Question on appropriate commission to negotiate...

[Michael W.]

I have a question on what is the appropriate commission to negotiate...

Background: For 5+ years my wife & I have been planning on semi-retiring & watching a semi-rural area (ranching/farming type community where you could commute to a big city) where other family members have retired to. Over a year ago we convinced my sister & her husband to also retire there and we jointly looked for a 20+ acre "ag exempt" property that didn't have restrictions preventing at least 2 homes. My sister found an agent and the agent helped us look at multiple properties. In the end, we didn't find a property we both liked/wanted (most were approx $200K-225k for the raw land) and we ran out of time so my sister decided that she instead wanted to get some 1-2 acre lots in a lake subdivision with amenites (pool, pavilion, boat ramp, basketball/tennis/volley ball courts etc)... In total the lots were approx $40K apiece and we thanked the agent for helping us.

Since then I have been watching that market and finally found a property that meets our original desires & is really close to the lake lot (we will try to keep that lot and maybe build a lake house one day or just use it for the amenities since the HOA is really reasonable).

Anyway, the property I found is likely to go between $325K-$375K total, is ~21 acres total (house .5ish & 20.5ish ag). We self-toured property (no agent on our side) & the house is likely not what most people want (older many-kids/large family style) but my wife & I are fine with the house overall... Most ~20 ag exempt acres I have seen in that area are approx $200-$250K so to me that means the house could arguably be approx $75K-$185K of the total deal depending on slice it. I am not sure exactly how this works but they put it up on the market as a 20.5 acre property but I think it is technically two 10ish acre lots with the house on one and .5 & house taxed as improved and 20 acres ag exempt (or something like that).

I frankly don't know much about proper due-diligence on buying properties and want help on validating many things (tax roles for the house vs. the ag property, should I make two offers (one for house and one for the ag property, etc)). I also want quality inspectors to review the house, wells, septic, barn, etc.

At this point I still don't have a buyer's agent. My brother and his buddy run a real estate company (re-finances, etc) and his buddy offered to represent me & rebate 2% of the 3% back to me but really doesn't know that area & I want some due-dilagence he likely can't do.

My sister recommended I talk with her original agent and tell her I found a property and would like that agent to do it but since I found it and did most of the leg work (up to now) ask for a percent or percent-and-a-half off (of the 3%).

Anyway, I thought this agent was "ok" and as good as any I had met though I personally would have chosen someone with more of a rural/ag focus. She appears to be pretty connected in that area and with me moving my family there with kids in those schools I don't really want to offend anyone for no reason...

Sorry for the long post but I figured it best to share the details as best I could to get a quality response. If you have read this far I really appreciate it...

Anyone have any recommendations/thoughts as to what reasonable discount/rebate, if any, I should be asking for if I go with this (or another) agent?

[Jon Holdman]

Keep in mind agents split their commission with their broker. This could be as bad as a 50/50 split, though likely less. Nevertheless, you're talking about a $10.5K commission, which the agent would net $5000-7500, pre tax.

Not sure where this property is, but a rebate from an agent to an unlicensed person is illegal in almost every state. An unlicensed person cannot receive a cut of the commissions.

You could negotiate a price reduction, with the understanding the agents involved will take a smaller commission. If sales are slow, and this property has been setting around a long time, they might do that.

Realize the commissions are paid out of the sellers proceeds from the sale. Yes, I understand you're the one bring cash to the table, but the seller is paying the commissions from what they net.

You acknowledge you don't have the ability to do the necessary due diligence yourself. So, you need the help of an agent. I can see asking an agent to take a commission reduction if you're doing some of the leg work. But you're saying you need the agents help.

In a RE transaction, its my opinion the buyer's agent does most of the work. Admittedly, you've found the property. That save a bit of work, and potentially a lot of work if the agent had to shuffle you from place to place. OTOH, it sounds like this agent DID shuffle you around on the first hunt, and didn't get paid anything. The hard work of helping you with that due diligence and doing all the paperwork still remains to be done.

I don't think any commission reduction for the buyer's agent is in order. If you want 1 or 2%, get the seller to knock that much off the selling price.