Negotiated 1.9% instead of 2.5%, and the 1,590 came back as a credit

Closed a 265k three bedroom rental in a boring inner suburb. Nothing clever about the property. The compensation part is the only interesting piece.

I'd been watching this submarket for fourteen months and I had the MLS alerts, the sold prices, and the drive-bys already done. So when I interviewed agents I offered a specific trade: I do my own search and shortlist, you do contract, inspection negotiation, and close, for 1.9%. Two said no. The third said yes with the condition that if I asked her to start running searches, we'd renegotiate. Fair, and we never got there.

Fee at 1.9%: 5,035. The listing side was offering 2.5%, which is 6,625.

That gap nearly broke the deal. My agreement capped her at 1.9%, so the 1,590 difference had nowhere to go by default. The listing agent's position was that 2.5% goes to the buyer's broker, take it or leave it, and the title company drafted the settlement statement with 6,625 on the broker line. My agent flagged it herself, to her credit. We amended the purchase contract to direct the difference as a closing cost credit to me, confirmed with my lender in writing that it stayed inside their contribution limits at my down payment, and re-cut the statement two days before closing.

Net: 1,590 back on 265k, plus a 4,300 credit she negotiated after the inspection found a failing service panel. She earned the fee she charged.

What I'd keep: doing my own search when I actually know the submarket, and paying for the parts I can't do. What I'd change: get the excess-compensation language into the rep agreement at signing instead of amending under a deadline.

Answer

0ryanmck27SC2C

The mechanism you stumbled into is the one thing from my licensing coursework I'd want every buyer to know. A rep agreement is a cap on what your broker may collect from any source for that transaction. If the listing side offers more than the cap, the broker can't just keep the surplus, and the surplus doesn't automatically belong to you either. It has to be directed somewhere by the purchase contract, or it drifts back to the seller, or in your case it sits on a settlement statement line because nobody told the title company otherwise.

So the language you want at signing is roughly: broker compensation shall not exceed X percent from all sources combined, and any amount offered by the seller or listing broker in excess of X shall be credited to buyer as a seller-paid closing cost credit to the extent permitted by buyer's lender. That last clause is doing real work, because whether the credit is allowed and how much depends on your loan program and any lender overlay, which is why you were right to get it in writing.

How this is papered varies by state, since the association forms differ and a few states use attorney-drafted contracts instead. Some state forms already have an excess-compensation box and some have nothing at all.

The part I'd push on: you got a yes on the third try. Would you have taken 2.5% on the fourth? Because the 1,590 only exists because you had a cap in the first place, and a buyer who accepts the standard rate never sees the surplus at all.

3 replies

2nataliehsuSO1BPRO7

Two of three agents said no and the one who said yes attached a condition. That ratio is the real story for anyone thinking of copying this. Fourteen months of alerts and drive-bys is what made the offer credible, and most buyers asking for 1.9% are asking for a discount without bringing anything to trade.

2renee_dubois Get yours

What happens to this if the panel had failed inspection and she hadn't gotten the 4,300? You'd be at 1,590 saved on a house needing a 4,300 repair, which is a fine outcome, but the post reads as though the fee structure produced the win when the inspection negotiation did. Would you still run 1.9% on a property in a submarket you didn't know cold? That's the version I'd struggle with, since the search is exactly the part I'd need help with in a new market.