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A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!

Member Summary
Most Recent Posts
IANAL. In NJ the procuring cause states that you have to show and follow up with the buyer to be eligible for the commis... (more)

gruntwork (Mar. 18, 2013 @ 9:25a) |

Like grautwork already mentioned, you have a case. Do you have text and/or email proving the client went to the open hou... (more)

TYH3 (Mar. 18, 2013 @ 10:26a) |

Yes, I have emails sent to my client. I also emailed him the "Residential Purchase Agreement" ready for submit until th... (more)

alan6815 (Mar. 19, 2013 @ 11:48a) |

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beyond827 said:   A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!


1) There is no norm for commission (for new constructions or otherwise). All commissions are negotiable.
2) The agent only pay tax on what she actually brings home.
3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed.

I got 60% back on commission for a 550k home. Your commission kickback probably will depend on the sales price of your house as the agent isn't doing much more work for a 500k home than a 200k home.

We knew the realtor personally; generally believe we could have gotten 50% back if we just hunted for an arbitrary agent who wanted to arrange something without much trouble.

If she didn't sign any paperwork and the house she's thinking about is one the agent didn't show her, seems like you're in the clear. However if the agent brought you there (like TYH3 says) you might have a trouble. We ended up going through the model of the house we ended up buying without an agent ourselves the first time and technically the Lennar agent who babysat the home would have technically gotten the commission and we'd be unable to use an agent; however, that seemed very much like a non-enforced rule (we used an agent in the end). (This may have just been "Lennar" policy, or maybe it's just normally how things go (we bought a Lennar house and were happy, I don't mean to disparage them)

I did the same for my parents (was their buyers agent for a new home transaction, rebated the entire commission).

The builder my folks purchased from had a large sign at the entrance to the sales office that said something to the effect of "If you have a real estate agent, that agent must be present and register with you on your first visit here."

Not sure if that was just a scare tactic to prevent this type of situation (buyer finds community on their own and gets a rebating agent later), or if they really would not pay a commission to an agent added after the first viewing (and if so, is there a time expiriation - i.e. come back 12 months later with an agent and purchase).

Just a heads up.

Edited to add: I just read skagen's reponse (must have submitted it while I was crafting my post). Looks like Lennar was flexible on that policy, but it seems to be a common policy (at least with 2 major builders).

I'm not sure if skagen had typos there or what - but you should not expect a commission to be anywhere near 50 or 60% - that is absolutely ridiculous (not claiming he is telling untruths - but something far far far from the standard).

Typical commission rates are usually 3-6% - but they are negotiable. I believe that 6% was once considered the standard, but owners try to negotiate. Some agents will sometimes be willing to take a lower commission if the seller lowers the selling price to meet the buyers offer - as they just want to move a property.

skagen said:   I got 60% back on commission for a 550k home. Your commission kickback probably will depend on the sales price of your house as the agent isn't doing much more work for a 500k home than a 200k home.

We knew the realtor personally; generally believe we could have gotten 50% back if we just hunted for an arbitrary agent who wanted to arrange something without much trouble.

If she didn't sign any paperwork and the house she's thinking about is one the agent didn't show her, seems like you're in the clear. However if the agent brought you there (like TYH3 says) you might have a trouble. We ended up going through the model of the house we ended up buying without an agent ourselves the first time and technically the Lennar agent who babysat the home would have technically gotten the commission and we'd be unable to use an agent; however, that seemed very much like a non-enforced rule (we used an agent in the end). (This may have just been "Lennar" policy, or maybe it's just normally how things go (we bought a Lennar house and were happy, I don't mean to disparage them)

BenH said:   I'm not sure if skagen had typos there or what - but you should not expect a commission to be anywhere near 50 or 60% - that is absolutely ridiculous (not claiming he is telling untruths - but something far far far from the standard).

Typical commission rates are usually 3-6% - but they are negotiable. I believe that 6% was once considered the standard, but owners try to negotiate. Some agents will sometimes be willing to take a lower commission if the seller lowers the selling price to meet the buyers offer - as they just want to move a property.

skagen said:   I got 60% back on commission for a 550k home. Your commission kickback probably will depend on the sales price of your house as the agent isn't doing much more work for a 500k home than a 200k home.

We knew the realtor personally; generally believe we could have gotten 50% back if we just hunted for an arbitrary agent who wanted to arrange something without much trouble.

If she didn't sign any paperwork and the house she's thinking about is one the agent didn't show her, seems like you're in the clear. However if the agent brought you there (like TYH3 says) you might have a trouble. We ended up going through the model of the house we ended up buying without an agent ourselves the first time and technically the Lennar agent who babysat the home would have technically gotten the commission and we'd be unable to use an agent; however, that seemed very much like a non-enforced rule (we used an agent in the end). (This may have just been "Lennar" policy, or maybe it's just normally how things go (we bought a Lennar house and were happy, I don't mean to disparage them)


I think he meant 60% OF the commission.. So 60% OF 3-6%

Thanks for all the responses! The relative learned about the new construction through a friend, not her (ex)agent, so I guess she's in the clear. She was hoping for 75+% since she did/is going to do all the work, but it seems 50-60% is more reasonable.

Before posting it here, I spent an hour searching for this information online with no satisfactory results. This is why I love FWF!!

tchen811 said:   
I think he meant 60% OF the commission.. So 60% OF 3-6%


Ah - yes - that makes much more sense. Multi-tasking affected some of my reading comprehension skills there

beyond827 said:   Thanks for all the responses! The relative learned about the new construction through a friend, not her (ex)agent, so I guess she's in the clear. She was hoping for 75+% since she did/is going to do all the work, but it seems 50-60% is more reasonable.

Before posting it here, I spent an hour searching for this information online with no satisfactory results. This is why I love FWF!!


75% is pretty aggressive. Your best shot for the highest rebate is with an independent broker.

Anyone with a big name agency will owe a cut to the franchisor (Century 21, etc). An agent (not broker) will also owe a cut to the broker. An independent broker will only have his/her overhead (while many costs are fixed expenses, many brokers/agents pay E&O insurance on a per-deal basis, so that would be an additional expense they would incur).

Has she signed the contract yet, this could be a negotiating point... no need to involve an agent... just ask for $$ off

I believe standard total commission is 5-6% which is split in all sorts of ways... so 2-3% commission to buyers agent - then split further - so 1-1.5% rebate should be achievable
but builder may discount 2% to avoid paying 3% to a buyers agent... be prepared to walk

I did 50% a few times..both new and resale. Usually it has to be disclosed in paperwork and check is cut by agency after closing. I'm not aware of a line item adjustment on the hud1 if you relative/ friend was hoping for credit at closing.. Wouldn't jeopardize anything by discussing with builder in advanced and I'd have a signed agreement prior to registering at builder with your agent.

Side note, several states ban the practice of rebates on realtor commissions :

Justice dept referenc

Which states currently ban rebates and/or inducements?

Ten states currently have laws that ban rebates. Nine states have a full ban on broker rebates: Alabama, Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee. In addition, Iowa prohibits rebates when the consumers use the services of two or more real estate brokers during a transaction.

I just signed a new seller contract for my home that's on the market.. Got 5.5% commission, or 4.5% if listing broker sells the house. Normal in my area was 7% until the housing bust, now its 6% listing.

My builder wouldn't offer a 3% discount so I retained a buyer's agent through www.hungryagents.com

Just used them on new construction. They ask for a brief description of what you're looking for and agents bid with the percentage of rebate they're willing to offer.

Edit: Got 35% back

Update: the relative asked a few agents and was quoted 30%, 50%, and 65%. She of course went with the 65%

This is in CA so totally legal. Builder also wouldn't offer any discount even if no agent is involved.

robby69 said:   I just signed a new seller contract for my home that's on the market.. Got 5.5% commission, or 4.5% if listing broker sells the house. Normal in my area was 7% until the housing bust, now its 6% listing.

Did your contract specify the percentage to the buyer's agent?
If it's under 3%, it may cost you showings from other agents.

Keep in mind that with new construction, it is exceedingly common for builders to offer higher commissions. So, it is not unusual to see new construction commissions offered to buyers' agents in the 5% range. This typically means that with new construction, you can typically negotiate a better rebate structure with your agent.

Further, there is an enormous difference between negotiating a rebate with an agent when you haven't yet found a house and doing so when the house has been identified and you just need the agent to effectively pass-through the commission. With the former, the agent would be expected to do a lot more work, spend a lot more time and faces more uncertain prospects of a payout. With the latter, the agent's involvement should be minimal, so it is common for experienced homebuyers to negotiate much higher commission rebates with the latter, or to just enter into fairly small fixed fee arrangements.

robby69 said:   I just signed a new seller contract for my home that's on the market.. Got 5.5% commission, or 4.5% if listing broker sells the house.Personally, I do not enter these types of contracts. When I list a house, I offer the aggreed upon commission to the listing agent and then separately offer the standard commission (or, depending on the circumstances, may offer a standard commission plus a bonus or even higher commission) to the buyer's agent.

In other words, a contract with the listing agent for 5.5% or 6% or whatever commission, where the listing agent then splits it with the buyer's agent, does not benefit the buyer, as you then run into issues if the buyer doesn't have an agent, which, with this contract, means that your listing agent is then entitled to the entire commission for both sides (agents will frequently argue that if the buyer doesn't have an agent, the listing agent has to do double the amount of work, so both sides of the commission are justified, which is not a view to which I subscribe). You completely eliminate these arguments by keeping the purchaser's agent's commission, if any, separate from the listing agent's commission.

civ2k1 said:   The builder my folks purchased from had a large sign at the entrance to the sales office that said something to the effect of "If you have a real estate agent, that agent must be present and register with you on your first visit here."

Not sure if that was just a scare tactic to prevent this type of situation (buyer finds community on their own and gets a rebating agent later), or if they really would not pay a commission to an agent added after the first viewing (and if so, is there a time expiriation - i.e. come back 12 months later with an agent and purchase).

Just a heads up.
Google "procuring cause" and you'll understand what's going on.

It is not uncommon for listing agents to take the position that if the purchaser was not represented by an agent at the initial showing, then the aforementioned listing agent is the procuring cause of the sale and will, therefore, only offer a small commission split to the purchaser's agent or refuse to pay it altogether. Many agents do it because they feel like they shouldn't have to do additional work, but I think that the vast majority of agents who engage in this behavior are doing it as a way to fight back discount brokerages, like Redfin.

Personally, when I hire an agent, I have a no tolerance policy for this type of behavior, as listing agents engaging in this disadvantage the buyer, since this behavior makes it less likely that well qualified buyers who are using discount brokerages will see the house. I also contractually eliminate these issues by structuring my listing contracts in the manner that I discussed above, whereby the listing agent is entitled to the same pre-negotiated commission regardless of whether the purchaser has an agent. I also discuss the fact that if my listing agent decides to play games by filtering inquiries from such buyers, taking too long to call them back, etc..., the agent will be immediately terminated for cause.

..

TYH3 said:   beyond827 said:   A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!


1) There is no norm for commission (for new constructions or otherwise). All commissions are negotiable.
2) The agent only pay tax on what she actually brings home.
3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed.




Hello TYH3,

Are you sure about your statement--
"3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed."

I had worked with my buyer for more than 6 months, I took him to one of the open house, and ready to put an offer. The listing agent ended up stole my buyer before I submitted the offer to him. Yes, it sounds ridiculous, sad but true. I lost my sell and the commission. My broker told me there is nothing I can do since I didn't sign a Buyer Broker Agreement. If what you saying is true, I want my commission!! Please reply to me at alan91788@yahoo.com for your kindest help, thanks.

alan6815 said:   TYH3 said:   beyond827 said:   A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!


1) There is no norm for commission (for new constructions or otherwise). All commissions are negotiable.
2) The agent only pay tax on what she actually brings home.
3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed.




Hello TYH3,

Are you sure about your statement--
"3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed."

I had worked with my buyer for more than 6 months, I took him to one of the open house, and ready to put an offer. The listing agent ended up stole my buyer before I submitted the offer to him. Yes, it sounds ridiculous, sad but true. I lost my sell and the commission. My broker told me there is nothing I can do since I didn't sign a Buyer Broker Agreement. If what you saying is true, I want my commission!! Please reply to me at alan91788@yahoo.com for your kindest help, thanks.


IANAL. In NJ the procuring cause states that you have to show and follow up with the buyer to be eligible for the commission. If you can prove that you can complain to the real estate commission or your local board of Realtors and then wait for the hearing.

alan6815 said:   TYH3 said:   beyond827 said:   A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!


1) There is no norm for commission (for new constructions or otherwise). All commissions are negotiable.
2) The agent only pay tax on what she actually brings home.
3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed.




Hello TYH3,

Are you sure about your statement--
"3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed."

I had worked with my buyer for more than 6 months, I took him to one of the open house, and ready to put an offer. The listing agent ended up stole my buyer before I submitted the offer to him. Yes, it sounds ridiculous, sad but true. I lost my sell and the commission. My broker told me there is nothing I can do since I didn't sign a Buyer Broker Agreement. If what you saying is true, I want my commission!! Please reply to me at alan91788@yahoo.com for your kindest help, thanks.


Like grautwork already mentioned, you have a case. Do you have text and/or email proving the client went to the open house with you and you follow up with them about an offer etc? If you do, you can take the evidences to your state's real estate board and file a procuring cause dispute.

TYH3 said:   alan6815 said:   TYH3 said:   beyond827 said:   A relative is purchasing a newly constructed house in CA, which she discovered by herself. The builder wouldn't lower the price even if she doesn't have an agent, so she's thinking about finding one who would offer her a rebate on the commission. Now her questions are

1) What percentage is the norm for a commission rebate on a new construction?
2) Does the agent have to pay taxes on the entire commission even if part of it is given to the buyer as a rebate? Or just the part the agent actually pockets?
3) She had an agent who took her out once. She didn't like the agent and didn't sign any paperwork with the agent. Is it OK to use a different one?

Please share your experience in this area. Thanks in advance!


1) There is no norm for commission (for new constructions or otherwise). All commissions are negotiable.
2) The agent only pay tax on what she actually brings home.
3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed.




Hello TYH3,

Are you sure about your statement--
"3) If the first agent showed your relative the house she ended up purchasing, that said agent could be entitled to commission even if there is no written agreement. The original agent started a chain of events that eventually let to the sale, and therefore could collect commission. If you mean can your relative just get a new agent and start looking at different properties, sure, why not, there is no exclusive representation agreement signed."

I had worked with my buyer for more than 6 months, I took him to one of the open house, and ready to put an offer. The listing agent ended up stole my buyer before I submitted the offer to him. Yes, it sounds ridiculous, sad but true. I lost my sell and the commission. My broker told me there is nothing I can do since I didn't sign a Buyer Broker Agreement. If what you saying is true, I want my commission!! Please reply to me at alan91788@yahoo.com for your kindest help, thanks.


Like grautwork already mentioned, you have a case. Do you have text and/or email proving the client went to the open house with you and you follow up with them about an offer etc? If you do, you can take the evidences to your state's real estate board and file a procuring cause dispute.



Yes, I have emails sent to my client. I also emailed him the "Residential Purchase Agreement" ready for submit until the listed agent flipped me over. I am in California, not sure our law is the same as NJ. I will file a compliant with the department as you suggested. Thanks!!



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