Might have accidentally killed a deal... oops

[Carl C.]

Last night my partner and I were on the phone with a seller's agent negotiating an offer and everything seemed to be going well. We had made an earlier offer which she told us they wouldn't accept. After looking at our numbers there was no way we could offer more. It just wouldn't work for us. we explained our reasoning to her and suggested that we would be willing to do a lease back at a significant discount for a few months so the current owners could be ready to go when they found their new house. This would also in effect add a few thousand dollars to deal. She liked the idea and said she'd discuss it with the sellers. Then my partner adds in that since we aren't using an agent, perhaps the selling agent would be willing to reduce her commission by 1% to help sweeten the deal for the sellers since she won't be splitting the commission with another agent. Well that stopped the to conversation cold. She was clearly very insulted by the suggestion. I didn't think it was such a bad thing to suggest but obviously I was waayyy wrong on that one. So I'm pretty sure this deal will be dead. Unfortunate, but we were going in on the top end of our budget anyway so it isn't the end of the world. That was a very valuable learning experience, to say the least! 

[Lumi Ispas]

@Carl C. I am an investor and an agent. I really like how everyone assumes that an agent get paid a full commission. 

I will share with you how is works: if the commission is 6%, and usually is 6% less than 20% of time, half goes to the listing office and the other half goes to the buyer's agent office.

Let's take half of it, and in this case 3%. The agent has to split that commission with the office and most of the time gets 50-60 of that 3%, so let's say it's 1.5% that is left now.

Out of the 1.5%, the agents has to paid Error and omission insurance for each deal, expenses and income tax, and the commission that he really walk with is 1%. 

In the 2.5% commission, the agent gets around 0.8% money in his pocket.

When a buyer or seller asks the agent to discount the commission, the agent has to have the company that he works for to agree to it, if he decides to just cut the commission himself, he is actually working for free, as his company will still take the commission they have in the contract and now the agent will work for .5% or less. 

Also, 80% of agents in USA sell around 4-5 houses a year and they can barely sustain them-self from Real Estate.

I had in the past a client that was making $97,000 on a house asked me to cut my commission by $5000 as he was not making a whole 100K, which would have reduced my commission to $1500 after working for him for months and months and wrote tens of offers.

I said NO, if the value he put on my knowledge that brought him a 97K profit was a commission of $1500, then he needed a different agent, I made a lot of millionaires, and I never asked them to give me extra because I got them a better deal than they expected.

Guys, would you take a cut out of your salaries at work just because you are doing a great job? It doesn't make sense, right? - That's why it doesn't make sense for an agent to cut his commission. 

Plus, if someone cut his commission for one client, then how is he treating the other clients that pay full commission?

Good luck to you, and remember agents can make you millions if you treat them right!