Buyer’s Commission: Negotiable?

A regular reader posted a question recently:

I am currently an attorney and confident that I can handle representing my own interests regarding the purchase of my home. I have disclosed in the offer that I will be representing myself and so they can save on commission, but they haven’t discounted very much for that fact. I can pretty easily take the sales agent exam in IL before closing. Can I then put my name as the broker on the contract and take the commission check at closing?

image You may very well be excellently suited to represent yourself in your transaction.

And, in fact, here in Illinois, attorneys are allowed to act as Real Estate Brokers on behalf of themselves and their clients.  For example, if you were handling the estate and disposition of property on behalf of someone that inherited some property.

You would be permitted to act as a Real Estate Broker as their attorney and place advertising, negotiate a contract, and handle the closing.

Here’s where there seems to be a bit of confusion:  A seller’s Realtor (note that I am using the Trademarked term Realtor in this example) – for example: from Big Blue Brokerage – has negotiated a commission from his client, the seller.

And that Realtor has offered compensation to other Realtors through the use of the Multiple Listing Service of his/her service area.  Here in Illinois, it’s MRED.

And contractually – by joining this association, and by adding a listing to the computer database, and offering a commission in that database, a contract is created between the Listing Realtor and all the other Realtors in the service area who are working with buyers.

However there is no obligation whatsoever on the part of the Listing Realtor to offer any sort of commission reduction or rebate to a buyer who is not represented by another Realtor.  (again using the trademark Realtor here on purpose.)

(Copyright © 2009
This content feed is for personal, non-commercial use only. The use of this content feed on other websites breaches copyright. If this content is not in your news reader, or on any other site than www.yourwindycityguide.com it makes the page you are viewing an infringement of the copyright and the owner of the site a thief. )

And even though you, as an attorney, may act as though you have a Real Estate License, your real estate license does not entitle you to COMPENSATION.  It only entitles you to REPRESENTATION (capitols only used for emphasis.)

The only way you would be entitled to compensation would be if you were a member of the Multiple Listing Service through which the offer of compensation has been made.

Notwithstanding my technical explanation above, many buyers certainly DO go out, and purposefully shop for property without the use of a Buyer’s Realtor in order to do just what you are seeking – namely the Buyer’s Realtor Co-op Commission.  But without the benefit of the contractual obligation of belonging to the local MLS, you are simply negotiating.

And in the case of negotiations, of course, everything is negotiable.  Obviously, as the practice is common enough that you are aware that the practice exists, it must happen on occasion.  But not always.  A Real Estate Agent with a desirable property that might sell without difficulty may be much less amenable to such tactics.  A motivated (i.e. hungry) Real Estate Agent may be totally willing to entertain your proposition.

But just because you ask, doesn’t mean you’re entitled.

In my course of business, I normally am hesitant to give away part of my commission.  The reasons are many:

* My offer of compensation to other Realtors is designed for us to cooperate together in making the process of helping our seller clients, and our buyer clients as hassle free and smooth as possible.  It aids us greatly to be able to take our buyers to properties that are listed with competing real estate agencies.  And vice-versa.  And I know that when a colleague from another company sells one of my listings, there is a chance that I will return the favor someday.  In your situation, it is likely that you will not be bringing other buyers to my listings nor will you be promoting listings that I would like to bring my buyers to someday.  Since it is unlikely that we are going to cooperate again someday, there is no incentive for me to give my commission to you.

* I might be willing to negotiate with a customer who could become a repeat customer someday.  But in your situation, as you have already indicated that it is your desire to represent your own interests in the purchase of your home, it is very likely you will wish to do the same when it comes time to sell your own home.  So I probably am not going to get repeat business from you.

* Most likely of all – you located my property for sale through one of the avenues that I spent money on.  Whether you find a property in the newspaper ads, or on the company website, or on a big National Website such as Realtor.com – that is an advertising outlet that I have spent a considerable amount of money on.  And if you located one of my listings through one of those advertising avenues, then it’s my desire to be compensated for procuring your interest through that avenue.

Certainly, I should recommend that you may very well benefit from a local expert on your marketplace and save even more money by using a Realtor that knows your neighborhood and the marketplace well.  Perhaps you should talk to one rather than focusing on that little percentage?

2 Comments
  1. Adam
    May 1, 2009 |
  2. dave
    May 4, 2009 |