells your house herself, she will not get 6% of the commission, but her broker will have to share that commission with the selling agent and broker.

...or you could pay her nothing ...or figure out a fair hourly rate for the work she did for you.

Perky ... her effort had not been worth (1.5%) $4.5K to me and there is zero motive for the sellers to agree to this amount as they essentially found their buyer and know how to structure a deal. I'm willing to pay for the use of my agents assets and time. Considering we found all of the properties that we've looked at ourselves and have only relied on her to gain access to walkthroughs, there were little to no assets involved (car payment and gas money aside). I don't think the agency can block my participation in the purchase of this property if I refused to compensate them as "broker" is suggesting (which I don't intend to). But if I do, I will essentially be on my own (which sounds a little daunting, but is certainly doable).

"broker" I think your idea of a fair hourly rate for past work is reasonable understanding that the majority of that money will go to the agency and not her.

Keep in mind too that the same broker is representing me in the sale of my house and will get 6% of the gross when (and if) that happens.

I congratulate you for even thinking about this matter; it gives me comfort to know that there is still something called "Honor".

Now, no one has yet posted (or I missed it); but is your current home already under Contract to be sold ? With a scheduled Closing Date ?

I cannot fathom how your Agent could possibly represent YOU in the Sale of your current Home and then also represent the Seller of the FSBO Home ! That seems to be what she was proposing, and that seems to be a version of DUAL AGENCY which is loaded with danger . . . . if not outright prohibited.

As a practical matter, she shouldn't be on your side of the table in the Sale and on the other side in the Purchase. She'd have to be bi-polar or have a split personality. Plus it sounds like you have become Friends. If so, then she should only be your Agent.

I recommend that you hire her at the appropriate time as a Sales Consultant at +/- $45.00 per hour to guide you through the Purchase of the FSBO. She should be honored that you are proposing it and the amount paid "should" be a bargain for you and gravy for her. But the "Meter" shouldn't start running on that Purchase until you have a FIRM Contract on your existing home.

Just some observations.

P.S. Could it be that you might Purchase the FSBO before you sell the existing Residence ?

Do you have an Exclusive Buyer's Agency agreement signed with your agent who was showing you homes? If so, there may be something in there requiring that you use them as your agent when purchasing a home in a certain time frame, regardless if it is FSBO. OR, it might state that if a party is not paying the commission, then you would be obligated to pay the commission stated in the EBA. So, let us know if you have one of these agreements with your agent.

Vermont007: My house is not under contract yet. My agent has been actively marketing it and I am under an exclusive with her agency until October. The agreed upon is the standard 6% for the sale of my house, of which she will probably take home 1.5%.

The house we want to put an offer in on is FSBO and the owners will accept contingent offers. So, if I use an hourly rate model, I would have to spend some money on the assumption that my house will sell, the congency will lift and the deal will not get hung up on any one of the hundred little things that might happen. Assuming negotiations go smoothly, can you estimate the number of hours I may be liable for? I assume some of the paperwork gets filed after all contingencies are lifted.

I agree that it seems like a conflict of interest for her to represent both buyer and seller in the purchase of this new home as well as seller in my existing house. However, I don't think there's a snowball's chance in hell that she'll get the business from the seller.

It's hard to know how good that $45/hour number is. I'm in Rochester, NY.

That's a truly fantastic question to which I don't have a good answer. I went through all of my paperwork yesterday looking for such a document, but was only able to find the contract to sell my house. I will have to clear this up with my agent as it could dramatically change this deal. Thanks for bringing this up.

If you haven't sold your house yet the FSBO might be gone you sell yours. So it seems you are getting way ahead of yourself here unless you can comfortably qualify debt ratio wise and carry 2 mortgages.

For your info do yo ueven know what this property is worth??

Often times FSBO'S are way overpriced or underpriced. usually they look at other listed properties and price similar to there's thinking I am saving the commission.

They aren't saving squat. If a house had an agent and SOLD at 1,000,000 at a 6 percent commission that's 60 thousand in commission. So a FSBO listed at 1,000.000 would be overpriced by 60,000 if they were similar properties because they did not pay a commission and are tryign to pocket 60k more money.

A buyer will look at a FSBO and deduct the 6 percen toff the top because they are not paying a commission.

good luck-People always think they are smarter until they get bit in the [censored].

A FSBO and an unprepresented buyer trying to negotiate a contract is a deadly combination.

Take head to this warning. If this seller is as savvy as they claim then you might end up on the short end of the stick.

I suppose it's "heed" ?

or you could get an atty to review the contract and an indpendent fee appraisal to verify the value... which you might want to do anyway...

If you are comfortable buying FSBO and that is the house that you like the best, then go for it. The seller obviously does not want to deal with the whole agent and commission thing so if you want to pay your agent for her time, then do so either directly out of pocket or by increasing the sales price (if approved by your lender to do so).

Hopefully your house will sell while listed with her. If she only gets half of the transaction then so be it.

You should not feel bad for finding a FSBO house that you liked without her...it's not the same thing (in my book) as going out with another agent...

FWIW.

Thanks for the great responses everyone. Check back here in a few weeks and I'll let everyone know what we decided to do and how the deal went.

Yes you can get an attorney and some are good and some are bad.

There are some I run circles around and they make all kinds of mistakes. Usually in my area they charge 500 to negotiate the contract.

You need to find a baseline market value for your house which an attorney is not going to be good at.

Just remember the numbers make a deal not what type of property it is. I see people overpay everyday of the week for foreclosures,fsbo's,regular sales,etc.

So to determine a deal I always look at the numbers and don't get caught up in the hype.

I have yet to come across an attorney that could negotiate anything. They are trained to litigate and that is their goal.

My advice to you is that you tell the FSBO seller that you will move forward with purchasing their home if they are willing to pay your agent 3% to represent you. You don't want your agent representing the seller. You should be represented when it comes to the FSBO. The seller will most likely agree if they want to sell their home right now. Then you will also have representation on your side too.

with respect to money, why is this a moral dilemma for you on the buying side? you are the buyer and potential employer. if this were your business, would you offer to pay a prospective employee (or contractor) that had no employment agreement with you and had performed no work for you? there's no moral or legal issue to consider with no agreement in place.

if you are considering employing an agent to represent you in the purchase of the new home, why not hire a DIFFERENT agent for that transaction? wouldn't that be more fair and ethical?

Update: I proposed and we agreed upon a flat fee of $2000 (payable upon close) for my agent to represent me in the purchase of this home. This is under 1% of the value of the house and is a good deal for me. The agent gets this work and is working to sell my existing home (for which her agency will get the standard 6%). She's happy, I'm happy. The offer has been made on the new house and the owners have until 4PM tomorrow (Sunday) to respond.

I would think that the agent would not be representing the fsbo but would asssit them as a transaction broker and would represent the buyer. I would also like to point out that finding a buyer a home is the just the beginning of what we do. As you pointed out, the fsbo has done this before and is very comfortable selling themselves. Lets just hope for your sake that the only reason they don't want to pay an agent is because of the money. Also, please realize that there is more to that paperwork than filling in the blanks. A good agent is worth their weight in gold when it comes to that paperwork. How well you are protected in the buying process depends on how well that paperwork is written. Yes, you can have an attorney review it or even write it, but unless you get an attorney who has a daily working knowledge of writing purchase agreements and who has personally seen this home, something may still be missed. While sometimes property is bought and sold easily without a real estate agent, I would not recommend it. As I said earlier, the fee the agent is being paid is not only for the paperwork, but for the experience she brings to your contract and purchase. JMO

I would allow your agent to writ up an offer that requiries the seller to pay a substantial amount of your closing costs and then you compensate your agent from the funds she was able to gain for you to go against your closing costs. This may just fix the issue with the sellers not wanting to pay the agents commision and your agent will get a chance to earn her commision. If she is unable to pull it off then she did not deserve the commision in the first place.

Most FSBOs offer compensation to a buyer's agent. Even then, many FSBOs are trouble. You may think that's 'real estate scare tactics.' But it's true. FSBOs are often unpredictable, unknowledgable about real estate transactions, and out to pinch every dime from you. In fact, a FSBO seller can be just about as dangerous as a really bad agent. Watch out!

I have to note one other comment you made, BTW. You said your agent would get 3% for 'filing a little paperwork.' Now, I understand that some deals go very smoothly and it may appear to those involved that all that was done was 'filing a little paperwork.' But the truth is most real estate deals have complexities involving the financing, the inspections, the release of contingencies, the option period, the appraisal, the survey, and the title work. In addition tight coordination is required between buyer and seller to make sure there are no 'surprises' on closing day. So what appears a smooth and transparent transfer to the clients actually was the result of quite a bit of overtime on the part of the agent.

I make very clear in to my clients the years of experience and expertise that I have... and that's why my services are so valuable to them. Perhaps your agent doesn't have that experience. Or perhaps she's failed to communicate it to you.

Good luck!