Realtor Commission Adjusted "Market Value"

I believe in order to sell a home, the selling agent should be compensated their full amount!  We all know how the system works and if an agent sees that they're not getting a full commission, they don't add that home to the list, it's sad to say, but it's true.  I show whatever home that fits my clients criteria no matter what the commission is.  It's hard enough out there and as Realtors we need to make sure that both sides get paid and paid fairly.  We have to educate our sellers and buyers on the process.

Glenn do you ever feel as if you are pushing a boulder uphill and you'll never reach the top?  I just finished a listing appointment where I talked to the prospective sellers about a fee for service model.  You could see the wheels spinning but the gears got stuck.  The biggest issue on the buyer's side seems to be how to return the the excess funds provided under the current commission model and not be stuck with a tax issue (as the agent) or a lender issue (as the buyer.)  Still working on it.

Glen the tax question comes into play with what most of have been told, right or wrong, along the way.  If the over-payment appears on the HUD and is deducted from the available commission prior to the remainder being distrubted to me then my tax consequences is only on the amount of the check I receive from the title company.  There is no tax consequence to the buyer.  However if the over-payment comes to me and then I process it to the buyer I will have the tax consequence on the full amount of the commission.  The buyer may or may not have a tax consequence.  What is your take on that scenario?

Reblogged with my take as follows:

When Buyer's Agents first hit the market this was a common question, especially from Sellers who often stated: "The Buyer's Agent is working for the Buyer and not me! Why should I pay for the Buyer to get an assistant?"

I've had FSBOs come in and say I was asking $100,000 and now I want to list it, but I want to increase the sales price to $110,000 to cover your fees. Really? You couldn't sell it at $100,000 and you want to increase the price by 10%?

This is how I see it: The Seller pays the fee because a mortgage company will not loan the commission to a Buyer. Everyone knows how it works, unless the Buyer wants to bring another X% to the closing table it will remain this way. The fight over who is actually paying the fee is really a moot point, IMHO.

Knowing what the fair market value is and wanting to go lower than that, to me has nothing to do with whether the realtor is in the picture of not. But I can assure you that's what the buyer will be thinking.

Let a blind man lead another into the transaction. It'd be a good movie to watch.

Glenn if a lender only allows x% of closing cost assistance to the buyer and I negotiate with the seller to pay that amount then there is an excess that the lender will not allow on the HUD.  Then we get into the issue of taxable consequences for me and possibly for the buyer.  This is where we start to have issues.  Perhaps this isn't a common issue throughout the country but currently in my area it isn't uncommon to be able to get 3% closing cost assistance from the seller. 

The Buyers Agent is free to negotiate the amount they will be paid by the Buyer in the addition to what the Seller offers.  It's up to the Buyer if they want to pay them extra.