What is owed to realtor?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
User avatar
Topic Author
rocket354
Posts: 322
Joined: Mon Dec 14, 2015 12:31 pm

What is owed to realtor?

Post by rocket354 » Mon Jan 13, 2020 10:01 am

I have a question for what my obligations are to a realtor. Situation is described immediately below, and questions follow.

I've been casually home-searching for a few months, with the plan to buy in the summer. However, this past weekend (Saturday morning) I saw a house come up for sale that, on paper, checked literally every box I have. I've never seen that before. I wasn't working with a real estate agent, and was concerned I might miss out on the house (it's a fairly fast-moving market) so I clicked the "schedule a tour" button through one of the major websites and got set up with a realtor.

He asked me if I wanted to see any other houses while we were out and I said sure. In total we saw four existing-supply houses that same Saturday afternoon. Two were not contenders, one is now under contract with someone else, and the one that checked every box turns out to be in a neighborhood that I have concerns about, and so I'm conflicted.

On Sunday (yesterday) I did my normal rounds of open houses, including seeing again the house from the previous day I really liked. I did these rounds alone. I also toured a new-construction home and am very interested in one of their models. I am strongly considering putting in an offer.

That evening I spoke with the realtor again about the one house from Saturday and told him I'm conflicted and still deciding, but that I might put in an offer on a new-construction home I toured that day. He asked specifically if I'd already toured the home (which was yes) and seemed a bit off-put. In my follow-up research I found that developers might only pay buyers agents a commission if they were there during the first tour.

To make things that much more nuanced, I may end up purchasing a model that wasn't available to be toured yet, and the house itself hasn't even broken ground yet.

Questions:

1) If I were to buy one of these new construction homes, what would my obligation to this real estate agent be? Does it matter if it was a home I've actually toured or one of the other models?

2) Just along the same path and for future reference, if I had ended up wanting to purchase an existing home that I had found myself that day, would I have an obligation to the agent?

3) Should I bring him into any negotiations I have for the new-construction build? Have been seen value in that? Or, the reverse, have people done it and decided it isn't worth it?

4) Ultimately, how do I play this situation from here on out?

I haven't signed an exclusivity contract with the guy or anything, or even agreed to anything verbally. He just showed me those four houses, gave his thoughts and opinions and then he followed up the next day. He hasn't given me any general guidance, or actually done any work searching or finding out homes for me--every house I've seen with or without him I've researched and found completely on my own.

For what it's worth, he seems nice and knowledgeable. My goal isn't to short-shrift him or anything, but just to understand the expectations and make sure all parties are treated fairly. If I bought one of those houses that he showed me, then he would be my buyer's agent for sure. However, it complicates things for houses he didn't actually show me: having to pay a buyer's agent may effect any negotiations I take part in for the new-construction home, for example.

Thanks in advance for all responses!

Jack FFR1846
Posts: 10750
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: What is owed to realtor?

Post by Jack FFR1846 » Mon Jan 13, 2020 10:04 am

Did you sign a contract to pay money to this agent as a "buyer's agent"? From your wording, I suspect no. You do understand that if that's the case, the agency who listed with the seller gets paid by the seller whether you came in with them or you walked off the street, right? You owe the agent nothing.
Bogle: Smart Beta is stupid

User avatar
lthenderson
Posts: 4426
Joined: Tue Feb 21, 2012 12:43 pm
Location: Iowa

Re: What is owed to realtor?

Post by lthenderson » Mon Jan 13, 2020 10:17 am

I don't think you owe the agent anything. I had a similar situation where I bought a house for sale by owner after looking with a realtor at other houses. I bought the realtor a nice fruit/cheese basket and a bottle of wine to show them my gratitude but I wasn't obligated to do so. I also did that in case I might ever need to use them in the future to sell the house I bought.

sailaway
Posts: 907
Joined: Fri May 12, 2017 1:11 pm

Re: What is owed to realtor?

Post by sailaway » Mon Jan 13, 2020 10:21 am

You owe this realtor nothing. They were disappointed because they are unlikely to get a commission from you.

student
Posts: 4250
Joined: Fri Apr 03, 2015 6:58 am

Re: What is owed to realtor?

Post by student » Mon Jan 13, 2020 10:21 am

lthenderson wrote:
Mon Jan 13, 2020 10:17 am
I don't think you owe the agent anything. I had a similar situation where I bought a house for sale by owner after looking with a realtor at other houses. I bought the realtor a nice fruit/cheese basket and a bottle of wine to show them my gratitude but I wasn't obligated to do so. I also did that in case I might ever need to use them in the future to sell the house I bought.
+1.

User avatar
jfn111
Posts: 1092
Joined: Fri Nov 08, 2013 10:42 pm
Location: Minnesota

Re: What is owed to realtor?

Post by jfn111 » Mon Jan 13, 2020 10:42 am

You don't owe the previous agent anything if you didn't sign a Buyer's Rep agreement and he/she is not the procuring cause for the house purchase.
I work with some clients without an exclusive agreement, mainly investors, and it's a chance the agent takes that they won't get paid for their efforts.

User avatar
gunn_show
Posts: 1538
Joined: Wed Jun 06, 2007 3:02 pm

Re: What is owed to realtor?

Post by gunn_show » Mon Jan 13, 2020 1:28 pm

rocket354 wrote:
Mon Jan 13, 2020 10:01 am
I haven't signed an exclusivity contract with the guy or anything, or even agreed to anything verbally. He just showed me those four houses, gave his thoughts and opinions and then he followed up the next day. He hasn't given me any general guidance, or actually done any work searching or finding out homes for me--every house I've seen with or without him I've researched and found completely on my own.

For what it's worth, he seems nice and knowledgeable. My goal isn't to short-shrift him or anything, but just to understand the expectations and make sure all parties are treated fairly.
This is the crux of your concerns, and a few others' have already addressed. Point blank you owe nothing to anyone. Period. Personal / emotional thoughts aside. This is a commission only job with (99.9% of the time) no contracts. No one (agents) get paid till a buy/sell transaction happens.

The guy is disappointed because he thinks/thought he had a free lead walk in his door over the weekend, and that lead may walk right out the door and buy something without him getting paid. That's all. He is entitled to nothing. That's part of the job in RE and every agents knows it. You need a lot of fish in the funnel to get a few on the hook and to closing time to get paid. Pure numbers game.

Being nice is part if his or her job. Doesn't get you paid.

If you end up buying something without this person, nothing says you don't have to buy them a nice thank you for their time, but even that is going above and beyond.
"The best life hack of all is to just put the work in and never give up." Bas Rutten

J295
Posts: 2232
Joined: Sun Jan 01, 2012 11:40 pm

Re: What is owed to realtor?

Post by J295 » Mon Jan 13, 2020 1:56 pm

Some background so you can filter my response. My spouse is a real estate agent, and although I’m biased she is outstanding. I transitioned out of my profession at age 53, and then she went back to work because the kids are all grown and independent and she enjoys it. We don’t need the money.

It happens sometimes that her buyer clients will find new construction or a builder they like and go that direction. They sometimes choose to go without her moving forward, so she receives no commission. That’s completely understandable and understood as part of the business model for a real estate agent. Frequently in these situations though, they continue to engage her to help through the process. Around here, the builders are almost always represented by an agent, and those agents charge the builder a percentage, and if the buyer has an agent that percentage is split between the seller agent and the buyer agent. If the buyer comes in without an agent, then the seller agent just keeps the full percentage. There is no rebate to the builder or the buyer. I have not heard of situations where the builders discount the new construction price because the buyer does not have an agent although that is theoretically possible and may happen in other locations.

A great agent/great person does not get bent out of shape when they lose a client/fee. They are looking out for the best interest of the client, or at least they should be.

Financologist
Posts: 48
Joined: Wed Jan 01, 2020 11:16 pm

Re: What is owed to realtor?

Post by Financologist » Mon Jan 13, 2020 2:13 pm

Perhaps another question worth asking is what do you owe to yourself? Presumably this will be the most or one of the most important investments of your life. If I were in your shoes I would research realtors in your area and find one whose insights and opinions you value. Then make the most of this relationship by working with this professional to help you make the best decision possible.

When we bought our home we had an amazing realtor on our side. I won't soon forget how valuable his involvement was.

With regard to this particular agent I would suggest giving him a fair shake in the process of selecting a realtor. Not on the basis of some secret etiquette-code that only realtors know about, but because he gave you his time when you asked for it and for that I believe some consideration is owed.

Good luck

User avatar
Bernard
Posts: 33
Joined: Thu Oct 31, 2019 5:55 pm

Re: What is owed to realtor?

Post by Bernard » Mon Jan 13, 2020 6:58 pm

Buying a house is like a divorce. In a divorce you have an attorney and the spouse has an attorney. They both look out at their client's interest. In case of a house purchase the seller has an agent and the buyer has an agent. The buyer's agent is to make sure that his client isn't been taken advantage of. There are a gazillion disclosures and forms to fill. Best of all, as a house buyer, you don't have to pay your agent a penny. He or she is paid by the seller. Imagine a couple getting a divorce, and she goes to his attorney who then puts the papers in front of her and ask her to sign. That's what you are risking in buying without a person who's business it is to make sure you don't get taken advantage of.

User avatar
snackdog
Posts: 835
Joined: Wed Nov 12, 2014 4:57 am

Re: What is owed to realtor?

Post by snackdog » Mon Jan 13, 2020 8:02 pm

I would absolutely use a realtor for the transaction. You seem to have already selected one (although I'm not sure I would have followed your selection process); if you are comfortable I would proceed with them. They can get more information than you can from the other party and get the best deal possible. On new constructions price may not be negotiable, but everything else may be - free appliances, upgrades, window coverings, etc. I even got a builder to pay the HOA fee for me the first two years.

stan1
Posts: 7975
Joined: Mon Oct 08, 2007 4:35 pm

Re: What is owed to realtor?

Post by stan1 » Mon Jan 13, 2020 8:19 pm

snackdog wrote:
Mon Jan 13, 2020 8:02 pm
On new constructions price may not be negotiable, but everything else may be - free appliances, upgrades, window coverings, etc. I even got a builder to pay the HOA fee for me the first two years.
Did a realtor negotiate that for you or did you negotiate it yourself? Real estate sales is very much about reputation. Usually realtors don't want bad blood with local builders and won't go to battle to get you a few more dollars back like that unless you the client are pushing them to do it.

ScubaHogg
Posts: 157
Joined: Sun Nov 06, 2011 3:02 pm

Re: What is owed to realtor?

Post by ScubaHogg » Tue Jan 14, 2020 2:21 am

sailaway wrote:
Mon Jan 13, 2020 10:21 am
You owe this realtor nothing. They were disappointed because they are unlikely to get a commission from you.
+1

nguy44
Posts: 224
Joined: Sun Jul 09, 2017 1:52 pm

Re: What is owed to realtor?

Post by nguy44 » Tue Jan 14, 2020 2:48 am

Legally, you do not owe the realtor anything.

However, we were in a similar situation and chose otherwise. The house we found and ultimately bought we found on our own via an advertised open house. We could have gone solely thru the realtor at the open house. But our realtor had shown us a lot of houses, and in doing that helped us better define what we did and did not want in a house. While he did not find us this house, his work helped us decide this is the house we wanted. From our own ethical standpoint, we chose to bring him in on this and have him present our offer.

Our realtor knew we did not have to do this and was VERY appreciative, particularly as it was during a recession in the housing market. There were things he went out of his way on during the contract process to do for us out of that appreciation.

User avatar
snackdog
Posts: 835
Joined: Wed Nov 12, 2014 4:57 am

Re: What is owed to realtor?

Post by snackdog » Tue Jan 14, 2020 9:25 am

stan1 wrote:
Mon Jan 13, 2020 8:19 pm
snackdog wrote:
Mon Jan 13, 2020 8:02 pm
On new constructions price may not be negotiable, but everything else may be - free appliances, upgrades, window coverings, etc. I even got a builder to pay the HOA fee for me the first two years.
Did a realtor negotiate that for you or did you negotiate it yourself? Real estate sales is very much about reputation. Usually realtors don't want bad blood with local builders and won't go to battle to get you a few more dollars back like that unless you the client are pushing them to do it.
Any realtor who was more interested in protecting the counter-party in a transaction should be fired immediately. My realtor works for me and we maintain strong alignment to extract all we can from the counter-party. I've never dealt with a realtor who was protecting a contractor/builder - they all are delighted to squeeze them as it can be so much easier than squeezing a homeowner and there is no emotion involved, strictly business. In my most recent purchase, the builders agent said things like "my client is agreeing to your terms, but I have never seen anything like this. What is going on? Is the buyer strapped for funds?"

mighty72
Moderator
Posts: 728
Joined: Fri May 04, 2018 11:22 pm
Location: Somewhere in the West

Re: What is owed to realtor?

Post by mighty72 » Tue Jan 14, 2020 9:52 am

If you trust the realtor, I would continue to work with them specially if this is your first home. There is a lot of paperwork and decisions to be made even after you decide to buy the house. Who will write up the offer with the right terms in place.
In our case, we got into a contract on new construction which was half way done and the builder had a discount on the upgrades previous buyer had selected. Then 2 weeks before closing, the builder's agent says that there is a mistake and we need to pay 10k more. I say no and they started pulling up paperwork which was confusing. I showed my math and called our agent. Boy, she told us to wait for her and was there in 30 minutes. She effectively told the seller agent that this is breach of contract, we want our deposit right now and we will see compensation for money, time and effort spent on this house. Well, it worked.
Long story short, she saved us 10k and never charged us anything.
Also, if you are going to work with the realtor, give them a call if you like a house. They can set up viewing just for you.
PS: I am not a realtor or related to one

User avatar
jabberwockOG
Posts: 1853
Joined: Thu May 28, 2015 7:23 am

Re: What is owed to realtor?

Post by jabberwockOG » Tue Jan 14, 2020 10:03 am

Real Estate "working" for a buyer agent's primary motivation is to get paid, period full stop.

To that end they will:
1. push hard to get the buyer to buy a house ASAP.
2. push hard to get a purchase contract written and accepted by both parties.
3. push hard to make sure the transaction closes so that they get paid.

Any other motivation ascribed to the typical real estate agent is a VERY distant second.

User avatar
8foot7
Posts: 1728
Joined: Mon Jan 05, 2015 7:29 pm

Re: What is owed to realtor?

Post by 8foot7 » Tue Jan 14, 2020 10:08 am

I'd send the original guy $500 and thank him for his time. Then I'd go find a rebating realtor (if legal in your state) and go buy your new construction with one of these rebating realtors.

Post Reply