Profile picture for user04682202

Agents and FSBO

We have been using an agent to look for homes but recently found a HSBO home by ourselves without our agent's involvement. Do we have any obligation, legally or ethically, to ask the owner to pay a agents commission fee if we decide we want to buy the house?
  • September 23 2013 - US
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Answers (14)

Profile picture for Outer Banks N C
Does it hurt in some way to ask if they would?

Did you sign an agreement with the agent? If so that will have wording in it about this type of thing. If not then no, but I would ask and let your agent help you to get it to closing.
  • September 23 2013
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Profile picture for Ofe Polack
Do you have a buyer agency agreement with the agent that you are working with?  If you don't and you are pleased with the services that the agent has been providing I would say let her make the appointment and help you in the process.  The fact that you are asking means that you have a conscience , you are a decent person and understand that the agent has been helping you for the ultimately goal of receiving payment at the end.
  • September 23 2013
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Profile picture for hpvanc
If you want to use an agent in a transaction with a FSBO, why not pay the agent yourself? It eliminates a serious inherent conflict of interest, the "buyer's" agent will no longer be the Selling Agent collecting a sale commission from the seller or as a sub-agent of Listing Agent. Assumably the seller has opted or at least would prefer not to use a salesperson, if you still want to use an agent why not have them work in a professional capacity on the buy side of the transaction. Hopefully you are in a position where you can still negotiate a professional services compensation arrangement with your Buyer's Agent rather than have already signed a contract with a "buyer's" agent that demands if they sell you or you otherwise buy a house that you pay them a sales commission if the seller won't pay.
  • September 23 2013
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Profile picture for nwhome.us
Thank you hpvanc!

The standard pricing that goes through any MLS system includes agents commissions for both the listing agent and the buyer's agent.  The FSBO price should be a wholesale price without any commissions and therefore the buyers are in a perfect position to pay a 3% commission to be represented.  Both parties save about 3% off of the retail price.

If you think that finding a home to make an offer on is the only thing that an agent can do for you, think again.
How does the wholesale price fit the market for comparable homes?
How are you going to present the strength of your financing?
How are you going to present the inspection addendum and get a perspective on how that inspection fits into the norm for the product that you are making an offer on?

I could make a list that is 3-4 pages for you, but the bottom line is that finding a home gets you about 10-15% of the way through a transaction.  The internet has removed that task from the agent's responsibility.
  • September 23 2013
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If  you have a buyers agency with your Real Estate agent then it probably indicates YOU would owe the fee if you purchased a home where the seller was not represented by an agent.

Better read that document carefully. Did the seller indicate he would work with an agent?  Most sellers will because they have a hard time finding qualified buyers.  Lots of tire kickers - few who can actually perform.

If you go it alone without an agent guiding you - you have no idea what your rights or responsibilities are.  If something goes wrong your deposit money could be at risk.
  • September 23 2013
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John

I agree with you in part.  If in fact you were only representing the buyer then I'd agree a 50% reduction would be reasonable. 

What happens is you wind up with sellers who have not even prepared a sellers disclosure.  You have to take them by the hand and show them what to do.  You spend your time answering their questions and guess what?  Because they agreed to pay the buyers agency they think they are entitled to YOUR representation as well.

Try to explain agency to them - Good Luck with that.
  • September 23 2013
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Profile picture for hpvanc
I'm going to disagree that it should be a percentage of sales price. If it is still open to negotiation between the buyer and the client it should be treated as a professional services fee, where effort and value added are used to set the fees. If you represent and are compensated by a buyer in a FSBO transaction, you are acting solely in a buying/purchasing capacity, sales commission or compensation that is structured just like a sales commission does not match the services being provided.

I know to some extent it is just semantics. However, a consumer hiring a purchasing/buying representative on a FSBO transaction may be better served if they take action that specifically defines and treats the agent as a professional service provider solely acting in a purchasing/buying capacity. Most agents will try to frame the services provided and the compensation in line with the selling/sales side, which is inappropriate to say the least.
  • September 23 2013
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I think it honestly depends on how much value your agent has provided you in your search, and how much value you think they might provide during the negotiations. Another consideration is - if you cut them out of this deal, and it falls apart, are you going to go back to them or not?

Home shoppers can learn a lot from seeing homes with an agent, and, if that's the case, then maybe the agent is worth compensating for your gain. 

All the best,
  • September 23 2013
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Profile picture for Sue Burns
If you signed an exclusive buyer's agency agreement with your realtor than you are obligated to pay them a commission. Did you contact the seller yet? If not have your realtor call & ask if they would pay a 3% commission for them as your buyer's agent. Theres are many issues to be covered in the buying process & its well worth having a reputiable agent to steer you through the process.
  • September 23 2013
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Most FSBOs are willing to work with your agent, they are ok paying the 3% commission if they can save the other 3% from listing. Also- it is almost always the SELLER who must pay the commissions, so as the buyer it doesn't affect you.
If you like your agent and he's done well for you so far bring him with you.

However unless you have signed an exclusive buyer's agreement saying you will pay him on any home sale you aren't obligated.
  • September 23 2013
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Profile picture for SteveNash1
This depends if you have signed an agreement with the buyers agent.  If not then as said before no.  However in many cases the agent can negotiate that the seller pay your fees.  This can worth be more then its weight in gold because for you this is a huge purchase but for the agent it is their profession.  This allows him to look at it in an objective way and see things you may not.  Helping navigate threw the home inspection repairs, appraisal repairs, loan types and local experts in the area for the parts involved.  Many sellers will not loose a deal over this and will pay and add it to the loan amount or even split the costs at closing.
  • September 23 2013
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HPVANC

Just to comment on what you said.  You are not just representing the buyer in a FSBO sale.  While in theory you are the buyers agent - in reality it does not happen.  If that was the case I would agree with you the compensation could be fee based or flat rate.  I'd prefer an hourly rate.  You never know how long it is going to take you.

The FSBO seller winds up being a time sucker. Most times they have no idea what they have gotten themselves into.  They usually do not have a sellers disclosure.  You hand them one and as an agent I'm bound to explain to them the purpose of the form and the legal ramifications if they falsify it.  That is time I would not have to spend if I was only representing the buyer.

They ask a question "What happens now"? and that starts the never ending stream of "what do I do now"?  "What is this form you asked me to sign"?  "What if I do not want to pay for that repair"?  "What if I want to close later"? "What if my house does not appraise".  It goes on and on.  "Explain this to me".  "Can you recommend a roofer"? "How do I get a deed done"?  "What are my closing costs going to be"?

As an agent I have a duty not only to represent the buyer but "To do no harm" in the transaction.  That is the legal instruction in PA.  If I do not answer the FSBO questions and help them I open myself to legal liability later.  I am the expert and therefore I cannot take advantage of the fact the seller does not have representation.  Like it or not the buyers agent is thrown into an unwritten dual agent situation

If I answer the seller by saying - you will have to get legal advice about that, or I represent the buyer and can't help you - then I potentially stall the process for my buyer.  I am then doing a disservice to the buyer.  It's a Catch 22.

I have done it more than once and it has not been fun.  I did the work for both sides and got paid for one. 
  • September 24 2013
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Profile picture for hpvanc
Sisters,

I also believe that an agent can and should in many cases act as a neutral professional, which seems to be the scenario you are describing. I also agree there is some more time involved. I won't agree that structuring the compensation as a sales commission is appropriate for either a Buying Agent or a more neutral transactional coordinator that is bound to do no harm to either party. While I would prefer a fee for services arrangement personally, I have no argument with the hourly arrangement. My beef is with agents trying to make every situation fit the sales model, when no selling is asked for by either party. Both the compensation method and how the agent identifies the services provided play into that.

I don't believe that agents should not be compensated for their work, and I believe that the right agent can add value. I simply believe that the current system has a strong tendency to work against all parties (including the agents involved) when it comes to agents providing professional services, and that tendency is even greater when a FSBO is involved. My point was there is no salesperson in this transaction, professional assistance by an agent may be of value, but both the compensation method and the agents attitude towards the capacity they are being asked to act in, should be strictly that of professional service provider.

Unfortunately I also think it takes different credentials, than what the typical agents possess.
  • September 24 2013
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Profile picture for Carole Tyne
My clients when interested in the for sale by owner send me the address and contact information.   I then contact the seller on their behalf.   They can represent you in the purchase.  
  • September 24 2013
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