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Updated over 6 years ago on . Most recent reply

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Bei He
  • Rental Property Investor
  • San Jose, CA
10
Votes |
37
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When purchase a property, isn't buyer pay agent fees better?

Bei He
  • Rental Property Investor
  • San Jose, CA
Posted

I consider myself an "little" investor mainly do buy and hold rental properties. So far, I bought 3 properties including my primary residence.

However I noticed that usually seller pays for 6% buyer and seller agent fees. Why don't people negotiate? 

My thoughts are, assuming a property selling at $300k:

Option 1: Contact price $300k, seller pay 6% agent fee. Seller get $282k, buyer pay $300k.

Option 2: Contact price $282k, the term change to buyer cover agent fee. Seller pay 0% agent fee. Seller get $282k, buyer pay $282k + agent fee $16,920, total $298,920. 

So option 2 seller get the same amount into pocket and buyer pay a little bit less. To me, if I'm a long term buy and hold, every year I can pay a little bit less on property tax right? 

Am I think right? Sounds to me this is a no brainer. 

Most Popular Reply

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10,250
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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
16,108
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10,250
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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
Replied

Interesting take on this, Bei.  I don't know many buyers that have the desire or ability to put an extra $16,920 'down' at the buy to save $1080.  Plus, the listing contract is between the LA and seller. It states the seller will compensate.  

Not every area bases property tax on actual sales price, but some might. The prop tax savings would be pretty miniscule I would guess.

The real problem you'll have is when you sell.  You paid $298, but your cost basis on paper is only $282.  To save $1080, your tax burden increases plus you'll get to take less depreciation while you own it.

I've had great results not getting a buyers agent at all. I offer 3% less, stating I will remain unrepresented unless countered.  I usually do not get countered.  Keep thinking creatively out there! 

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