You too can buy without a realtor !!

[exeunt]

Originally a response to another post…thought it might be of benefit to all…comments invited…

i’ve been buying and selling residential RE for years. When I started, I used realtors. My first house, I bought with a buyers agent. Over the years, I came to realize that when buying a house, an agent really isn’t required at all. Frankly, I think the realtor dude who replied to you is being quite disingenuous. What guides buyers agents to particular homes to show are the seller-side incentives offered. The buyers agent will invariably guide you to those listings which offer a greater commission percentage to him/her. Realtors are not bound by any legal fiduciary duty to you. Indeed, when you begin to sign a boatload of paperwork to close on the deal, your so called buyers agent will pull out a bunch of stuff which he/she will ask you to sign that does nothing but protect them from being sued by you! You see, the whole business of realtors is to skim both sides, the buyer and seller, and make good.

OK…so much for my bias. Today, with various internet tools, you dont really need the services of a buyers agent. Here’s how I’ve done it the last couple of times (within the last 6 months, in Ventura county and in Santa Barbara):
1. All MLS listings are available on the internet. Sign up with realtyTrac, or use any of the following: yahoo realestate (updates daily), trulia, realtor.com, etc.
2. Research the areas you want to live in. You can get all school scores from greatschools.net. Then you can go and drive around the towns you want to buy in and get a feel for them.
3. Now here’s the cool part: sign up with a discount realty service. like Redfin. You pay a flat fee, they hook you up with a local guy who will handle the paperwork of the transaction. For a newbie this works great. I used them in my last transaction in SB, and they credited back 2/3 of the buyers-agent commision to me, which I used as part of my down payment. I saved more than $25K. This is a sea-change in the way RE is conducted, and will likely sweep all the RE chaff off the floor within a few years. See, YOU are paying for your buyers agent AND for the seller agent. What not take at least one of these skimmers off the books?
4. Make appointments to see the homes you like directly with the selling/listing agent. Redfin charges you per home shown, so its not worth using them for this. But who cares? Every selling agent is dying to show you their home directly – the greed factor (getting both buying and selling commissions) kicks in, you see!
5. To make an offer on your home, use the Redfin guy – he’ll do all the paperwork and help you with escrow. I found their system to be clean, relaible and no-nonsense. Do not use services provided by the seller. If they insist – walk away fro the transaction. The Redfin pre-negotiated value is better, in my opinion.
6. Remember, the REAL people behind the trnsaction are the escrow and title companies. You can deal with them directly, but if you are doing this for the first time, learn by using someone like Redfin.
7. Always, always bid lower than what the seller wants. My last purchase in SB was in a good part of town, lots of interest, but the house needed work. So I summarized what needed to be done to the house on a spreadheet and the Redfin agent submitted it with my offer at 12% below. They rejected it, of course. I then came in again at 7.5% lower, having already seeded the sellers mind with what ought to be done to the property, and my bid was accepted. Remember, when buying a home, especially an older one, there are PLENTY more where this oe came from…so be prepared to WALK when things aren’t going your way. It may take a couple of times for you to get used to this, but you’ll figure out how much bargaining power you really have.
8. Over the years, I have come to have a rather low opinion of realtors. Out fof 8 transactions, I was involved with only one couple who had some integrity, and that was because they were both 7th-day Adventists – very sincere folk. The rest were people like high-school jocks, ex-car salesmen, housewives looking to make a fast buck, bible-thumpers, and whatnot. The more educated ones were cynical and actually the worst – they were smart enough to know how to make the most money. There are very few requirements to becoming a realtor. My gardener became one last year (he was a house flipper!), and he had no formal education beyond grade school.

[(former)FormerSanDiegan]

When your gardener becomes a realtor and starts flipping it’s a sign that you shouldn’t buy … whether you use an agent or not.

I can just see it. The little Toyota pick-up with ladders, rakes, and a pile of leaves on it driving down the 52 to the dump, with a little sign on the side : “Evergreen Lawn Care and Real Estate”

Do they also leave little baggies stuffed with a rock and a 4×6-inch flyer that lists recent market activity in your area ?

[farbet]

What about Zip Realty? How many people used Zip Realty?Pros and Cons.Do they really give a rebate on the comission?
They do give a limited version of the MLS

[BobbyD]

Take a look at the following blog:
http://sandiegohomeblog.com/2007/02/08/redfin-revisited/

The Bergs, realtor husband & wife team in Scripps Ranch interviewed the CEO of Redfin.

[SD Realtor]

I read the article. Quite interesting.

With absolutely no doubt I can say that you can get the same rebate as the Redfin model and receive much better buyers agent services.

SD Realtor

[JJGittes]

Is the rebate taxable income? Seems like it probably would be. I doubt redfin or zip or buyside would want to pay taxes on the whole nut.

Perhaps it might be better to reduce the purchase price by that amount instead, if the deal can be crafted that way?

[justme]

Rebates are not taxable. A rebate is not income, it is a price break on a good or service that you purchased.

Do you pay income tax because the store sold you something at a sale price? Of course you don’t.

There are realtors that will claim that they cannot give you a rebate because either

a. you don’t have a real estate sales license and therefore it would be illegal to “pay” you for representing yourself.

b. you would have to pay tax on the commission “income”, and “their office just isn’t set up to do that”.

Both a. and b. are total lies.

Repeat after me:

I’m getting a REBATE!
I’m getting a REBATE!
I’m getting a REBATE!

There, does everyone feel better now :-).

[Sandi Egan]

With absolutely no doubt I can say that you can get the same rebate as the Redfin model and receive much better buyers agent services.

Could you please elaborate? I like dealing with my agent, but 15K on a 500K home seems to be a REALLY expensive way to say thanks. I imagine I could tell my agent that she is getting a fixed 3K from any deal I sign, and the rest she will have to pay me back. And I believe she would agree, since it’s still more than nothing. Somehow, though, I suspect that will make me the least favored of her clients, and that’s bound to have negative impact on the service provided. Don’t you agree?

[SD Realtor]

JJG –

I will try to answer your question but I am doing it in a gingerly manner because I don’t want to be accussed of shilling or promoting fraud.

A “possible” and what I would term “very much recommended way” to get a rebate would be as follows:

– Lets just say for instance you struck a deal to say split the commission 50/50 with your agent. Lets say the seller was paying 3% commission to the buyers agent.

– When you submit the offer, in the purchase agreement you include a request of 1.5% credit towards non-recurring closing costs. Your Realtor will also submit a coop commission agreement agreeing to only take 1.5% commission rather then the 3% of the commission.

– Now, all parties involved, including the lender, appraisers etc will see that a credit is involved here so there is nothing being hidden.

Now as Bugs can correctly chime in and say that lenders scrutinize credits. So the bottom line is that these credit should be used AS STATED, for non-recurring closing costs. Don’t expect that the credit will come back to you as cash. However, you can effectively use it for your loan origination fees, buying down the loan, etc…

From the perspective of the IRS it is no different then any other credit in a real estate transaction.

Now there may be brokerages that issue credits or rebates in the form of writing a check directly to the client after the transaction is closed and then sending them a 1099 at the end of the year. I cannot comment on that because it is not something I am familiar with.

JJG – Also yeah simply reducing the purchase price and asking your Realtor to simply accept a lower commission is just as easy and effective.

SE – You can ask your agent for a commission rebate or to reduce the commission he/she will take and lower the purchase price. All she can say is no. She most likely will not have any say in the matter because it is up to her broker not her.

These sort of statements don’t exactly make me a darling among my peers.

I think that each case merits insight. If you are a buyer and have only had your Realtor show you a few places, then yeah perhaps a commission rebate is warranted. However, if your Realtor has shown you 30 different homes, spent weekends driving around for you, sent comps all over the place, and put in alot of time and effort for you then most likely they are earning thier money. Remember most/all realtors who work for the big boys share a slice of that pie.

SD Realtor

[exeunt]

CAVEAT EMPTOR . . . . . . . . . . . . . . . . .
1. Your agent will be the best friend you’ve ever had until your transaction is complete. After this, you he/she will not give you the light of day, unless you put them on retainer.
2. I would rather pay for a boat in MY driveway rather than the boat in HER (the agents) driveway, wouldn’t you?
3. Believe me, realtor folk don’t have too many clients right now who can deliver the goods – there are fewer listings, closing volume is way down, and many of these folks are the ones living highest on the hog these past few years. They need the money. If they don’t serve you, fire them and get someone else, like a Redfin or some other fixed-fee agent.
4. The fixed-fee agent wont give you much time until you get serious about an offer, after which I think he/she will be better at negotiating a close than a freelancer. Also, use other tools to gauge the state of the neighborhood: the best of these is walking around the neighborhood, knocking on doors, and meeting and talking to the neighbors. Indeed, one such conversation alerted me to a drainage problem with the property that I used to advantage in negotiations.
5. You can also hire a lawyer to go over the paperwork for you. The local title/escrow companies can refer you to such folk, or you can find them by yourself. I used my own lawyer on one recent high-$ transaction to ensure that the paperwork was kosher. You pay them by the hour, and use them at the end. I had done this abroad, where escrow companies dont exist, and its just as doable here.
6. It’s all kinda up to you – just like when you hire a painter to paint your home for $8K, but then next time you try it yourself with a few friends and it only costs $300 for materials. Your own state of readiness to take on the responsibility defines the solution to the problem.

[Raybyrnes]

WHoever put this post together is wrong on the tax issue. You do pay income tax> I consolidated my student loans and got a rebate for doing so. Ity was accompanied by a year end 1099 as I expected. This would be not different. It is miscellaneous income. Just as ther is mortgage fraud ther is tax fraud aswell. If you get a rebate expect to pay tax. Be happy you are paying it becasue many people are not getting that wame rebate so you are way ahead of the game.

[PerryChase]

I would negotiate a lower purchase price (in a down market you can, especially if you're a willing and able buyer). I don't really care how the agents work it out. That will immediately lower my property taxes and pay me back a little bit every year for as long as I own the house. If there was a way to work it out, I'd be willing "rebate" money to the seller and pay all closing costs just to get a lower property tax basis.  

You can easy calculate the "rebate" that you want and lower the purchase price accordingly.  Be ready to walk if the parties can't come to an agreement.  

I think that each buyer is different. Some buyers like to be presented lists of houses to visit and have someone walk them through the purchase process. Other buyers know that they want and are capable of finding their own house. I fall in the latter category. When shopping at the mall, I'm very irritated when the salesperson wants to help me or makes suggestions. I just need someone to find my size when it's not on the rack.

Sad to say but most people would rather have the extra service because that makes them feel good, although they have to give up something else for that service.

The main problem with negotiating with agents is that most buyers rely on the agents who work in conjunction with loan, title and escrow officers to "get them into" a house. They are ignorant of the process and can't afford to push for a better deal, lest they "loose" the house they want.

I like the way exeunt put it: I would rather pay for a boat in MY driveway rather than the boat in HER (the agents) driveway, wouldn't you? 

Since I'm very familiar with RE transactions, I would have no problem going with a discount brokerage such as Zip Realty for a purchase I have already identified.   If I needed hand-holding or suggestions on where and what to buy, I would use a full service broker (who charges discount commissions) such as SD Realtor.  I think that SD Realtor has a good business model for the future — kinda like the Southwest Airlines of Real estate; you get everything for a lower price.  Well, you get peanuts for lunch on Southwest, but you wouldn't eat the food on American anyway.  

 

[Daniel]

SD Realtor,

Could you (again) post your e-mail address in this forum, please? I would like to contact you regarding possible representation. I’m not planning on buying anything real soon, but perhaps in a year or so.

Thanks,
Daniel

[justme]

Raybyrnes,

I can’t possible know what you mean by “consolidating a student loan”, but it doesn’t sound anything like getting a rebate on the services of your real-estate broker.

But then, why would someone give you a “rebate” (cash back) for consolidating a loan?

If you are talking about “cancellation of debt”, sure that is taxable a income. Many of the people that foreclose on a house and get their debt canceled by the bank will experience that this year.

Any forgiven loan must be taxed as income. Otherwise your employer would be giving you payday loans each month, and then forgiving them the next (wink-wink). Good for everyone, except the IRS is too smart to let such a loophole exist.

[Anonymous]

Be careful using one agent to show you a property while thinking you are going to write with someone else. It doesn’t work that way, at least not with the Southland Regional Assoc of Realtors. If an agent shows you the property, they are entitled to the commission. The agents agree to this by participating in the association. The listing agent (or whoever showed the home) would be within their rights to insist that they would be the one entitled to the buyers agent commission. Yes, you can threaten to walk if they don’t agree to allow the discount agent to write and all, but the whole thing just gets real ugly. You’d probably be ahead to ask the listing agent to take 3.5 or 4% to do the whole deal (instead of the 5 or 6% full commission).

[Author]

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