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Gerald, Esq
Gerald, Esq, Lawyer
Category: CA Real Estate
Satisfied Customers: 3822
Experience:  30 years of experience
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The market is quite hot in silicon valley. I am selling my

Customer Question

The market is quite hot in silicon valley. I am selling my house for about $2m. I would like the commission to go to 4%. My agent tells me if I go below 5% that no buyer agent would go for my property. There isn't much on the market so I wonder if he is telling the truth.
I bought this house in 2012 when he was also my agent so I feel he already made a lot of money on me anyway. WHat do you think.. Would buyers not buy my property because of the lower commission?
Submitted: 1 year ago.
Category: CA Real Estate
Expert:  Gerald, Esq replied 1 year ago.

Hello:

Thank you for using Just Answer. I am an attorney with 30 years of experience including real estate and real estate investing experience.

Your Agent isn't saying that buyers would not be interested. He is saying that the real estate agents who work with buyers will not show your house. This is why:

The way Real Estate agents get paid is that they split their commissions betwen 4 persons: Listing Broker, Listing Agent, Selling Broker and Selling Agent.

The Listing Agent works for a Listing Broker. He does not work for himself, he is required by law to work for a Broker.

The same is true for the selling agent. He works for a Broker too.

When you enter into a listing agreement the porperty is listed on the "multilist" by the listing Broker agent. Selling Agents (usually working with buyers) see the property and how much the commission is. It is the selling agents that bring buyers to the property.

When the property is sold the Commission is split 4 ways. 1/4 to the Listing Broker 1/4 to the Listing Agent 1/4 to the Selling Broker and 1/4 to the Selling Agent. So the reality is that the agents that are bringing buyers to properties are looking for the best pay day for themselves. They are less inclined to bring buyers to see properties where the Commissions are reduced.

This does not mean that your property will not sell, it just means that the Agents showing the property have a reduced incentive to show your property over another property.

You can alter the equation by offering a Selling Agent Bonus. This is money that will go directly to the selling agent and Not split. Listing agents of course are not fans of such arrangements (they feel shorted).

So legally, you can negotiate the Commission that you want to pay. The Broker and Agnet have the right to refuse to take that listing. And if they do list it Selling Brokers (those working with the buyers) are free not to show your property.

I hope this information helps you.

Good luck.

Kind regards,

Gerald

Expert:  Gerald, Esq replied 1 year ago.

Sometimes the listing agent and selling agent are the same person. When this happens the Agent hits a home run and takes both parts of the Agent's Commission.

Customer: replied 1 year ago.

Thank you for your info.. I explained this wrongly.. I meant the buyers agent that would potentially not show my house to his client (buyer) because of the sellers agent lower commission. I understand that the buyer couldn't care less.

So I guess I will not lower the commission to 4%.

Thx

Customer: replied 1 year ago.

I understand you but have a couple more questions:

1. I have been told that when a house is listed that agent is not looking for % commission until the house will be sold so then he would already have shown it to client when he finds out.

2. What if I suggest to agent if he takes his commission to 1.5% and buyer 2.5%. This house is $2m still a lot of money and he is independent so no need to pay a broker..

3 He made a lot of money when I bought the house in 2012 when the full 6% was charged. What if I suggest 4% unless he sells over $2.2m then I am happy to up it by 1%?

Expert:  Gerald, Esq replied 1 year ago.

Thank you for the follow up questions.

1) To my knowledge the offered commission is listed on the Broker MLS.

2) and 3) Legally the Commission structure is negotiable. Discuss this with your friend and negotiate a Commission that you are willing to pay. Legally you can offer the type of bonus that you describe.

Good luck.

Kind regards,

Gerald