Kate's Commission-Cutting Crusade

Blogger's Note: Kate in the Valley is back -- still house-hunting after five unsuccessful bids, still blogging. In Chapter 3 of her diary, she explains her plan to single-handedly restructure home financing and why it didn't work:

"Want to hear about this great idea that I latched onto?  Well, it turned out to be not such a hot idea after all, but I'll get to that later.  Anyhoo, I thought it would be Super Smart to restructure the traditional home purchase offer.   Traditionally, when you buy a house you just give the purchase money to the seller and the seller pays the 5% commission out of that.  But when you think about it, you are agreeing to pay 5% more for the house, and that translates to a bigger down payment, a bigger mortgage and bigger property taxes every year.  So I figured it would be brilliant to subtract the 5% off the purchase price and pay the agents' commissions separately myself.  Seems like no big deal, right?  Wrong.

Let's say I agreed to pay $750k for the house.  Traditionally, the seller would give the agents $37,500 in commissions and take the remaining $712,500 to pay off his expenses, etc.  I need to cough up $150k for the down and take out a $600k mortgage.  My property tax is $9,375 per year.

But if I just give the seller his $712,500 directly and then pay the 5% commission to the agents separately, the 5% is reduced to $35,625 (saving $1,875) because it is based on $712,500 and not on $750k.  The seller is getting the exact same thing, only the agents' commission is reduced.

My 20% down is likewise reduced to $142,500 (saving $7,500).   My mortgage is reduced to $570k (saving $30k principle and 30 years' interest on that).  My property tax is reduced to $8,906.25 (saving $468.75 each year I own the home).  Sure, it requires a little bit more cash upfront to pay the commission separately from the purchase money, but the savings are meaningful, so I absolutely loved this idea!

Guess who absolutely hated this idea?  The agents. 

Read more: What happened when Kate bid on a house using her new-fangled commission structure...

Their commissions are getting cut to the tune of about $1,000 each, and the comps for the neighborhood are going down a bit. My agent argued that I was only hurting myself by doing this because I was lowering the comps in the neighborhood and saving only a few thousand dollars.  So, let me get this straight: I should pay extra for my house so that the comps are up for the neighborhood?  That makes no sense.  In this scenario, even the seller benefits because the escrow and closing costs are reduced.  The only ones taking a hit are the agents, the mortgage brokers, and the title companies because their fees are all based on this reduced purchase price.  In fact, when you think about it, it's the exact opposite of the cash-back scheme, which inflates all those fees.

Ultimately, my agent begrudgingly wrote the offer.  The house went into multiples and guess what happened?  The seller's agent refused to counter my offer.  Yup, they countered everybody but me.  The house went for a price that I would have happily paid, but I was excluded from the bidding.  Needless to say, it was an idea that was ahead of its time, and I have stopped using it.  When the buyer pool shrinks, the structure may work, though.  Feel free to give it a whirl.

Comments? Insights? Let loose.
Photo Credit: Kate in the Valley

Comments

[Peter Viles]

Kate -- I admire your moxie, but this is tilting against windmills, I think -- even though it makes perfect sense. The vast majority -- I'm going to guess 90% or more -- of home-buyers do not have an extra $36,000 in cash to pay the commission, which is why they roll it into the purchase price and finance the commission over 30 years or so. And neither sellers nor realtors want to see stray comps -- call them "Kate Comps" -- that are 5% below surrounding comps. Other than that, a great idea!

[East Coast Reader]

This is an interesting story, and is a good example of the uncompetitive practices that exist in the real estate industry. The Federal Trade Commission and the Department of Justice put out a report earlier this year entitled "Competition in the Real Estate Brokerage Industry." The report can be read as saying that in much of the country the real estate industry has gone to considerable lengths to squelch competition, preventing individuals like Kate from structuring transactions in outside-the-box ways.

Here's a paragraph summarizing the report:

While there have been many positive developments in the residential real estate industry, there are some indications that consumers are not enjoying all of the possible benefits of competition in the real estate brokerage industry. A number of developments have raised competitive concerns, particularly laws and regulations in some states that limit consumer choice of real estate brokerage service offerings and that prohibit rebates to consumers, anticompetitive agreements among brokers, and industry practices that impede competition. These practices can lead to substantial consumer harm through reduced choice of real estate brokerage services, higher fees, and limitations on the ability to access information about real estate listings.

The full report is available at
http://www.usdoj.gov/atr/public/reports/223094.htm

[www.BetterVillage.com]

Kate,

Too much excercise book learnin' and too little street smarts to achieve what you're setting out to achieve unless your goal is to expose the industries dirt rather than actually buy a house.

How do you know that "the seller's agent refused to counter [your] offer"? Do you have any evidence that the seller actually saw your offer?

One of the things that has bugged me most over the years, in my own purchases as well, is the tendency of listing agents to control the process in their own favor (and definitely not necessarily in the best interest of seller). What mechanisms exist to keep the process honest? Mysteriously, even for homes that sit on the market for months, "multiple bid" situations erupt. I can understand why a listing agent would want twice the commission for "double-popping" the sale - I've enjoyed this myself when my buyers produced superior offers - but aside from a nebulous "duty" to protect their client, what specifically can be done to keep the process legit? Realtors? I know agents that make a big show of refusing to play the "dual agency game," but in my experience they don't wait for the buyer to find their own rep; usually they recommend someone within their own company or sphere of influence.

[Kate]

Pete:

I'm sure it's true that most buyers don't have the extra 5%, but much to my surprise there are a lot of all-cash buyers out there. Oh, what am I saying? It's totally moot as long as traditional agents are running the market.

East Coast Reader:

Thanks for the link! I love it! The article reminded me of the reaction I get from listing agents when I mention Ziprealty (a popular discount broker). They are positively scathing.

Better Village:

You, Sir (or Ma'am), have hit the nail on the head. I am definitely set on buying a house but a lot of interesting things have come up on the way and I certainly have gotten side-tracked with what is going on behind the proverbial curtain. I like to think that I am back on track now but maybe that's because the next shocker has not yet revealed itself to me.

All of my information on that particular bid, came from my agent. She told me that the seller's agent described my offer as "too confusing" for the poor seller. This struck me as highly unlikely as the seller was herself a transactional attorney. Due the allegedly highly confusing nature of my offer, the seller decided to counter the other bidders but not me (despite the fact that I submitted proof of funds, pre-approval letter, and 3% earnest money with my offer).

As far as what can be done, I suspect that ultimately companies like Redfin and Ziprealty will win the war. Especially when the younger, more tech savvy, generation starts to buy.

[www.BetterVillage.com]

Not sure how the word "excercise" got in my last post... but just ignore it...

[Edwin Waggens]

Just as an aside Kate, ZIP Realty is NOT a discount broker. They listed several homes in my area of Woodland Hills, and I talked to several of their agents.

What they are is a full service brokerage with a significantly lower overhead. So they give breaks to the sellers, and offer buyers a rebate on the commission. The business model is not that same as other brokers, and the approach is making huge inroads into the business of the "big Three" which is why their agents get their backs up when you mention it.

In my opinion, it's a zero-sum business and every sale one company makes is one another didn't get.

Contrasted to discount brokers where you do everything yourself, or pay ala carte for any agent services, ZIP is closer to old-line brokerages. The difference is they don't have an office on every corner. They are in cyberspace with the buyers. One of the agents told me "we know over 75% of potential buyers and sellers start their search online, and that's where we meet them".

[Pat]

If you had offered to keep the commissions the same, you would have still been able to save on the property tax. I would guess that the agents (yours and the seller's) would not have pushed back in that case.

[kate]

Edwin:

Thanks for the clarification. I am a big fan of Zip and certainly didn't mean to imply that their service is anything "less than." Indeed, I find their online tools to be the most powerful available.

Pat:

Yes, I suspect you are correct about basing the commissions on the full price. And while there would still be some property tax savings, I think I shouldn't have to leave the extra two-grand on the table. The commission is supposed to be 5% of the sales price, NOT 5% of the sales price plus commission. Nevertheless, you are correct.

What really gets me is that we are paying higher commissions during the boom (when homes were selling themselves) than we were paying in days past when it was much more work to sell a house. Alas, it is what it is (for now).

[Ann Observer]

I have been in Real Estate 22 years and just when I think I have seen all the hare brained ideas people come up with to undercut the Realtor, this grand moronic idea comes up.. you buyers and sellers NEVER cease to amze me!! It is a good thing most of uf professionals value our time and our profession because as is painfully obvious, the majority of buyers and sellers don't. I am figuring that most o'you just think of us as the necessary evil..

I have news for you folks.. we have been around a long time and we will continue to be around collecting our very hard earned commisions, and trust me they are very hard earned for the most part. Mostly in having to endure people like this brainiac Kate and the legions who think like her and make our life a living hell!!

[Evil Landlord]

Ann- Bitter much?

I don't begrudge a person making an honest living- I'm in insurance for a day job. I also refuse to insult the intelligence of my clients. Several people I know have left the agency model to buy and service themselves online. So far, one has returned, and I anticipate more after any sort of claims process.

Kate's propsition might not have been the best idea, but can you refute her percieved benefit?

[formerlahomeowner]

To Ann Observer,

Gimme a break! Your post is exactly why some people hate dealing with realtors. "Collecting our very hard earned commissions," you say? Get another job because with that attitude and the current real estate market, those commissions will be harder to come by.

Kate,

I don't blame you for trying to save money. Here's a suggestion: Offer 5% below what you initially want to offer - that should take care of the commission. A better suggestion: Wait another year or so and you will be getting a bigger discount. How does 20-30% off sound to you? That should take care of the commission and then some. Happy house hunting. Careful of Ann Observer - she will definitely work hard for her commission.

[KNewburry]

Good for you that you are thinking about alternative ways to write an offer. The full service RE agents are going the way of the dodo and the now almost extinct full service travel agents. Services like Zip will bring the costs down for buyers AND provide better service by putting a lot of info right in front of the buyer on line.

[whodecides]

There is a full blown assault on RE Agents in the media and on blogs at the moment.

Can we just begin to reduce the pay of everyone in every industry. Everyone of your inflated salaries increase the cost of my living as well. If I reduced your salaries, then my taxes would be less, my car would cost less, my computer would cost less, lets just go around and determine who really deserves what they make.

In my years as a business owner, its painfully obvious that with the level of effort that most people display, they dont even deserve a fraction of their salary. Lets cut everyones pay.

[Kate]

Dear Ann O:

I think your "necessary evil" comment is right on the mark. I don't believe that every single real estate transaction requires a real estate agent (let alone two) yet it is almost inescapable.

As far as agents "continuing to be around," I agree. There are some outstanding real estate agents out there. People who know their market, know how to write a contract, and have the necessary connections to bring buyers together with sellers. But surely you've seen a whole crop of new agents (with questionable skills and ethics) arrive with the boom who are bound to be pushed out of the market in the near future.

As to your suggestion that I am "undercutting", keep in mind that my structure still provided a 5% commission. I am only limiting the commission to the purchase price as opposed to basing it on the purchase price PLUS commission. It's not evil, it's just math and what should be the benefit of having extra cash saved up.

But, Ann, I really want to know what you think about some agents' practice of pushing cash-back-at-closing structures. Do you find this practice to be as outrageous as my proposed deal structure? Or do you think there's a justification for the cash-back deal structure? I do hope you'll weigh in because I haven't heard an agent's perspective.

[Pat]

Stock Brokers, Bond Traders, and now Real Estate Agents. What do they all have in common? When they had a monopoly of information, they could charge higher rates for their services. Stock trades now cost a flat rate. Same with Bond trades. Real Estate can't be too far behind.

[Pat]

Cash back at closing is one of the main avenues for mortgage fraud. I would not be surprised to see lenders refuse to finance such deals in the future.

[Kaye Thomas]

Kate,
Just a quick note.. in the "Boom times" commissions did drop in most areas.. it was not uncommon to see 4% or less in 2003-2005. They are back up to now as agents spend more money and time on marketing..

Buyers never believe this but Sellers are funny and don't always want to deal with something different from the standard contract.. A lot of sellers don’t like creative they want basic. If there were multiple offers and all of them were generally the same terms then the seller may have decided not to counter you because they thought your offer wasn't serious... Anytime you are dealing with a multiple offer situation the best thing you can do is to keep it simple if you want the property.
As to your agent not wanting to write the offer because it would bring down the comps in the neighborhood.. that’s just silly. A desperate seller might accept a lower offer, there could be a foreclosure or a short sale . These situations would certainly affect prices more then one sale. A number of situations can happen that might have an effect on sales and agents can't control what people accept or reject .... six sales that are significantly lower will affect prices one sale? .. No way.

Cash backs.. if disclosed upfront to all parties including the lender and for repairs then I have no problem with it.. however under the table transactions that are not disclosed... BAD.. WRONG.. VERY BAD.. FRAUD... JAIL..

[Jim]

Kate,
Why don't you have a real estate license? Be your own broker. You could solve your own "discount pricing" problems by taking your discount as a legal share of the commission.

Better yet, be an active broker or a salesperson. Pay rent, spend money for advertising, work weekends, etc. Then, see how you feel when someone comes up with an offer to "clip" your commission.

People tend to forget how hard and how many years Realtors worked to build up the MLS system. Now, they want the Realtors to give away their knowledge...and methodology for selling.

The government says "Commissions are negotiable." Sometimes, when I really want to sell, I offer to pay a bigger commission, say a 10% commission including 6% to the selling office, and maybe even a bonus for the first acceptable offer. Why, because it gets attention focused on the sale of my property. It gets excitement. Think about it for a while. If you had a salesperson's license, worked for a 50% splitting broker, and you could earn 1/4 of 6% = 1.5% OR 1/4 of 10% = 2.5%, I think that you'll be featuring my property.

[Cal]

It's a nice thought Kate but against the rules and specifically prohibited. It is interesting that your agent (or any of the agents commenting here) didnt know that..

Crisnet (now part of SOCALMLS) MLS rule 9.7:

"The Cooperating Broker shall not use the terms of an offer to purchase to attempt to modify the Listing Broker’s offer of compensation nor make the submission of an executed offer to purchase contingent on the Listing Broker’s agreement to modify the offer of compensation."

Yeah, I'm a nerd and actually read MLS rules.

[Guy West]

Go for it Kate! The system is ripe with flaws, but the NAR continues to shoot itself in the foot by failing to modernize.

The system separates pay from performance If someone buys a house for $400K with 5% commission, puts in a 100K for improvements in 6 months, and flips it for $600K with 5% commission, the agents' omission goes up from $20K to $30K...what did they do that was worth $10K more?

This makes even less sense if the house sells quicker, by less experienced agents in the second transaction.

[AnnS]

(1) we have been around a long time and we will continue to be around collecting our very hard earned commisions, and trust me they are very hard earned for the most part. Mostly in having to endure people like this brainiac Kate and the legions who think like her and make our life a living hell!! Posted by: Ann Observer |

EARNED??? Oh please! Neither agent did enough work on that potential sale to jsutify $35000+.

A realtor does not even need a high school diploma.
A realtor goes to some classes for 1-3 weeks and passes a standard test.

Thats it for education and qualificaitons.

Whining about the costs of being self-employed? Get over it. EVERYONE who is self-employed has to pay their advetising, office costs and all the rest. Tell it to the self-employed plumber who isn't getting the same amount an hour.

With no educational requirements to speak of, realtors think hey are entiteld to such exorbitant rate.

When I was still practicing law before retiring, I would have had to worked 175 hours to make $35000 (and I had to pay all my assistants and staff and the costs of running the business.)

I don't think the 2 realtors on that transaction put in 175 hours or 87 1/2 hours each - and even if they did, they sure weren't worth the same hourly rate as someone who spent 4 years in college and 3 in grad school.

(2) Tell Kate to go look for FSBO properties. They can cut out the whole amount paid over to realtors. There are usually websites for an area where people list their properties. Also, she can find the standard offer and contract forms on-line.

[Steve]

Kate,

This is a lot of work and hassle for chump change releative to the entire deal. You want to save some real money, buy a house outside of SoCal for about 60% less then this dump and live happily ever after.

[Kate]

Cal:

Thanks for the citation to Rule 9.7; I share your geeky affinity for knowing the letter of the law.

After reviewing the rule,however, I am not sure my structure runs afoul. That is, if the listing is offering 5% I am still paying 5%. All I am doing is saying to the seller: "Hey, would you take a lower purchase price if I pay the commissions for you?"

In the case of an aging listing, many sellers would be thrilled to take away the same cash as they would at full list price. My mistake was not the structure itself, it was attempting to use the structure in a multiple offer situation.

Jim:

Funny you should mention getting my license because I have considered doing that. As I already have my law license, I understand that some of the brokers' requirements are reduced.

As to your comment about "giving information away," I whole heartedly believe in this model. Hoarding information creates a market ripe for fraud. That's why you can look up the law -- so everybody has a chance to know their rights. And if you have trouble with the information, then there are professionals who can help you. So in the case of real estate, I say give ALL the information away for free. And then, if anybody has trouble with the information, there should be professionals available to help for a fee.

Steve:

Yes, it does seem like a small amount of money relative to the transaction. But I don't think a few grand is truly "chump change." I could almost get central air installed for that price!

Thanks all for your feedback!

[Mr Income Stream]

The reason, why you didn't get a counter was because no one wanted to deal with your nonsense when they had real buyers at the trough who were qualified and giving the least resistance. Who has time to read through and figure out all your crap when there's a line of people waiting to buy at asking or over. Get over yourself. Nobody cares about your spreadsheets or theories. The thought of an agent not countering you because he/she was going to make 34k instead of 35k is a pipe dream that only fogs your mind. You need to seek employment as a comedy writer. If you were as bright as you thought, you wouldn't be trying to buy a house now at this juncture anyway. You'd be calling banks and asking them when are they going to release the hounds so you can truly get a real deal and save some real money over time. The valley is filled with morons who overspend trying to keep up with the Joneses. In about 6 mo's to a year it going to be foreclosure heaven with the rate that Trustee Sales are going. Another L.A. meathead... so out of touch with reality they need to be living on Mars. Where do these people come from...?

[shockg]

I think the cry baby realtors are failling to listen to what the customers want. The realtors don't set commisions, customers do (or at least should). If Customers don't feel you are worth 5 or 6 percent, guess what, your not! This Industry is a total cullusion with kick backs and referral fees being the norm. What a joke. It's just a matter of time before enough customers stand up and do something about this.

[Cal]

Kate,

I think the point where the deal runs afoul of 9.7 is that the Seller hires the listing broker and the listing broker is technically the one offering the compensation to the another brokerage (if one is involved) when they bring in a buyer. Therefore your offer does fundamentally changes the structure and compensation offered. Dont get me wrong, if you got an agent that doesnt know the rules they are the one that is going to get in trouble, not you. But it isnt something that will be sweeping the nation anytime soon.

Also on your math there is a lot of "saving" that isnt "saving" at all but instead just paying money sooner (which has an corresponding "opportunity cost" which is unaccounted for). Outside of the opportunity cost there is the tax break consideration on the additional money paid per month in the original scenario (both property tax and extra interest paid) not accounted for. I estimate it is approximately a $100 a month difference under very favorable conditions. If you are willing to expose the extra money not spent initially to market risk (i.e. stock market or bonds) instead of a CD and let it sit and compound I bet the savings would be close to zero.

The end numbers I was using was $28,125 cash sitting in the bank instead of used to pay for the home. There was $162.50 a month difference in interest paid looking at a non-amortizing schedule (yes I know you would be amortizing and it would be less over time but this make it simple) with $39.06 difference a month in property tax for tax deduction purposes.

As for the "becoming a broker" idea, personally I think its great. If you are a member of the BAR you can take the test now (obviously you wouldnt want to do that without some studying) with a law degree you could take the test in 5 weeks after taking a couple correspondent courses. The MLS fees arent horrible (except the darn $500 setup fee) and you'd save a lot more than your above scenario ever could. Check out Allied School or Kaplan Professional Schools for test prep videos and CDs, they also have the correspondent courses if you need to take the classes. Im a big fan of DIY, althought with places like redfin and Buyside Realty the return on the DIY investment is a bit lower but you'll be in full control.

[formerlahomeowner]

Mr Income Stream,

Nice way to put it. Made my point easier to understand (see my previous post).

[Kate]

Cal:

I guess we have to agree to disagree on 9.7. But I definitely see your point on the opportunity costs. However, that reminds me of some additional deal points I considered which included paying all transfer taxes on behalf of the seller thereby lowering the "purchase price" further and gaining additional write-offs for the tax year. Of course, going into that will only cause more readers to doze off. ;-)

On the license issue, I'm hunting for study books now. I would never act as my own listing agent, but on the buy-side it seems like the thing to do.

Mr. Income Stream:

Upon closer review of the comments, I think you'll see we agree on more points than we differ. Where we agree: (1) the flaw with my deal structure was using it in a multiple offer situation (in my defense, mine was the first offer in); (2) prices are coming down; and (3) nobody cares about my spreadsheets or theories. Where we disagree: (1) I think a listing agent will absolutely blow off an offer that reduces his commission by any amount if he can; and (2) I could never ever get a job as a comedy writer, trust me.

[www.BetterVillage.com]

Kate: a problem that keeps bugging me is that you were told by your agent that this was a "multiple bid" situation. They, apparently, were told this by the llisting agent. There are many buyers that understand that "multiple bid situations" are frequently fabrications (I invariably get calls from the jaded when listing commercial property: "Hello... tell me about the property.. yes, yes.. .I know you have multiple offers, blah, blah, blah). Outside of just taking it with a grain of salt, or not "becoming married to the properties" what's a buyer to do? Perhaps there could be a mechanism built into the system that verifies the existence of other actual, current offers? I'm not sure about this, however, as I'm sure a cottage industry would spring up that produces "actual" competing offers. I can respect an auction type atmosphere, but just can't stomach blatant lies.

[Mr Income Stream]

"...Where we disagree: (1) I think a listing agent will absolutely blow off an offer that reduces his commission by any amount if he can;..."

Not if eating and paying the bills are a priority. Here's the dirty little secret. In the vast majority of deals if an agent is full time in the business. very rarely does he get the commission in full. there is always a hiccup in the deal that both parties can't agree on and the agent digs in his pocket to smooth the transaction. Think about it realistically 34k of 35k is a whole lot better than 0k if the deal doesn't go through especially if Master Card or Visa is calling.

I've read some of your blog and your postings here and have come to the conclusion you suffer from too much intelligence, too much time on your hands and impatience. You also should hone your skills in interviewing Real Estate Agents.

Here's a tip wait about 6 months subscribe to DataQuick's forclosure service, comprise a filter of all the zipcodes you find acceptable, hire a new agent and wait for a deal in your acceptable zip codes. Have your agent contact the bank and buy direct probably for a lot less than what you're looking at now, at the rate property is being foreclosed on right now.

With a published report out that states L.A. Real Estate is at least 52.1% overvalued and with the rate that foreclosures are coming back, why anyone with even marginal intelligence would be out trying to buy a house right now is mind boggling.

But too each his own... if you insist then that's the route I would take.

MIS

P.S. Anyone can ge a comedy writer have you glanced lately at the crap on T.V. these days...

[LA Expat In Arkansas]

"I would never act as my own listing agent, but on the buy-side it seems like the thing to do."

Kate: Why wouldn't you act as your own listing agent? Nobody cares more about the sale of your home than you. Why would you list with someone else if you had a license, presumably spending 6% to sell your home as opposed to 3% to pay a buyer's agent. You're spending an inordinate amount of time trying beat the current system through creative accounting, thereby saving a few bucks, when you could be earning your real estate license, taking control of your own house search, and saving some real dollars. Knowledge is power.

[Kate]

BetterVillage:

I am fairly confident that the multiples in my particular situations were valid as I lost the war and the house(s) went into escrow. It's pretty risky to fake multiples if you don't really have any nibbles as you may chase off the one valid bidder. I don't think this is peculiar to home sales though, any time an item is held out for sale you won't necessarily know who you are bidding against.

MIS:

In fact, I have subscribed to foreclosure.com ... the problem I am struggling with on a foreclosure is the difficulty of inspecting the house pre-purchase and the risk of losing earnest money. Thoughts on that?

You are totally right about my patience wearing thin, but no matter how impatient I am the market doesn't move so I am forced to wait.

LA Expat:

Personally, I wouldn't be my own listing agent just like I wouldn't be my own attorney. First off, I don't have any connections/leads. Second, cool heads prevail and it's hard to not be emotional about your own home. IMHO, the only time to be your own listing agent is if it really is your chosen profession.

And, in case you are wondering, there is never a time to be your own litigation attorney, see e.g. http://www.msnbc.msn.com/id/18471265/

[Mr Income Stream]

Kate-

First lose foreclosure.com realtytrac and all the rest. Most of those services are good only for sending someone off to chase shadows. For the best pure real data on foreclosures in SoCal... Dataquick, Retran and countyrecordsresearch.com are by far the best.

As far as inspections are concerned if you approach a bank direct they will accomadate your needs to inspect during the escrow period and if not inspect during your dialogue of making an offer. Should be real easy if the property is vacant and (cough) someone leaves a door or window open. If it's boarded up or still occupied and the bank won't let or can't let you in to inspect it then present an offer as if the house is totally gutted with no power or water hooked to it. Inspection if you really want it is easy. If no inspection if you're smart and savvy means a better deal for you.

The market is moving downward slowly but surely but the real deals from experience are going to come from the banks. Private sellers are far to emotionally invested to provide real deals most will probably go down with the ship clinging to uninformed and false hopes. L.A. property owners are famous for their stupidity witnessed even more so by this ludicrous runup in prices. The stupidity going on now far exceeds a "sunshine tax".

[Agent Scoreboard]

Kate, love your blog and your moxie on your offer.

Somehow I cant get your math to make sense.

712.5 + 35.6 = 748.1k = Total Transaction Cost. OR
750k = Total Transaction Costs

177.5k Cash out of pocket vs. 150k Cash out of pocket?

***This is all exclusive of closing costs***

Savings $1,900? + maybe your property taxes another 500 a year.

Why would you put 80% down on the 712.5k price? to not pay PMI? or get a better loan? LTV is based on appraised value. If the house is worth 750k than you could still drop just 115k down and hit your 80/20 mark.

It seems to me under your scenario that your putting more cash upfront (35 + 142.5 = 177.5 vs. 150k), without any substantial benefit to you, actually your losing the time value of the extra 22.5k your dropping upfront.

I don't know if it makes sense to put up 22k more to save $2,400.

I do like your creative thinking. I have an article that might explain how real estate people look at commission, it might help for the future. http://www.agentscoreboard.com/blog/the-commission-paradox-unabridged/

[Why]

Why use a RE agent? Not trying to bash, just trying to understand. I've sold 2 houses without RE agents, listed the house on MLS, hosted the open houses myself on the weekends, advertised the house as needed in my local paper and hired an attorney to handle the closing work. Instead of paying 6% on the sale, I spent less than $4000 on the first sale and about $6000 on the second sale.

[kate]

AgentScore:

In this scenario, I am already putting 20% down to avoid PMI (see above).

And, actually, I am not putting up $22k more just to save $2,400. You need to look at the numbers again, the savings are across the board: 20% down is a smaller number, mortgage is a smaller number, taxes are smaller (without having to appear the tax board); and commissions are reduced. Then look at the total cost of paying full price commissions. When all is said and done (including the 30 years of interest) it's closer to $30k in savings.

[Cal]

IMHO, Once you factor in everything (which you havent,compounding interest, tax savings, etc) the potential savings is extremely minor. Add into the mix that any offer written like this makes you a "difficult buyer", you either will have to find a desperate seller or overpay. Plus I still dont think its allowed :) .

[Dave P]

Kate, if you really think the agents are balking at losing $2k of a $35k commission, then try your offer but pay the agents 5% of the full $750 asking price. Heck, instead of offering less $2k less than full commission, offer them $2k more, and maybe you get the counter and all the standard buyer offers get shut out. Since your math has you saving so much over time paying the full commission or a little extra should be okay.

Unfortunately, I don't think it will work as well as you'd like. The posters that were Realtors like myself know firsthand how jittery sellers can be. If you present 3 standard offers and one offer that you need a scientific calculater to figure out the true price, that 4th offer better be hell a good. If it's the same money as the simple offer, why bother? People like simple, not complicated. That's the reason they pay the commissions in the first place.

I do agree with you (and other, non RE agent posters) that the commissions have gotten too high. If the market appreciates 50% in two years, we haven't done anything to deserve 50% more commission in that same period.

Traditionally, homes appreciate at a rate similar to inflation, so 6% would give us a fair raise over time, no more, no less. Inflated home values are one of the reasons Los Angeles commissions are usually 5% instead of 6%, and during the boom you would see an occassional 4% (sometimes with the listing agent taking 1.5% since they only had to plant the For Sale sign and wait by the fax...GAWD I miss those days already).

Make no mistake, we Realtors DO earn our commissions. It costs a lot more to market and sell homes than most people realize. There is a reason that FSBOs take longer to sell than agent/MLS listed homes. The poster that has sold two homes by his or her self benefitted from as much from the hot market as any agent ever did. Contrary to what some posters semm to think, a cold market makes homes HARDER to sell so Realtors should get a bigger percentage, not less.

I'm not sure if a flat rate or discount rate is the answer, but businesses like Help U Sell, Redfin, and Zip are going to make us figure it out sooner rather than later. Zip and Redfin are scavengers that take product off the market without putting their fair share back on, but the Justice dept may not let us block MLS access from them. Realtors best prepare for the New World soon.

Best of luck on your search Kate,

Dave P

[Dave P]

Three last things. Cal and Agentscore are right in that you're doing a lot of structuring to save a relatively small amount of money. Factoring in 30 years of mortgage interest savings is incredibly facetious. Almost no one stays in their home for 30 years. Factor in your interest savings for more like 5 years.

And it's definitly structuring the deal to affect the agent compensation. It's the very DEFINTION of structuring. Whether you or the seller would ever be penalized is a different matter. But if most of your savings comes out of the agents commission but the seller gets the same net, how is that not structuring? If the IRS decides the seller also recieved an improper tax benefit, there could be more problems down the line.

And the retired lawyer needs to stop being a diploma snob. I respect his (and my) education, but saying someone doesn't deserve a certain level of income because they didn't spend as much time in school as he did is asinine. If a person is an effective professional in his or her field they deserve whatever the open market will bear.

That is all.

[www.BetterVillage.com, XYZ, PDq.]

A little off-topic, but related: What do the realtors think about the low barriers to entry for their profession. In the medical industry, the bar was lowered and they flooded in... from all over... even from caribbean and other third world "medical schools." DO's and Chiropractors began to walk around calling themselves "Doctor." Health insurance plans began to pay for "therapies" like back massage. There is no real bar in the realtor/mortgage lending world. I've heard stories that people just pay accomodators for their license (agent and broker) without even bothering to read the thin volumes required for a real estate "education". Is this good or bad? My "gut" feeling is that it's bad because it allows the fast buck artists to drag down an entire industry. The "cream" has apparently not risen to the top with this system... unless you consider the cream to be the people good at making easy money at the expense of everyone else. Yes, there are good people that are making good money.. but there are so few!

[Brady Westwater]

First, since the offer would have made everyone involved a party to defrauding both the lender and the government, I can see why the broker and the seller would not counter that offer. Plus why deal with someone who seems to be interested in making a point about than system than in buying the house.

As for the future of full service brokers, there will always be a need for them.

Back when I was an agent myself, some of my best clients were other brokers who hired me - at a full commission - to represent them when they bought their own house or an investment property.

Many agents realize hiring a professional to deal with their own properties can - in the long run - make better financial sense since another agent could be more objective - and less emotional - when it came to pricing, dealing with all the ups and downs of an escrow - and dealing with the personalities of the buyer or the seller.

[Kate]

Brady:

I disagree with your suggestion that this is a fraud. It's not like I am giving the seller $750k for the house and then just writing $1 on the deed; I am merely separating the commission from the purchase price so that I do not have to pay property taxes on dollars that are truly attributed to the agent's commission.

I can't see how the lender is affected at all, but if you care to expand that would be great.

As to the government, they are receiving property taxes based on every single dollar I pay to the seller for the house. There's nothing fraudulent there.

As to the seller, his gain is not affected by my structure. If he paid the commission personally it would be deducted from his gain calculation; because he is not paying the commission, it is not deducted. As such, the seller's gain is wholly unaffected by the structure.

The agent's taxes are based on income and because he is receiving less income on this transaction his tax liability would be reduced in kind.

Finally, I am not more interested in making a point than I am in buying a house. I am interested in saving money by paying a bit of extra cash up front. And I'm sure that many agents in the near future will happily accept an offer like this when there are no other offers -- it's all about supply and demand.

[Cal]

Fraud wouldnt be an issue with the lender as long as everything is disclosed in advance. Basically, the lender needs to know who is getting paid what, regardless who is paying them. If everything is disclosed and they sign off on it, it isnt fraud. They might not sign off on it, but that is a different matter.

I dont know how Brady thinks the gov't thinks fraud would be involved (again, as long as it is disclosed).

Im frustrated with your lack of willingness to look at the issue mathematically, you havent done a full accounting for the money and refuse to do it. You are convinced this is the correct course of action, but refuse to look at it scientifically to determine the real benefit. I think if you did that you would see exactly how trivial this exercise is. (p.s. There isnt one set of variables, there are several sets, you would make a reasonable range of the variables and see the outcome).

IMHO you are optimizing the wrong thing. You are trying to make up for a suboptimal purchase decision by optimizing the purchase.

[Michael]

I think the whole point is missed here. Commissions are always negotiable between the agent and their client. In this case, the client is the seller and they had already negotiated a compensation agreement (listing contract). Here comes Kate and she asking to change the commission rate that has already been agreed to in a contract.

I do not care what business you are in… No one would agree to a reduction in compensation, especially after they had already started working on the assignment and the compensation is specified in a contract.

Do not get me wrong. I really think highly of Kate and her blog. I just think it is difficult to renegotiate a compensation agreement when you are not even an involved party.

[Dave P]

Kate, the fallacy that you seem to be working under is that you think the fair value of the house is $712,500, and any additional price is just the commission lumped on top of the fair value. You're thinking of it like tax on a retail purchase at Macys. The house is worth whatever the open market will bring and the commission paid by the seller is totally separate from the value. Many sellers also make a similar mistake when they try to price their house so they get X amount back to pay off credit cards or buy a car or realize X profit amount. It's worth what it's worth, and you subtract from there. Not add.

You're also making assumptions about the commission structure that you couldn't possibly be privy to. The listing broker may be taking offering the selling broker more than 50%. The listing broker could be taking a flat fee. It may or may not even be a 5% commission.

Plus your offer adds way too many people that have to agree to the deal. Even if the sellers love your deal (I doubt it because people shy away from complexity) the listing broker, listing agent, selling broker, and selling agent would all have to agree to it as well. The seller doesn't have the power to say yes because the commission structure is already in writing. You may also not be aware of how often the brokers/agents agree to give up some of the commission to keep a deal together during the escrow period when issues arise during inspections and disclosures.

The only thing I disagree with Cal on is the fraud issue. I think you're playing it fast and loose with the government there. The IRS has criminal penalties for what they term as "Structuring", and you actually use the word "structure" when you talking about changing the deal to lower your tax base and the sellers taxable gain. Add the agents knowledge of why the normal pricing and commission payment methods were altered and we may have introduced a conspiracy charge. If you think I'm blowing this out of proportion you've never had to watch the video that companies make you view about structuring.

[Dave P]

BTW, I'm not saying that it definitely IS structuring, but the main point is to avoid even the appearance of impropriety.

Also, saying that desperate agents in a miserable market situation will accept the deal isn't proof that it's right. desperation and ethics don't usually mix well.

[sheila]

since you are willing to do the legwork, and since, as many previous posters have indicated, there is a serious "entrenchment" issue with old-fashioned thinking and dedication to the conflicts of interest inherent in a commission structure, especially for a buyer's agent, why not try redfin as an interim solution?

it is ridiculous to "pay" for someone to "find" or "show" you a property when you are obviously doing all of that on your own. and yes, as you say, you are the one paying, regardless of the disingenuous mechanism which makes it appear as though the seller, then the listing agent, is actually paying. this mechanism should be radically changed - the incredible conflicts of interest and opportunities for collusion (many of which i have seen first-hand) between everyone but you are overwhelming. why not either an hourly or flat fee rate (plus documented expenses for listing agents) for all? that's how the majority of the world is paid...

although it is not as radical as changing the deal between seller and their agent, or changing the system to the type of compensation which removes 90% of the conflicts of interest, it is far more feasible, and you only pay for what you need:

http://www.redfin.com/stingray/do/buy

the world is changing, as it always has been. there are those of us who would like a total revolution and others who are willing to make interim steps. i would prefer a revolution in some of these things myself, but at the end of the day, buying a house is traumatic enough, expensive enough and hard enough without trying to single-handedly reform an industry dedicated to keeping its system as rigid and inappropriate as possible. unless you are a trust-fund baby, it is hard to justify the amount of time-away-from-work that this herculean effort will take - you will quickly see all those savings circling the drain in lost wages.

good luck, though, and i hope you make a dent in this mess!

[Mr Income Stream]

Michael wins the "Smart Cookie Award"

[Kate]

Gosh, lots of new and interesting points here. I guess I'll start at the top:

Cal writes: "Im frustrated with your lack of willingness to look at the issue mathematically...IMHO you are optimizing the wrong thing. You are trying to make up for a suboptimal purchase decision by optimizing the purchase. "

I have run the numbers and I am not disagreeing that the savings here are less than huge. You are right about that. It's just that I am willing to deal with all the hassle for these savings AND it's for exactly the reason you point out: Making up for suboptimal purchase. The market conditions were creating the suboptimal purchase and I was trying to optimize the situation even though it was more difficult than just towing the line.

Next, Michael writes: "Commissions are always negotiable between the agent and their client. In this case, the client is the seller and they had already negotiated a compensation agreement (listing contract). Here comes Kate and she asking to change the commission rate that has already been agreed to in a contract...No one would agree to a reduction in compensation, especially after they had already started working on the assignment and the compensation is specified in a contract."

Actually, listing agents agree to reductions in compensation to make a deal go through all the time because a reduced commission is better than no commission at all. However, you raise a valid point about the SPIRIT AND INTENT of the agreement being violated by paying the commission separately. The listing agent likely agreed to his commission believing it would be taken out of purchase money + commission given to the seller. Nevertheless, the LETTER of the agreement is being followed: the agent will still get the agreed to percentage (2.5%) of the home purchase price. (I totally realize that this is why people hate lawyers, by the way).

DAVE P. writes: "the fallacy that you seem to be working under is that you think the fair value of the house is $712,500, and any additional price is just the commission lumped on top of the fair value. You're thinking of it like tax on a retail purchase at Macys."

I am definitely working under that assumption but I'm not convinced that it is a fallacy.

DAVE P also writes: "The house is worth whatever the open market will bring "

But if my offer is the only offer, then that figure is exactly what the open market brought.

DAVE P: "The IRS has criminal penalties for what they term as "Structuring", and you actually use the word "structure" when you talking about changing the deal to lower your tax base and the sellers taxable gain."

When the IRS uses the term "structuring" it has a very specific definition. When I used the word "structure" I mean the dictionary or layman's definition, not the IRS definition. People structure all sorts of deals to capture the largest tax benefit possible, if you follow the IRS rules it's not illegal.

Finally, DAVE P states: "Also, saying that desperate agents in a miserable market situation will accept the deal isn't proof that it's right. desperation and ethics don't usually mix well."

An offer to buy a home should be accepted by the SELLER not the seller's agent. Nevertheless, I am saying that I do not see how this deal defrauds anybody. The only ethical dilemma I can think of is between the seller and the seller's agent because arguably the structure violates the spirit and intent of their contract. But it is between the seller and his agent to determine if the offer falls into the meaning of their contract and to determine if they want to renegotiate their contract so I still don't think there is anything unethical.

Sheila writes: "since you are willing to do the legwork ... why not try redfin as an interim solution?"

I am actually working with a really great buyer's agent who has a greed to take a reduced commission because he does less work. If a house is open for viewing by appointment only, he gets me in and he also gets me more inside information than I can get. But, if I hadn't found him, I definitely would use Redfin.

I want to say thanks to all of you who are commenting. I'm really thrilled to get so many different (and astute!) opinions.

[Mr Income Stream]

"...he also gets me more inside information than I can get..."

How so...? Well actually I know the answer. What I find interesting is that even though he is providing you an excellent service you still find the need to chisel him on his fee. I mean virtually all the information he has is available on the net for a fairly reasonable fee. What you're really saying is I found a sucker and I'm riding him for all he's worth. But hey I understand all's fair in love and war. If he allows it why not. Right?

I take it your an attorney, hope you don't take it personal when people begin to come into your office and say- Hey, I researched all the case law on the net and I just need you to stand in court by my side and by the way since I did all the research I'm only going to pay you 5.00 an hour and since you're licensed you can keep the liability too. That's not a problem is it after all you didn't attend Harvard or Yale so you're really not deserving of a real fee.

[Kate]

MIS:

Actually, I get all "that information" (meaning address, list price, square footage, days on market, last sale, property tax, etc.) for free.

What I don't always get is the inside information from the listing agent. The listing agent may tell my agent things that he may not tell me (like how many other offers there are, or if they are all low ball). Sometimes it slips in conversation, sometimes it is intentional, either way, it's information I don't always get. That, and I don't necessarily want to use a dual-agency if I am unfamiliar with the listing agent's reputation.

My agent isn't perusing listings for me, he isn't driving all over town with me, he isn't even writing the CAR form for me. He just goes to appointment-only listings and presents my offer. That's a service that I am willing to pay for, but it is less than the traditional service so it should be at less than the traditional price. He's actually quite happy with the arrangement and thinks of it as easy money. In fact, I've run into several other buyers doing the same thing with other agents.

I'm not sure why you reference Ivy League schools, but I really don't care where my agent went to school (or if he went at all). I care about the quantity and quality of service provided and base the fee accordingly. I assure you that different lawyers charge different rates for this very reason.

Indeed, you might be pleased to learn that there are some very inexpensive attorneys. For example, if you have a case in San Francisco but you live in Los Angeles, you can hire a local attorney (who knows virtually nothing about the case or the law at issue) who will show up to easier hearings and basically just stand in court and write down what the judge says. It's called a "special appearance." Obviously, I'm not going to pay $600 an hour for that (try $50). It is much much cheaper than hiring full-blown co-counsel in the other city or traveling for a simple hearing yourself. And that's pretty much what's going on here.

I think it should be up to each buyer to determine how much service they want and need. I just think agents should be more like lawyers and offer a full range of services at a full range of prices.

[www.BetterVillage.com, XYZ, PDq.]

"I think agents should be more like lawyers and offer a full range of services at a full range of prices."

You think *all* agents should offer a full range of services at various price points, or do you believe that some should specialize? Just looking at our wild and wooly residential market.. we have a smorgasbord of agents... where you should be able to pick and choose to your heart's content. But you usually never know what you're going to get when you choose from this wide variety... and conventional wisdom seems right on this: you *usually* get what you pay for.

If you do find some poor broken sap that is willing to provide you superior value for your pocket change - will you use them? Of course. Lesson here... to the victor goes the spoils. Might makes right. Of course, you're doing them a favor by keeping them employed at all. Other lesson learned? If the agent feels slighted by the pocket change... maybe they should find a different job?

If the current administration is as caring about visionary as they would like us to believe, wouldn't they be talking NOW about creating employment for all those people (good ones and bad ones) that are increasingly looking for work outside the real estate world?

What do we see instead? Increasingly ads for student loans... While the eyes are on the finance fallout, a sick little industry is gaining traction... "You need an education to get ahead" "We can help you with that" "Come get your student loan candy." What else do we see? Dubya in Tennessee tellin' us: he "can make you a prediction, though, that pretty shortly people are going to be knocking on people's doors saying, man, we're running out of workers." Thas' bout right, Sir. People have learned that greed is good. They no longer want to pick lettuce when they could be sipping soy decaf lattes in air conditioned offices, living longer, with better health. Sir. They want it all, and they want it now.

So, possibly, we just cannot have agents with a full range of services and a full range of prices. Maybe that range is artificially limited at the bottom end by agents' needs for housing, health care, education, etc. "Bring on the worker who is willing to do it for less, then! This is a FREE ECONOMY, " one might echo. The only problem is that the person who is willing to do it for less, to provide you with your full range of services, probably won't be able to live like a human being with dignity at that pay rate. "DIRTY COMMIE" you might retort. I shouldn't think that this is any worse than being called a "dirty capitalist." Clean, is again, probably somewhere in the middle.

By the way... it seems like Kate is building a case for discount real estate services. Let's think this through a little. The fsbo-mongers claim there is a "monopoly" by thousands and thousands of basically independant real estate agents. Is this really a monopoly? Brainy corporate america is swooping in to rescue us from these monopolists... with fizzboy and redfun at it's side... We definitely need to make room at the table for these feisty youngsters... but remember, they will soon grow up and won't be so cute anymore.

(yes, I know we shouldn't practice thinking at the blog's expense... but it doesn't hurt once in a while to have others take a look at your thoughts to see what they think as well.)

[Dave P]

I'll have some of whatever the Better Village poster is having, please.

Kate, I admire your counterpoints. You seem to have put a lot of thought into your plan. A lot of the issues are gray area so even if we disagree I don't think we're that far apart. There are only a couple of things that I don't think you're seeing clearly...

If we look at 4 similar homes listed for $750,000, they easily could have four different listing agreements. Once could be with a traditional broker and the seller pays 5%. One could be with a discount broker paying 1.5% to the listing agent. One could be a flat fee broker getting $9000. One could be owned by an agent representing herself.

This is where you can see your belief that the home is actually $712,500 plus commission on top is false. All of these homes will have a different net to the seller even when they have the exact same offer. The homes are worth $750k (or whatever amount) that someone will offer. The commission is a separate line item accounted for like mortgage balance or property tax or escrow fees. Knocking 5% off the selling price and paying the commission separately could make the bottom line so different from competing offers that the seller would be turned off more than the agents.

As an agent used to working with sellers, here's the best tip I can give you. If you simply MUST do some sort of alternative deal, find a way to make it simpler, not more complex. If I present 3 offers to my seller and one is X amount, the 2nd is X+1000, and the 3rd is (X-Y)*((A+B)-(B*.95)/1.05, I don't even have to downplay the 3rd offer.

Good lucking on your house hunt this weekend!

[kate]

BV:

I did not mean to suggest that each agent should offer a full range of services at different price points. I think that there should be discount agents who offer reduced services and high end, higher priced, agents who offer white glove service. Most professions, whether we are talking about auto mechanics or wedding planners, are divided up like this.

Dave P:

You raise an interesting point on the different commission structures and it reminds me of my peeve with FSBOs: They typically do not pass on any savings to the buyer.

Let's consider used cars as an analogy. If you are selling a used car (as a private party) you would never try to get the same price that a used car lot gets; you would undercut the lot price by a significant amount. Still, some people will prefer to buy from the lot because they want extra assurances and services. But there is a meaningful choice in the market.

With FSBOs, on the other hand, the seller wants you to pay the same amount as a full-service listing without getting the assurances you get from an established brokerage. It's not likely to work. They need to pass on at least some of their savings or it's unlikely they will ever strike a deal.

And this is why I think my belief (that the home is worth $712k + commission) is valid. Some people will buy at $712k from the FSBO, some people will prefer to buy at $750 from the established brokerage. I think your example is dependent on the FSBO being able to sell his house at $750 -- and that's where I think the fallacy lies.

Finally, I think your tip is right on the money and I have actually moved in that direction. The original structure actually involved the buyer paying all escrow costs and all transfer taxes too so that the purchase price was even lower and the buyer gains some tax write offs by paying the seller's transfer taxes. That was obviously just too much math (especially when escrow costs are a variable) so I cut out those. And quite frankly, if I loved a house and wanted to be absolutely certain I got it, I would abandon the structure all together. I would only use it on a house that I thought would be a good value but for which I had no emotional attachment.

[mhp]

Kate -- YES, YES, YES!! I'm reading this post after googling "los angeles, buying agent necessary?" I'm predicting there's quite a few of us out there who have thought through this scheme and haven't found agreeable agents. Much like some of the tech savvy consumers coming into the market, I'm able to find a lot of listings on my own (Redfin, Guest MLS, craigslist, friends passing on info, etc.). I do all the search myself then go to open houses or call the listing agent to view properties. My plan was to ask the Listing Agent if they'd represent me with 2/3 of the "buyer's commission" coming back to me to cover down payment, closing fee (I got the 2/3 number from Redfin).

I let the listing agent know that I'm not exclusively using an agent but rather doing it myself using my own resources such as Redfin (irritation or feigned ignorance about who they are). The two times when I was serious about making an offer, I asked the listing agents how they felt about representing me for this transaction for the same commission that Redfin would be taking. The reaction ranges from appalled to complete confusion and misunderstanding at best (feigned or genuine). The bottom line is they get so irritated with me and me at the them for not understanding how this is benefiting them (1% more commission, easier transaction since they'll be the main point of contact and not have to go through yet another person).

So, this hasn't worked for me either but I really wish realtors can see that this is an opportunity to change the way business is done to reflect a new set of customers coming on to the market. I'm not saying this is the way to do business but I do implore realtors to be open to non-conventional ways of placing an offer.

Many of us rarely will pay full price for something that can be bought on the internet for cheaper (and a tiny bit of patience). However, we're loyal and fair and do pay for specialization and service, especially if they reflect our values and ideals.

We pay more for free trade, organic and things that make us feel better about ourselves or make us feel like we're being smart about our decisions. We regard value (as in saving money) but more importantly, we regard smart partnerships with service specialists who understand the way we think.

Bottom line is I agree with you 100% Kate and really hope the Real Estate industry gets savvy to the way of doing business with "creatives" like us because there are a lot of us. It's that or suffer extinction from groups like Redfin. I'm still avoiding Redfin because I do believe in human to human, in person interaction and nuances but I'm close to giving in to a mechanical process that may just understand the way I make decisions and consume better than another human.

[Mr Income Stream]

Censorship is a bad thing, Peter...

[Pete Viles]

Mr. Income Stream -- As I've said a few times, I try to keep comment section free of profanity and personal attacks. As you've probably gathered, I have a very 1977-era definition of profanity.

[Mr Income Stream]

"...I have a very 1977-era definition of profanity..."

Funny...Ward Cleaver immediately pops into my mind. Whatever...

[Kate]

MHP:

We need to clone ourselves. Together we will change the world! Or get shot down in the street. But in either situation, it would be helpful to have clones. N'est pas?

[JK4507]

Kate,
I want to thank you for spurring this discussion. I have learned so much.

I have a question for everyone. Is it customary in California (specifically LA) for the seller to pay city transfer taxes?

I made a full cash matching offer for a condo 2 weeks (30 day escrow) - that was on the market for 45 days - and after reviewing the "Buyer's Estimated Settlement Statement" that I got today from the escrow co. - that my offer - written by my agent and signed by me - indicated a 50/50 split with the seller on the city transfer tax. My agent defends this move - he says it's customary with his previous offers and was intended to sweeten the deal. He never disclosed this intention when he explained all the details of the Purchase Agreement 2 weeks.

I'm pissed. I made an matching offer to the seller's asking price - with no contingencies. Why am I paying half of their city transfer tax. Why not also their county transfer tax too?

BTW: The listing agent says they got 2 matching offers the same day I made mine - they liked mine since it was all cash.

Your comments would be appreciated!!

[sheila]

as long as we are talking about buyer's agents' commissions, i actually discussed a type of commission with my good friend/agent which would remove the conflict of interest inherent in the "commission" structure. Buyer's agents, unlike seller's agents, don't usually incur higher costs (like advertising) for higher priced properties, and the worse deal their client gets, the better they do. it's totally stupid.

so, i set an "absolute top" price, and said that for every $10,000 drop from that she could wrangle for me, i would pay her three times what her commission would have otherwise been. for example, I'm willing to pay $500K max, but if she could get it to $470K, rather than losing $900 of her commission, she would make an additional $1,800 on top of what her commission would have been had she gotten me the place for $500K.

she thought it was an excellent idea, but of course her blue-chip broker NEVER would have agreed to start rocking the "straight commission" (oh, plus a flat $250 for the privilege of using them) boat, so we shelved it for another time. but, might be an idea for the new paradigm? seller never knows, never has to deal with "tricky" math, seller's agent isn't hating you for trying to cut their income, in a way that is suspect to them, your property taxes and purchase price go as low as possible, etc.

[David Alexander Wright in love]

I give thanks for the opportunity to comfort children who cry. I did not curse them so I am not afraid to see the mirror of their tears as my reflection of times of sadness or sorrow. Children are our mirrors.

Don't invite children ever saw their own reflection in the mirror and cried about it before they know how to focus in love to fix the matter and find the courage that love brings.

I was hoping to take a walk to LA... then I discovered Kate and flipped the time line around based on it's already being warpped... a little adjustment

kids ----- Angela look -------- daycare ----- Crystal --- Kate -

flips to
Kate in love --Crystal -kids- Angela - daycare
or something like that

The framework is so messed up that I am just trying to hold together the premise of a repeating time frame with hypermath and some huge bracers of tolerance and forgiveness for retardi's

Perhaps I can fix it in the next big loop...

The walk to LA seems to be offset by true love and trying to communicate in person with one true love.

If true lvve come's through than the time line fix will work... other than that it is the kids and daycare and angela that are next to examine...

I try in love again...

What to do to learn to live in LA... I ponder and I prepare the best that I can humbly.