This year I have been plenty of brainstorming for ideas for my business. I'm ready today to begin negotiating with buyers on the cost of my service.
All along my time in this business I have always disclosed to my buying clients my commission so I've never lost sleep when the check from my broker comes to me so I can deposit it into my bank account. In a 'typical' transaction of a single family home in Kingman, one where I represented a buyer to purchase a home that was listed by another broker in the MLS, I disclosed to my client the amount of money that my broker would be paid at the close of escrow. Often times that amount was based on a percentage figure in the 2.5% to 3% range.
Like most other Realtors, I didn't feel like the buyer was paying for my service. The commission was coming from the seller. If you asked 10 sellers, buyers, and Realtors how the buyers broker gets paid I'm willing to bet that 9 out of 10 of each will say that the buyer broker is paid by the seller.
Side note... technically the seller pays the listing broker the agreed to commission, then the listing broker pays the buyers broker the funds. The seller does not pay the buyers broker directly.
Since I started this blog back in March of this year and through the many other real estate related blogs that I read, I have been able to read about the thoughts and actions from many other [what I call] leaders of this profession. This has helped me in brainstorming for newer and fresher ideas to implement into my business. In other words I wasn't coming up with the ideas all on my own.
One very important blog (to me anyway) that I read is BloodhoundBlog. Judging from the many links to their site you probably would have guessed that anyway. Anyway, Greg started some conversations about buyer representation and has even put together a new fee policy for buyers. Well I'm going to mimic some of the things he has done. I don't argue with any of his ideas on the subject, but I will change some of the things he does to fit my own business.
While I'm launching this today, I probably won't be marketing this just yet. There are some changes I want to make in my online marketing and other things before I roll this new policy out for all of Mohave County to see. That said though, I will be informing any potential buyer that is looking for quality representation to help them with their real estate transaction about my new fee structure.
So how does this work?? It is simple really. Lets take the average price home sale in Kingman as of last month, which was $201,250 (you know this because you have read up on my latest sales report). If you were the buyer and hired me to represent you we would have already agreed [through negotiation] that you will pay a flat fee of $4,000 for my service. We would negotiate that fact and both sign a buyer/broker agreement to reflect it.
But I already hear you saying that you don't want to come up with $4,000 out of your pocket to pay me... well you won't have to. Here is why.
If you hired me and we did not negotiate a flat fee and this home that you wanted to purchase for $201,250, my fee for service would be $6,037.50 (if the home in my example was listed in the MLS and offered a 'co-broke' fee of 3% of the final sales price). By not negotiating a flat fee you should see that you left $2,037.50 on the table for me or for any other Realtor that you may have chosen to hire for representation.
First off, you are thrilled with your new home choice and can't wait to move in. You are already thinking about where the furniture is going to go or maybe on which side of the garage you are going to park on... and you've already come to terms on the price. So how can this deal be even better?? How about if I applied the extra $2,037.50 of YOUR money to YOUR down payment or to pay whatever closing costs your lender will allow you to pay with this 'rebated' money??
What is this about 'YOUR money' you ask?? Well yeah, without you agreeing to pay $201,250 to the seller no real estate agent gets any commission. It is YOUR money, how do you want to spend it?? I hope you see the picture I am trying to paint.
Some might ask why I would offer such a fee and my answer is that when representing a buyer, any buyer, the goal is the same; to negotiate a price and other terms for property that my buyer client and a seller can agree on to transfer ownership of the property. It is the exact same job, in essence, for each buyer I may work with. The total price of the home does not factor into the work I do for my client. In other words, if the property is sold for $100,000,000 or for $210,250 my goal is simply to navigate through all the terms agreed to in order to successfully close escrow and transfer ownership of the property at my clients bidding.
When representing a buyer my expenses for my business are basically; my expertise, my time, fuel costs, vehicle costs, membership to my MLS and Association, and a service fee to the electronic key for our Associations lock box that we use locally, errors and omission insurance, my brokerage fee, and the rent I pay for my office. The fee that I am offering buying clients of $4,000 will compensate me fairly enough to thrive in this business (as long as I have clients wanting to purchase property).
There are many more multitudes of cost that I will have while representing a seller, mainly for marketing efforts, but it is different on the buying side and you should know. And it is the reason that you owe it to yourself to first negotiate whatever fees that you are paying to your representative.
What if you were thinking about buying a home in the beautiful Lazy YU area here in Kingman overlooking the city out your front window while enjoying an incredible view of the Hualapai Mountains out your back yard?? This subdivision features larger exclusive homes in the $500,000 range and up. So lets just take one home for sale in that sub division for a moment and apply my fee to the transaction. We will assume that the home is listed by another broker/agent and it is included into the MLS with a 2.5% commission to the buyers broker. You and the seller agree that you will pay $545,000 for this remarkable home.
The commission I would normally make in the above scenario is $13,625, but you and I sat down together before we started searching for your new home and agreed that I will be compensated $4,000. Now there is $9,625 on the table of your own money. Apply it to the down payment and borrow that much less from the lender, just an idea. I'll help you make it happen.
Hey it is YOUR money and there is no way I can provide an extra $9,625 worth of service to justify keeping YOUR money. While some could argue that a Realtor would be more motivated to work on your behalf for the extra commission, there just isn't nine grand worth of stuff to make a deal happen any faster or face less potential problems. In fact, I think that I'd be more motivated to handle your transaction for the lesser amount so that I can represent another buyer, and another buyer, and so on. Also I can make the case that I am treating all my clients more fairly because my fees are almost always the same (I say 'almost' because the key word is negotiation when we sit down together and talk about my service fees for you).
So please consider me the next time you are thinking about buying a home in my serving area. I know I can provide the service that you are looking for and I have the knowledge gained from my many years worth of experience working for buyers to satisfy your needs for representation when buying property.