A to B agent commissions confusion

[Danielle C.]

Hello,

I’m a little bit confused about agent commissions and have a few quick questions before I contact any. On the A to B side, if there is no listing agent and I am using a buyers agent to kick deals over to me, what percentage commission do they usually make?

I understand that I can pre-negotiate a fee with them, however I would just like to know what the usual fees are so I understand where the starting point is.

Since these properties won’t be listed, the only agent involved on the A to B side will be mine. In this scenario, what is the normal fee for a buyer’s agent – 3% or 6%?

Because there is a chance the bank won’t pay A to B commissions and I may have to cover out of my spread, I would like to keep the A to B side as low as possible. I am thinking that I would like to offer a point or two on the A – B, and allow them to re-list the B to C at 6%. A couple of points for pulling some comps and sending somewhat pre-qualified leads my way isn’t too bad at all. Any thoughts on this?

Ideally I would like to forgo using an agent all on the A to B, however just starting out, I think they are going to be very helpful in generating business.

Thank you!
Danielle

[Carla Reid]

Danielle,

I am both an agent and investor. Coming from my perspective as an agent, there is work involved on the "A-B" side.

The agent has to market for the short sale leads through ads, mailings, etc. Your agent should be pre-screening the lead for you, and ultimately is the one responsible for disclosing and explaining the short sale process to the lead. I believe you should agree to pay the agent a commission on the A-B side. Otherwise, there is not an incentive for an agent to bring you deals. If you are only agreeing to pay the agent one commission (B-C side), the agent may as well list it as a traditional short sale and hire a negotiator to process the deal if they don’t want the hassle of negotiating it themselves.

Of course, commissions are always negotiable. It is the law. However, the customary commission is typically 3% per side, per transaction. Plus, as Nick stated, the bank pays the commission, you don't.

As of March 1st, 2009, all Fannie Mae backed loans are required to pay out a 6% commission on short sales. The banks are not allowed to pull any fast ones right before closing and reduce the commissions. Other banks may cut to 5% or 4%, but agents understand that's the name of the game.

Bottom line, scratch your agents' back and they'll scratch yours! :wink: