How do realtors buy/sell their own homes?

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anonyvestor
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How do realtors buy/sell their own homes?

Post by anonyvestor » Tue Jul 05, 2016 2:35 pm

How do real estate agents buy and sell their own properties?

1 Do they represent themselves in both buying and selling?
2 Do they offer one another professional courtesy on fees?
3 Do they receive their own buyer's agent fees when they buy?
4 Do "discount" realty agents use discount brokerages, and "full service" realty agents use full service brokerages?

And presuming they are in a "hot" seller's market, with under 30 days inventory:

5 Do they price low - hoping for a bidding war?
6 Do they price high and price reduce rapidly?
7 Do they hold open houses, or only private showings?
8 Which contingencies (if any) would they retain in the face of competitive offers? Or maybe they avoid buying in a seller's market altogether.

Responses from agents are obviously of particular value.

I am also considering obtaining my own license, more out of intellectual interest than hope for a discount. Can anyone comment on their experience obtaining an "amateur" license?

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LAlearning
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Re: How do realtors buy/sell their own homes?

Post by LAlearning » Tue Jul 05, 2016 2:41 pm

They wait longer and get more money.
I know nothing!

Afty
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Re: How do realtors buy/sell their own homes?

Post by Afty » Tue Jul 05, 2016 2:51 pm

LAlearning wrote:They wait longer and get more money.
"An agent keeps her own home on the market an average of 10 days longer and sells it for an extra 3-plus percent."
http://www.wired.com/2005/05/realestate/
(That's an excerpt from Freakonomics)

Tal-
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Re: How do realtors buy/sell their own homes?

Post by Tal- » Tue Jul 05, 2016 2:54 pm

I'm not an agent, but...

1 Do they represent themselves in both buying and selling? Yes - always
2 Do they offer one another professional courtesy on fees? Yes - almost always
3 Do they receive their own buyer's agent fees when they buy? Yes - though they can also negotiate this (and probably do) meaning neither the broker nor the buyer (agent) get anything.
4 Do "discount" realty agents use discount brokerages, and "full service" realty agents use full service brokerages? Not sure what you mean here.
5 Do they price low - hoping for a bidding war? No.
6 Do they price high and price reduce rapidly? No. LaLearning hit the nail on the head - they wait longer and get more money.
7 Do they hold open houses, or only private showings? Yes - they hold open houses with an emphasis on brokers' opens (market dependent)
8 Which contingencies (if any) would they retain in the face of competitive offers? Or maybe they avoid buying in a seller's market altogether. This is the hard one. Agents are like the rest of us, and need or want to buy/sell at various times, meaning they may buy in a seller's market. I'd wager a dollar to donuts that they do go through normal contingencies, including inspection - but I'm not sure about that one.
Debt is to personal finance as a knife is to cooking.

mpowered
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Re: How do realtors buy/sell their own homes?

Post by mpowered » Tue Jul 05, 2016 4:15 pm

Tal- wrote:I'm not an agent, but...

1 Do they represent themselves in both buying and selling? Yes - always
2 Do they offer one another professional courtesy on fees? Yes - almost always
3 Do they receive their own buyer's agent fees when they buy? Yes - though they can also negotiate this (and probably do) meaning neither the broker nor the buyer (agent) get anything. I TYPICALLY STRUCTURE MY OFFER TO NOT COLLECT A BROKER FEE, UNDER THE THEORY THAT THIS REDUCES MY BASIS IN THE HOME FOR REAL ESTATE TAX. I PUT THIS IN THE INITIAL OFFER TO MAKE SURE THE SAVINGS IS PASSED THROUGH TO THE SELLERS.
4 Do "discount" realty agents use discount brokerages, and "full service" realty agents use full service brokerages? Not sure what you mean here. NO I USE MY OWN LICENSE TO LIST THE PROPERTY. I MIGHT AS WELL BE A DISCOUNT BROKER FOR MY OWN PROPERTY, THOUGH.
5 Do they price low - hoping for a bidding war? No. SEE BELOW
6 Do they price high and price reduce rapidly? No. LaLearning hit the nail on the head - they wait longer and get more money. I PRICE HIGH AND REDUCE SLOWLY. I THINK CLIENTS HAVE AN UNREALISTIC EXPECTATION AS TO HOW LONG IT TAKES TO SELL A HOUSE. THIS IS AS MUCH THE CLIENTS FAULT AS IT IS THE LISTING BROKER'S
7 Do they hold open houses, or only private showings? Yes - they hold open houses with an emphasis on brokers' opens (market dependent) I DO NOT HOLD OPEN HOUSES. STUDIES SHOW ONLY 1% OF HOMES IN MY MARKET SELL THROUGH OPEN HOUSE. MY VIEW OF OPEN HOUSES IS THAT THEY ARE PRIMARILY HELD TO GET UNREPRESENTED BUYERS IN THE DOOR AS LEADS FOR FUTURE REPRESENTATION. FOR THIS REASON, I WOULD RECOMMEND ANY SELLER TO UTILIZE A DISCOUNT BROKER THAT LISTS FOR A FLAT, LOW FEE. YOU ARE PAYING FOR ACCESS TO LIST YOUR HOME ON MLS, NOTHING ELSE. SELLING BROKERS DON'T DO MUCH ELSE TO SELL YOUR HOME OTHER THAN LIST IT ON MLS. WHY PAY 3% FOR THAT? (ON THE OTHER HAND, BUYER'S BROKERS HAVE TO BE PAID 3% TO SHOW HOUSES, OVER AND OVER, WITHOUT ANY GUARANTEE OF INCOME).
8 Which contingencies (if any) would they retain in the face of competitive offers? Or maybe they avoid buying in a seller's market altogether. This is the hard one. Agents are like the rest of us, and need or want to buy/sell at various times, meaning they may buy in a seller's market. I'd wager a dollar to donuts that they do go through normal contingencies, including inspection - but I'm not sure about that one.
I hold a broker's license, but I'm not in the realtor business. I would echo all of these answers for the most part. My comments are layerd in all caps.

When I buy, my typical practice is submit an offer that is lower in price by the amount of the commissions that would be ordinarily paid to a buyer's broker, under the theory that this reduces my basis in the home for purposes of real estate taxes and saves me money going forward.

BW1985
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Re: How do realtors buy/sell their own homes?

Post by BW1985 » Tue Jul 05, 2016 4:29 pm

mpowered wrote:
Tal- wrote:I'm not an agent, but...

1 Do they represent themselves in both buying and selling? Yes - always
2 Do they offer one another professional courtesy on fees? Yes - almost always
3 Do they receive their own buyer's agent fees when they buy? Yes - though they can also negotiate this (and probably do) meaning neither the broker nor the buyer (agent) get anything. I TYPICALLY STRUCTURE MY OFFER TO NOT COLLECT A BROKER FEE, UNDER THE THEORY THAT THIS REDUCES MY BASIS IN THE HOME FOR REAL ESTATE TAX. I PUT THIS IN THE INITIAL OFFER TO MAKE SURE THE SAVINGS IS PASSED THROUGH TO THE SELLERS.
4 Do "discount" realty agents use discount brokerages, and "full service" realty agents use full service brokerages? Not sure what you mean here. NO I USE MY OWN LICENSE TO LIST THE PROPERTY. I MIGHT AS WELL BE A DISCOUNT BROKER FOR MY OWN PROPERTY, THOUGH.
5 Do they price low - hoping for a bidding war? No. SEE BELOW
6 Do they price high and price reduce rapidly? No. LaLearning hit the nail on the head - they wait longer and get more money. I PRICE HIGH AND REDUCE SLOWLY. I THINK CLIENTS HAVE AN UNREALISTIC EXPECTATION AS TO HOW LONG IT TAKES TO SELL A HOUSE. THIS IS AS MUCH THE CLIENTS FAULT AS IT IS THE LISTING BROKER'S
7 Do they hold open houses, or only private showings? Yes - they hold open houses with an emphasis on brokers' opens (market dependent) I DO NOT HOLD OPEN HOUSES. STUDIES SHOW ONLY 1% OF HOMES IN MY MARKET SELL THROUGH OPEN HOUSE. MY VIEW OF OPEN HOUSES IS THAT THEY ARE PRIMARILY HELD TO GET UNREPRESENTED BUYERS IN THE DOOR AS LEADS FOR FUTURE REPRESENTATION. FOR THIS REASON, I WOULD RECOMMEND ANY SELLER TO UTILIZE A DISCOUNT BROKER THAT LISTS FOR A FLAT, LOW FEE. YOU ARE PAYING FOR ACCESS TO LIST YOUR HOME ON MLS, NOTHING ELSE. SELLING BROKERS DON'T DO MUCH ELSE TO SELL YOUR HOME OTHER THAN LIST IT ON MLS. WHY PAY 3% FOR THAT? (ON THE OTHER HAND, BUYER'S BROKERS HAVE TO BE PAID 3% TO SHOW HOUSES, OVER AND OVER, WITHOUT ANY GUARANTEE OF INCOME).
8 Which contingencies (if any) would they retain in the face of competitive offers? Or maybe they avoid buying in a seller's market altogether. This is the hard one. Agents are like the rest of us, and need or want to buy/sell at various times, meaning they may buy in a seller's market. I'd wager a dollar to donuts that they do go through normal contingencies, including inspection - but I'm not sure about that one.
I hold a broker's license, but I'm not in the realtor business. I would echo all of these answers for the most part. My comments are layerd in all caps.

When I buy, my typical practice is submit an offer that is lower in price by the amount of the commissions that would be ordinarily paid to a buyer's broker, under the theory that this reduces my basis in the home for purposes of real estate taxes and saves me money going forward.
The seller's agent/broker would need to first agree to reduce the commission accordingly, correct? If you waived your buyer's commission that doesn't in itself mean that the seller's don't still owe their broker the full commission as stated in the contract.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

mpowered
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Re: How do realtors buy/sell their own homes?

Post by mpowered » Tue Jul 05, 2016 5:10 pm

BW1985 wrote:The seller's agent/broker would need to first agree to reduce the commission accordingly, correct? If you waived your buyer's commission that doesn't in itself mean that the seller's don't still owe their broker the full commission as stated in the contract.
Yes. They would need to agree to reduce their commission. I always include a line in any offer stating that the purchase price assumes no cooperating broker fee paid by the selling broker, which would otherwise be payable under the MLS listing agreement. Finally, I also highlight it in my cover email.

soboggled
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Re: How do realtors buy/sell their own homes?

Post by soboggled » Tue Jul 05, 2016 5:45 pm

As pointed out by another poster, it has been proven they set the price higher when selling their own home. That makes sense, since they only get a small percent of the money when selling a client's house but 100% when selling their own. They have an incentive to sell your house fast and minimize their effort. My experience has been they put more effort in securing the listing than selling it. Quite a racket, almost as bad as stock brokers and most "financial advisors".

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anonyvestor
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Re: How do realtors buy/sell their own homes?

Post by anonyvestor » Thu Jul 07, 2016 3:03 pm

Thanks for the thoughtful replies to my detailed list of questions:

It is interesting to attach a numerical value to an obvious bias:
Afty wrote:
LAlearning wrote:They wait longer and get more money.
"An agent keeps her own home on the market an average of 10 days longer and sells it for an extra 3-plus percent."
http://www.wired.com/2005/05/realestate/
(That's an excerpt from Freakonomics)
I am interested in the practicalities of implementing a request that the seller's agent forfeit the buying agent's portion of the commission:
mpowered wrote:
BW1985 wrote:The seller's agent/broker would need to first agree to reduce the commission accordingly, correct? If you waived your buyer's commission that doesn't in itself mean that the seller's don't still owe their broker the full commission as stated in the contract.
Yes. They would need to agree to reduce their commission. I always include a line in any offer stating that the purchase price assumes no cooperating broker fee paid by the selling broker, which would otherwise be payable under the MLS listing agreement. Finally, I also highlight it in my cover email.
Is this generally accepted, and if so, is it accepted based on professional courtesy when the buyer is a licensed realtor? Frankly, I don't particularly appreciate the services a buyer's agent has to offer, and would rather hire a lawyer paid by the hour for these services, without a large incentive to close the deal.

I can see a making a practical argument that there is an X% chance the next buyer will arrive with an agent from a competitor realtor, and therefore it is in the selling realtor's interest to forfeit a portion of the commission.

Specifically, I would ask if having a realtor's license would meaningfully facilitate the success of this strategy.

I suppose the alternative strategy would be to use a discount broker offering a "credit," to the buyer, which seems to amount to < 1%.

BW1985
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Re: How do realtors buy/sell their own homes?

Post by BW1985 » Thu Jul 07, 2016 3:08 pm

anonyvestor wrote:Thanks for the thoughtful replies to my detailed list of questions:

It is interesting to attach a numerical value to an obvious bias:
Afty wrote:
LAlearning wrote:They wait longer and get more money.
"An agent keeps her own home on the market an average of 10 days longer and sells it for an extra 3-plus percent."
http://www.wired.com/2005/05/realestate/
(That's an excerpt from Freakonomics)
I am interested in the practicalities of implementing a request that the seller's agent forfeit the buying agent's portion of the commission:
mpowered wrote:
BW1985 wrote:The seller's agent/broker would need to first agree to reduce the commission accordingly, correct? If you waived your buyer's commission that doesn't in itself mean that the seller's don't still owe their broker the full commission as stated in the contract.
Yes. They would need to agree to reduce their commission. I always include a line in any offer stating that the purchase price assumes no cooperating broker fee paid by the selling broker, which would otherwise be payable under the MLS listing agreement. Finally, I also highlight it in my cover email.
Is this generally accepted, and if so, is it accepted based on professional courtesy when the buyer is a licensed realtor? Frankly, I don't particularly appreciate the services a buyer's agent has to offer, and would rather hire a lawyer paid by the hour for these services, without a large incentive to close the deal.

I can see a making a practical argument that there is an X% chance the next buyer will arrive with an agent from a competitor realtor, and therefore it is in the selling realtor's interest to forfeit a portion of the commission.

Specifically, I would ask if having a realtor's license would meaningfully facilitate the success of this strategy.

I suppose the alternative strategy would be to use a discount broker offering a "credit," to the buyer, which seems to amount to < 1%.
People have done this and discussed it here in other threads. What you can do is request dual agency with the listing agent if they will agree to reduce their [full] commission by giving you a credit at closing since you are not bringing your own buyers agent to the deal.

There are atleast a few RE agents on the forum, hopefully they can help answer your question on 'generally accepted'. Everything is negotiable in real estate is what I've heard.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

pshonore
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Re: How do realtors buy/sell their own homes?

Post by pshonore » Thu Jul 07, 2016 4:27 pm

anonyvestor wrote:Thanks for the thoughtful replies to my detailed list of questions:

It is interesting to attach a numerical value to an obvious bias:
Afty wrote:
LAlearning wrote:They wait longer and get more money.
"An agent keeps her own home on the market an average of 10 days longer and sells it for an extra 3-plus percent."
http://www.wired.com/2005/05/realestate/
(That's an excerpt from Freakonomics)
I am interested in the practicalities of implementing a request that the seller's agent forfeit the buying agent's portion of the commission:
mpowered wrote:
BW1985 wrote:The seller's agent/broker would need to first agree to reduce the commission accordingly, correct? If you waived your buyer's commission that doesn't in itself mean that the seller's don't still owe their broker the full commission as stated in the contract.
Yes. They would need to agree to reduce their commission. I always include a line in any offer stating that the purchase price assumes no cooperating broker fee paid by the selling broker, which would otherwise be payable under the MLS listing agreement. Finally, I also highlight it in my cover email.
Is this generally accepted, and if so, is it accepted based on professional courtesy when the buyer is a licensed realtor? Frankly, I don't particularly appreciate the services a buyer's agent has to offer, and would rather hire a lawyer paid by the hour for these services, without a large incentive to close the deal.

I can see a making a practical argument that there is an X% chance the next buyer will arrive with an agent from a competitor realtor, and therefore it is in the selling realtor's interest to forfeit a portion of the commission.

Specifically, I would ask if having a realtor's license would meaningfully facilitate the success of this strategy.

I suppose the alternative strategy would be to use a discount broker offering a "credit," to the buyer, which seems to amount to < 1%.
I see a couple of problems with this approach:

1. Lets say I own an agency and I've determined that 1/2 of my listings are sold by my firm and the other half are "co-broked". The means I get 6% on half and 3% on the other half for an average of 4.5%. You're asking me to cut my income by 1/3 from 4.5% to 3% if this idea caught on and was "generally accepted". In a way, you're changing the whole business model. And of course I also have listings that don't sell for one reason or another which I have time and money invested in. We'll ignore those for now.

2. In most jurisdictions, a realtor's license will only get you half way there. You still have to work under the supervision of a person holding a broker's license so its tough to make your own "deals" since your broker will still want their half of what you bring in. Of course there's nothing to stop you from getting a brokers license once you have the requisite experience, insurance, MLS memebership, etc. and can pass some additional testing requirements.

mpowered
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Re: How do realtors buy/sell their own homes?

Post by mpowered » Fri Jul 08, 2016 3:07 pm

anonyvestor wrote:Is this generally accepted, and if so, is it accepted based on professional courtesy when the buyer is a licensed realtor? Frankly, I don't particularly appreciate the services a buyer's agent has to offer, and would rather hire a lawyer paid by the hour for these services, without a large incentive to close the deal.

I can see a making a practical argument that there is an X% chance the next buyer will arrive with an agent from a competitor realtor, and therefore it is in the selling realtor's interest to forfeit a portion of the commission.

Specifically, I would ask if having a realtor's license would meaningfully facilitate the success of this strategy.

I suppose the alternative strategy would be to use a discount broker offering a "credit," to the buyer, which seems to amount to < 1%.
The only time I get pushback is from a homebuilder. Their concern is that if they knock the price down 3%, that will result in lower comps and could cause future sales to fail to appraise for the sales price.

In this instance, I represent myself (or friends and family) as Broker, collect the cooperating broker fee that would be normally paid to your average homebuyer being represented by a buyer's agent.

Generally, selling agents expect to pay a cooperating broker fee, so it's no skin off their back to reduce their fee by half.

mpowered
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Re: How do realtors buy/sell their own homes?

Post by mpowered » Fri Jul 08, 2016 3:11 pm

pshonore wrote:1. Lets say I own an agency and I've determined that 1/2 of my listings are sold by my firm and the other half are "co-broked". The means I get 6% on half and 3% on the other half for an average of 4.5%. You're asking me to cut my income by 1/3 from 4.5% to 3% if this idea caught on and was "generally accepted". In a way, you're changing the whole business model. And of course I also have listings that don't sell for one reason or another which I have time and money invested in. We'll ignore those for now.
Yes, this only applies where the buyer of the house is a licensed broker and would otherwise be entitled to collect a co-broker fee. Listing agents sometimes have a reduced fee where the buyer happens to not be represented or the broker is acting as a intermediary (or dual agent, varies by state to state). I don't believe any listing agent would voluntarily reduce their fee for an un-represented buyer who is not themselves a licensed agent, unless their listing agreement with the seller has it baked in already.

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