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What's up with real estate agents requiring a retainer fee and contract to help me find a $15K home?

  • April 09 2011 - Detroit
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (26)

Profile picture for abblue sky1
first of all we should try to understand the type of business real estate is. And then compare it with other type of comparable businesses.
In my view, any agent(who is getting paid the commission as well) asking for upfront fee will give me a doubt about their commitment level and ability to satisfy the various needs that come up in real estate dealings. They will know in their minds that regardless of providing a good service i am being paid for driving around..!! Not very good for those who want to work in this kind of business.

From buyer's perspective, the agent is NOT investing in their "independent business" and expect buyer to pay them to show around( the free taxi reference) and basically pay the agent to get off their chair ( lazy agents) and do some work and eventually in the end enable them to earn commission as well when deal is closed? Scenario is NOT looking good for the UpFront type of agents!
  • September 18
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I've had calls from potential buyers that I suspected were more trouble than they are worth. Instead of telling them 'No, not you' and risk some type of discrimination issue, I say "I charge an upfront fee of $500- refundable at closing. NO cost to you." They always go away.
As you might note from my picture, instead of wasting my time, I'd rather go skiing !
That's the advantage of being older and experienced. I'm not desperate.
  • October 26 2013
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Make sure fee is paid directly to the broker, not the agent. Here in MI all money has to flow through the broker. Most retainer fees are credited at closing, but read your contract.
  • October 26 2013
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Real estate brokerage is NOT a job, it's a business profession similar to those who independently practice law, engineering, medicine, accounting, and consulting, just to name a few. It's often overlooked that real estate agents are on the same level with the professionals just mentioned because agents are legal fiduciary advisors and not just salespeople. Many agents are also small business owners who, consequently, face the same issues as other private practice professionals and business people.

Problem is that we're not trained on how to operate as professional advisors and offer professional services. So much of what we learn is based on a sales model and out-dated sales fundamentals. Like some have already expressed, I agree that we should be appropriately compensated for our time, knowledge, skills, and abilities.   

Too many of us waste valuable resources on poorly selected deal opportunities - oftentimes in the "hope" of earning a fee.  It's a poor man's business model. Sometimes the topline (i.e revenues and gross margin) may look good, but the bottomline (i.e. cash flow and profit) and ROI will tell a different story.

In business and especially in the professions universe, retainers, hourly fees, fixed fees, and even contingency fees (aka "the commission fee") are all 100% legitimate pricing models and there's nothing wrong with using them in a real estate agent's business. As other's have said, it's about time that real estate professionals get brought up-to-date. 

There are plenty of resources now that will educate any entrepreneur on modern business practices. It's highly recommended that agents learn consulting fundamentals in addition to their personal education programs and learn from what other professional practitioners are doing to operate their practices profitably.

The CE that we're required to take every two years or so is NOT sufficient in becoming a professional real estate advisor. Judging by the comments on this post, it's evident that the industry is changing as more business-minded pros enter the industry.  Personally, I think it's refreshing that we're embracing our business and professional status.  
  • September 25 2013
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Attorneys, Appraisers, CPAs, Inspectors, and Contractors are all licensed business entities. All are independent contractors. All charge for their professional services "up front". All are considered professionals just like licensed real estate agents or Realtors. We always pay for before mentioned professional services up front. I don't see why more licensed real estate professionals don't charge at least an "I'm serious" retainer fee that could be rebated to their represented buyer at closing.

 

I think many Realtors are accustom to doing things the way they have always done them and don't question the suitability of their system, given modern times or they don't place enough value on their service or their time to charge an up front fee or maybe their "I hope you are serious about buying a home – pay me later" system simply works for them and that's great, for them. It does not make anyone more or less a professional. It's your service that does that.

 

I've seen it work both ways. I would appreciate if those of you that are screaming "bloody murder" would refer to your state's law of contracts or your state's promulgated buyer's representation agreement. You will likely find a reference to some form of optional up front fee or retainer fee there

 

. Just because someone operates on another level (not higher or lower –just different) does not make them a crook.

  • May 15 2013
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As I was writing my answer, I got a call from a Real client - one that signed an exclusive buyer brokerage agreement, and paid me a non refundable marketing/expense service fee in advance because he felt I was the only solution he wanted to handle his real estate needs.  He did everything I asked him to do, including paying me in advance for his $25,000 house.  He paid half as a retainer - which will be credited back to him at the closing table - and he paid me the other half  for my expenses. 

I was a Top Producer in 2011 with my company and I always charge for my services because I Know am worth it. Advance payments helps me sift the serious clients from those who are dishonest, who double dip with(other agents who are also dishonest), and who use agents as a freebe service to run around like a free taxi or research company and who will never buy.

{ Do you know that some agents who do not use FMLS or GAMLS have their clients call those of us who do, for listings?  They have us do all the work, the comps and even the viewings because they don't have the tools of the trade?}

Brokerage agreements are not enough.  When you charge those fees in advance, that removes the element of doubt, and it separates  the serious from the others.

I urge my fellow agents to wake up - and smell the behavior.  Dishonesty have very clear signals.  1) They don't want to sign a contract and 2) they don't want to pay a retainer or marketing, expense or service fees.
Real buyers who 1) can afford a home will not blink an eye when you say I expect the earnest money, proof of funds, or approval letter, a brokerage agreement, a retainer and a NON REFUNDABLE marketing/expense fee IN MY OFFICE IMMEDIATELY!
Those who are serious come right on through.  The others who don't save me so much time, gas, frustration, aggravation, disappointment, money, and tears.  Oh yes, I have cried like a baby when customers have literally " robbed" me 
of my ability to make a living when they cheat, sneak and lie.  I have seen wonderful good, kind honest, professional agents leave this business because of people who are dishonest.

So, I am proud to say, I charge for everything in advance because I am a professional and professionals have the right to charge for their services.  I have saved my clients from making very costly mistakes, I have saved them thousands of dollars - the small fee I charge in advance takes the stress out of Real Estate.  It takes the wonder and desperation and pressure away.  I can think clearly when I have a client that I know is serious and I give that client my attention with confidence.  That is why I won an award last year because my clients paid me for my service and I did an exceptional job for each one of them without fear nor doubt.

When you tally up the time and work involved in a $15,000 deal, I would expect you to pay me a minimum of $1500.00 in advance.  And I will give you excellent service.  All Payments are to my Brokerage Firm according to the terms of the Contract that my clients and I agree upon.

  • July 05 2012
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When you do the math, the Realtor will net zero at the end of this transaction.
  • July 05 2012
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Although most buyers think of the agent who took them around as "their" agent, in reality, both that agent and the listing agent were paid by, and had a fiduciary duty to, just the seller. So both were obliged to tell the seller everything the buyers said about their plans and negotiation strategy. This is how it used to be which introduced agencies which now typically spell out contractually what sort of relationship they have with the buyer -- a good reason to read all paperwork you're given very closely. Plus, a new kind of agent emerged over the years, the "exclusive buyer agent," who is responsible to the buyer alone and doesn't list homes. I highly recommend that buyers seek out such agents, as they'll not only keep your confidence, they'll also drive you around, give you valuable insight into market conditions and negotiate hard on your behalf -- without any possibility of a conflict of interest.

But like everyone else, buyer agents don't work for free. At first glance, it seems like the seller pays them, since most are paid at closing from the commission costs that the seller pays, just as in the past. In reality, buyers pay for everything, since sellers routinely factor these costs into the asking price for the home. The typical real-estate commission ranges between 5% and 6%, split between the buyer and seller agents. Since the median price of an existing home is currently $208,400, that means a buyer is effectively paying between $5,210 and $6,252 for representation in a typical transaction.

But not every agent works this way, and flat fees are an acceptable form of compensation -- in fact, they're sometimes a bargain, if you compare $395 with the figures above. Be sure you understand and agree with what you will be getting for your money, though. Will the team be finding for-sale-by-owner and distressed properties for you, as well as those listed on the multiple listing service? How often will listings be sent to you, and in what form? Will somebody be available to show you properties that interest you, at your convenience?  How much help and advice will you get to secure financing? Who will do the negotiating when you present an offer, and who will shepherd you through closing? Is there a provision in the contract that says that the flat fee is all that will be paid to the agent on closing, and that he will forego any commission? What happens if you are dissatisfied with his service -- can you cancel the contract before the year is up and hire someone else?  I hope this helps you understand it doesn't matter the price of the home it is the service being provided to the client/buyer.  

  • May 27 2012
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@ wetdawgs 

I don't know if you are a Realtor or not but that is not considered double dipping...It is being compensated for your services...I am an Exclusive Buyers Agent ...I do not work for the seller on any transaction...the seller has a contract with the listing agent and the listing agent agrees to share his commission with any agent that sells that listing which in turns says that the seller agrees to pay anyone licensed to sell his property a commission...Buyers on the other hand need to contract with an agent to insure they are represented and that the agent is working solely on their behalf...In reality if I service a buyer and do not have a buyers agency disclosure or agreement in place I ultimately work for the seller as well.. so say what you want but get educated first...I get paid for my services I run a business by the way let me give you a little education on what a EBA is :    When you have an EBA (Exclusive Buyer Agent) on your side, you can rest assured that he/she works solely for you, representing your best interest and avoiding conflicts of interest that are inherent in traditional real estate transactions. This unique relationship built on trust and commitment means that buyers net the best possible outcome.   As your advocate, an EBA works solely on your side of the transaction. You can put your trust in an EBA. An EBA will advise you on deal-breakers as well as positives. In most states, this is something a non-EBA Realtor isn't required to do. Only when you have complete disclosure, the kind you get from an EBA, will you be satisfied that your deal is the right deal for you. 

Just a few things a buyer can receive when working with me or any certified EBA...not to mention :
Historically, real estate agents represented sellers. Exclusive Buyer Agents, on the other hand, represent only the buyer. An EBA has no dual agenda. An EBA has your back, specifically helping you to: 
  • locate and evaluate property
  • negotiate the best price and terms
  • evaluate loans and financing options
  • facilitate inspections, disclosures, contract compliance and the closing. 





  • May 27 2012
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Profile picture for wetdawgs
user101363 apparently believes in double dipping for payment.  Yikes!   thanks for making that clear.
  • May 27 2012
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Ok I believe that there are some very uneducated Realtors.  If we get together and start charging our buyers upfront a retainer will get more loyal clients as well as they can have higher expectations for a job well done...I would not take a buyers money and not perform...I already go over and beyond giving knowledge, providing showings, writing contracts, negotiating etc...many have argued that we need to be paid after the transaction is complete by the seller and the buyer should not pay...well if you look at the big picture if you are a buyer representative then you should be paid by the person who is representing you as well as a commission by the seller for selling there home to your client.. Now what I believe is the issue is that so many Realtors don't know or understand that work put in to service the buyers.  If you actually service them then you would know that the chances of having to waist your time on  a buyer who either never buys, don't have the means to buy or buys from another agent or broker is high...I don't waist time on buyers who are not committed to a relationship with me and not ready to comply with what is required to work with me..bottom line...we need to stick together.. 
  • May 27 2012
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You should use an investor to find you a home in Detroit. We are investors who find homes for people and we won't charge you like realtors do. E-mail me at [website removed by Zillow moderator]



Thank You,
Brian
  • September 03 2011
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Not sure, why don't you ask the agent why....best of luck
  • June 01 2011
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There are many experienced agents who would be happy to represent you as your buyers agent.  Buyers agents get paid by the seller when we have located a property for the buyer, get a signed accepted contract and close escrow.  Contact your local Realtor or feel free to send me a message for more advice on this subject.
  • June 01 2011
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Profile picture for Succesful Agent
Well if you hire an attorney to write up the deal for you...guess what??? He is going to charge you a retainer and he is NOT going to go out and show you houses. Basically, if you have an agent that is charging you a retainer there is 2 things you can do:
1) Hire the agent and pay for the retainer (he just might be more experienced).
2) Go out and hire somebody that is not busy (like someone previously said), and hope that he/she doesn't screw up the transaction.

It is not illegal to charge such a fee. Anybody saying this has NOT read the Buyer Agreement from their Board of Realtors and has no business being a Realtor. In the form there is a section that says (some forms might say something different): a) NON-CONTINGENT RETAINER FEE
Buyer will pay Broker a non-refundable retainer fee of: $___________.

So for those agents that are ignorant of that form, call your local board of Realtors and you might want to take a contract class that explains all the forms they offer.

Not to offend anybody. Just want to get the facts straight.

Yes, I'm a Realtor. I don't charge the retainer fee but I think I'm going to start. As of today.

By the way...You may also want to look at the gain you'll have on this $15,000 home. Are you going to gain more than the $450. that the agent is going to receive as a commission? Minus 25% aprox. that he/she has to pay his broker minus E&O insurance he/she has to pay as well. If you were a Realtor would you pay him the retainer fee? I would! well worth it! Especially if you are an investor.

14 years in the real estate business and I love it!


  
  • June 01 2011
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As Sunnyview stated, don't pay any retainer, or any other fee directly to any agent. If any fees are to be paid, pay it directly to the broker of record and get a receipt. But then again, as already mentioned, there are many other agents out there that will do the job and be paid at the end of the transaction, in which insures they do the job and don't just kick back and collect retainer fees, strange just saying that, and then give you no results.
  • April 25 2011
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Profile picture for sunnyview
I would not pay any fee retainer fee directly to an agent. You could offer to deposit your funds into an escrow account in your name to show that you are able to perform on a deal, but that's as far as I would go. Shop around. Every agent is different.
  • April 25 2011
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If any agent is asking you to pay them up front, then walk away.  Plenty Legitimate agents will get paid when the work is done.
  • April 25 2011
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Sounds like the next scam that the State Attorney General will be jumping on. Are these licensed agents or just scam artist that got booted from loan mods and are now starting up the next wave of scamming people?

Actually, either way, it is still a scam and a retainer would more than likely fall under "Advance Fee" here in California, which would be illegal.

To find a $15K home? Sounds like someone is planning on collecting a bunch of fees and skipping town.

Although... A retainer probably wouldn't be that bad of an idea vs the buyer broker agreement arangement... Probably would prevent a bunch of court cases to enforce the Buyer Broker Agreement.
  • April 25 2011
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I have never heard of a "retainer fee".  We are in the business of dealing with people and helping them either buy or sell their home.  A person looking for a $15,000 home is just as important as a person looking for a $100,000 home.  In our business there is no guarantee - that is the nature of the business. 
  • April 25 2011
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The market is saturated with such properties where there is no guarantee that a buyer after being shown several homes will even buy just to receive a $500 commission. This is why you encounter serious agent who are ready to work with serious buyers and need evidence of such a commitment.
  • April 25 2011
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You can always find a newer agent or one with less business to do it without a fee. Either pay it or move on to a new agent. My CPA charges $300 to do my taxes. I can do them myself for free. However I pay extra for his knowledge I think it is worth the cost. It's your choice.
  • April 09 2011
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Put your self into their shoes.  
  • April 09 2011
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The retainer fee is NORMALLY refundable after closing. It's just to assure that the Agent isn't using their time and gas $ with no return. Would you want to?
  • April 09 2011
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Profile picture for wetdawgs
An agent's pay for helping you purchase a $15,000 home is very small, so before they expend a lot of time they want to have some confidence that they will get at least a few cents for their energies.

  • April 09 2011
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Profile picture for nwhome.us
It's called commitment.
It's probably easier to find it on your own and use an attorney to help you write your deal.
  • April 09 2011
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