Profile picture for Anya_vi

Should we pay a finders fee or are we obligated to pay commission?

We have had a Real Estate agent showing us homes for sale. He recently showed us one in a particular neighborhood we liked, house not so much. While he was showing this property to another potential buyer another resident of the neighborhood approached him and asked about selling their house. He brought us to see the home and we love it. We want it. However the owners wanted an appraisal performed first to determine the value and selling price. We are still waiting to find out the magic number , but in the meantime we have found that the agent has NO agreement with the owners formal or otherwise. Now we find that they are hesitant to sign an agreement with him as they do not want to pay a 5% commission. I do not want to lose this house, as it is perfect for us. So, should I suck it up and agree to/ offer to pay a finders fee? Am I obligated to pay a commission? As they are not interested or willing to sign an agreement I want to approach them on my own, but I need to know what my obligations to the agent are. Is a finders fee acceptable if we handle the sale with the owners on our own? How much are we obligated to pay?
  • October 06 2011 - Carolina
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Answers (17)

Carolina, I'm a believer in doing the right thing.  This agent should be compensated.  Keep in mind, agents aren't only there to JUST find you a home.  We also have a ton of other services that we provide to help ensure you have a smooth transaction with the best price, terms, etc.  Try getting the seller to meet you half way and pay 2.5%.  You pay the other half.  Typically, a FSBO required more work and attention than a traditional sale. While it doesn't sound like you are "obligated" nor the seller, you should do the right thing.  Also, if you have a buyer broker agreement, this is more than likely to "obligate" you to paying the fee.
  • October 06 2011
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Profile picture for hpvanc
I'm always curious why agents claim to be professionals, yet many of them when faced with a situation where they perform a limited and set group of services refuse to consider being paid a fee for services rendered.  I know that the real market value of those services is probably less than what the sales commission would have been. 

I recommend that you try to reach agreement with the agent to pay them for the showings and research they did on your behalf prior to locating this property.  Talk to the owner of the property you want to buy and see if they will split the cost of the professional services that (this or another agent if the current one is unwilling to work on a professional basis) you wish to use the agent for and make arrangements to pay them.  There is no law or moral imperative that states an agent can only act as sales person and never act or be compensated as a professional services provider when the situation merits it.  That said if you signed a buyers representation agreement with a mandatory commission rate you may be stuck with having to use the sales person and be denied professional style representation.
  • October 06 2011
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Profile picture for sunnyview
Legally I am not sure whether you are obligated to pay. It really depends on your contract. I would talk to the owners and explain the situation. Tell them that you understand that they do not want to pay a full commission, but that you feel that having a professional handle the paperwork would be beneficial to both you and the seller.

I would offer to split a partial commission with them. Doing that may be cheaper for both of you than hiring an attorney or another professional to do the paperwork and disclosures. It also depends on how much time this agent spent with you looking at houses. I think you need to be fair with them, but just from what you've said so far a full commission or double commission for this FSBO would seem to be unreasonable. Talk to the owner and see if you can come up with a fair split all around. The agent should be willing to work with you and should not expect a full commission since they were not the listing agent for the FSBO.
  • October 06 2011
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Profile picture for Anya_vi
We have no agreement with the agent either. He has shown us properties listed by his firm, and multi-list properties. Believe me I searched around for a buyer agent but none seem to do it or even want to do it. This house just kind of 'fell in his lap" while he was showing the other one he has listed. Really like the guy , but I know he is not my friend, he is in it for the $, bottom line. Just trying to asses what and how much is "right" First reply guessing you are an agent, nice try , but 5% not happening.  After further research have found that .05-1% is a more accepted finders fee 
  • October 06 2011
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Moral vs Legal.
There is no legal agreement/obligation for you to pay the agent.  However, If you really want the house which it sounds like you do, talk to the agent and tell him your concerns.  Yet, if he had not taken you to the neighborhood you probably would have not seen the home.  Perhaps speak with the broker and the agent, give them a deadline to complete before speaking with the owner.  If that fails and you do speak to the owner you can still ask the agent to broker the transaction for a fee.  These services are limited and usually just make sure that the transaction is fair and legal.  I have investors which ask me to do the same. 

hp.  I wouldn't ask my pilot to take a pay cut to fly me
 
  • October 06 2011
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Profile picture for Pacita Dimacali
You said "another resident of the neighborhood approached him and asked about selling their house."

Clearly, the owner wanted someone --- a realtor whom he knows will have buyers --- to help him sell the house.

So your realtor, knowing what you're looking for, deduced that this is the house that will meet your needs. And acted upon it. You wouldn't have known about it if he wasn't in tune with what you're looking for.
 
By taking you around to look at houses, there is an implied agreement that you have hired him to do this job for you.

The house didn't just "fall in his lap".  By virtue of the fact that he was seen and known as a realtor, the homeowner sought him out. Even in social environments, we ask accounting questions when we meet an accountant. We ask a mechanic about certain problems with a vehicle. Legal questions with a lawyer. Medical questions with a doctor.

Realtors go through continuing education to make sure that all real estate transactions conform and comply with state and local government regulations, that the required disclosures and documents are completed and acknowledged by both buyers and sellers, that other professionals and tradespeople (escrow officer, lenders, contractors, service personnel) are available to help complete the transaction.

I once persuaded a homeowner to let me show his house (not for sale) to a client who really wanted to buy a home in his neighborhood. When I brought my buyer, we went through negotiations and reached a price at which the seller would be willing to sell his house and the buyer is willing to pay for it. It was never on the MLS. The buyer compensated me as my reward for finding him a house that he really wanted.

That's part of the service. And what kind of profession doesn't get paid for providing a service. Surely, when YOU yourself work for someone that you would expect to be paid for it?

The seller wouldn't have had you as a buyer if the realtor didn't bring you two together.
  • October 06 2011
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Profile picture for hpvanc
I didn't say anything about the agent taking a pay cut.  I even suggested that Anya pay for the showings the agent had provided if they wind up not using them for the transaction.  Professional services fees paid at time of service should have the costs of continuing ed, administrative expenses, and a limited (5%-10% of the total fee) amount for prospecting.  What they should not have built into the fee when paying upfront is the cost of showing homes to a multitude of buyers that never buy and listings from sellers that never sell, that should be a separate fee structure from those that are willing to pay upfront for professional services rendered. 

Where I will admit this one gets muddy ethically, is there was no upfront expectation that the agent would be paid for the showings that did not result in the sale.  If Anya chooses not to pay for those services already rendered, then even I can see where the agent has a case to demand a buyers agent commission.  Why are so many agents opposed to using a professional services fee for service business model when customers ask for it?
  • October 06 2011
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Do you have a Buyer Broker agreement with the agent?  If you do you are obligated to the terms.  If you don't have one then that will be between you, the agent and the sellers. 

Also realize that if you want the agent to represent you in the transaction they do deserve to be compensated in some way. 

When in doubt talk to all parties involved, put yourself in everyone's shoes, and do what you think is best. 

Good luck!
  • October 06 2011
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Profile picture for blue screen exile
"Even in social environments, we ask accounting questions when we meet an accountant. We ask a mechanic about certain problems with a vehicle. Legal questions with a lawyer. Medical questions with a doctor." -

And in "social settings" such professionals do not get paid for a casual conversation nor preliminary opinion.

Nor do the professionals typically charge for an interview.  Nor does an initial interview constitute any kind of legal contract morally nor ethically.

If someone just walks up on the street and asks a question.... that is a social setting and not any kind of business relationship.

If no offers were made, and no listing was made, and the agent didn't look up the property anywhere, there is no "procuring clause" in effect.

To pay someone for services not rendered makes no sense.
If no offer was made, and the agent didn't "show" a house by using their Sepra code to gain access to the lock box, how could one possibly interpret the situation as taking one completely through the escrow process to a successful close?
  • October 06 2011
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Profile picture for Anya_vi
 
  • October 06 2011
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Profile picture for Anya_vi
Well let me see if I have you right ...you (an agent) are waiting at the gate of a gated community to show a home, your client/ the homeowner is late, you beg your way into neighborhood from another resident entering the gate by explaining you are a real estate agent, and that person allows you to enter, and mentions they are considering an agent to sell their home, and that is seeking him out? You then pursued the owner and asked to be allowed to see the home. You were sought out? I know this, because he told me that's how it happened. BTW fell into his lap , was his term.

Implied is like assume, and you know what they say about assuming. You want a guarantee, get it in writing. As I mentioned previously, I looked for a buyer agent but the rel estate profession tends to shy away from that. Why is it? Is it because, then there would be an obligation to look out for more then a commission? The whole reason for `Caveat emptor` Buyer beware, as we know that even though we may like you 9any agent) and you are friendly, you are NOT my friend. The commission is all that matters.

I have got to say some of the agents I have come across, are little better then used car salesmen. Some are vague, deceptive, and shady at times (showing homes with termites, termite damage, and moisture problems and either trying to make light of it, or  a fake show of surprise), and show properties without knowing basic details about them. If I had a buck for each time I asked a question about a home and was told "I'll have to check on that for you, and get back to you", but never did, I could hand 5% over without batting an eyelash. I mean really, how can you show a property without knowing if it does or does not include appliances, and what the yearly property taxes are, or how much the annual HOA fees are? This has been the rule not the exception too. Showing up late, canceling appointments last minute. Tell me we are going to see four houses so I reserve my afternoon to do so, arrange a sitter or pack the kids along and we see two , because you had all week to arrange this and did not? 

The owners do not want him brokering the deal it seems. I must say I agree, judging from the contract he gave me, (a poorly written , vague, fill in the blank and only in Spanish while we are dealing with a bilingual group) I did better when I drafted one myself , and will be using it should we be moving forward with this. 

I never said I was trying to stiff him, nor  that I wanted to not compensate him in any way, and per my research I think a 1% finders fee is more than adequate. 
  • October 06 2011
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Profile picture for Misstibbs

Okay, if you have already decided, or have settled, on a 1% compensation for this individual why all the questions, dis-satisfaction with the answers and what appears to be a hostile waste of time? It appears that everyone is trying to offer genuine help when genuine help is not really needed.

  • October 06 2011
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Profile picture for blue screen exile
The only "hostile waste of time" I saw on this thread was the agents trying to extort an un-earned fee for some other agent.

I still can't believe the "hand out" mentality of our present times.

By the way, I don't believe there is a such thing as a "buyer's agent"; they are all the "selling agent" according to the contracts and the multiple listings.  Trying to doctor up the name to make it more appealing to the clients does nothing to change the contracts nor how the agent gets paid and who the agent is really working for.
  • October 06 2011
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Misstibs - I agree with you completely ...the Op has clearly aready formed an opinion and has a strong sense of what she wants to do.........so - why all the bantering is continuing, I don't know.........it is a waste of time.

And Anya - here's a concept - the agent is "just in it for the $$ bottom line" you say?
Well ....here's a newsflash...... it's called a JOB - he isn't showing you homes for the glory and pleasure, or to be altruistic - - it's called earning a llving so he can pay his bills.


Pasa your continuous agent bashing and negativity has become extremely tedious.......you come across as a curmudgeon ........ maybe it's time to just  take a deep breath and smile - be pleasant  - just once.
Try it maybe you'll like it
Being polite is a nice quality, too..........like so many of us are when you constantly post your charts and graphs that few truly care about, certainly not as much as you do...........
  • October 06 2011
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Profile picture for Anya_vi
Misstibbs- Well, I asked a question, and found myself jumped on, and so I shared the behavior of some of your fellow 'professionals' you are so vehemently supporting and defending. After I posted my question, I continued researching on my own and received an answer to my own question through research. Wasted time, no, the attitude has been a further eye opener. 

Debra-  Here's a concept and a newsflash...ethics! Yes, I know it is a job, but why not do a job well then? I don't care what job I have, but being able to look in the mirror and like the person looking back should be paramount. Agent bashing? No I was sharing the truth of what I have experienced, after being told I am being unfair. 

Thanks to all for the insight and opinions.
  • October 07 2011
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Profile picture for sunnyview
Good luck with the purchase of the house. I hope that everything goes well and that you are able to negotiate a fair fee with the agent.

If you do not use an agent and decide to just deal directly, please make sure that you use a good contract, get all your inspections and consider a home warranty. Those three things together can really save you a lot of headaches on any house you buy.
  • October 07 2011
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I can say exactly about 3 times here.  Anya, (agents are people, not all are 'moral', not all are model citizens. however there are a lot of good ones out there), This is a TOUGH venue with false information as well as really good advice from pros and non-pros.  I think what they (Ms Tibbs and Debbie) is when you are as upset with the situation as you are it is difficult to listen to someone who is not supporting your opinion.  I don't see where they were "jump"ing on you.  You asked "Should we..."  And they answered.  If you wanna see jumped on...  look at my first Zillow post.  :)  They simple did not know of your displeasure of the agent.  With that, your legal situation may not change but it shines a new light on morals. 

But remember Anya, Finding the house is a small part of the process.  Really, a taxi cab driver can do this.  There are so many things to consider in the process.  Do you TRUST the seller to do the right thing during the sale and closing?  Does the seller or you know all of the small things that can go wrong during the process?  These laws change constantly.  I have been called in during the middle of the process and that is Never a good thing.  Some agents/brokers do shy away from 'buyer agent' contracts.  Here (FL) it is not as much for money as it is legal obligations.  It only takes a moment to speak directly with the broker.  The broker is the one whom is legally responsible for the whole shibang.  He/she might be able to remedy the situation.  At the very least, he/she would know about the problem with in the agency and handle your transaction professionally as you wished at the beginning and possibly at a lower rate.  Chances are your contract/obligation is NOT to the agent but to the broker/agency.   I would say, give them(broker) an opportunity to make it right or fire them and offer them a finder's fee to walk away.  

Best of luck and pray on your decision.
God Bless
  • October 07 2011
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