Agent telling me to increase buy offer. Is this normal?

[Kyle Danielson]

First time home buyer here. I'm trying to understand the world of real estate but the longer I deal with this the more I get the feeling real estate agents are like used car salesmen... shady. I told my agent to put in a buy offer for me for $5,000 over asking price, instead she says she will check what the highest offer is, then tells me to offer at least $50,000 over asking because that's the highest offer. I know agents get a commission based on sale price so she has an interest on me bidding a higher price. The whole thing seems shady, especially when I Google this and people say it's illegal for seller agents to disclose offers and their amounts. Should I replace the agent or am I being paranoid? 

[Charlie MacPherson]

@Kyle Danielson  It depends entirely on your local market.  In some places, $50,000 over asking (assuming the house is priced correctly) is the norm, due to a severely restricted supply.  In others, it's absurd.

Rather than jump straight to "sleazy Realtor" accusations (something I see all too often here on BP), think about this:

$50,000 in additional sales price at an estimated 2% buyer-side commission = $1,000.  That is most likely split with the broker 60/40.  That means that the Realtor would make an additional $600. 

That's not nothing, but it's not exactly jackpot money either.  Most likely your Realtor is telling you what she thinks it will take to get the deal done. 

You can limit the risk of over paying by use of an escalation clause.  Ask your agent about making that part of your offer.