Commission Discounts or Buyer Rebates

Real Estate Agent with

This is the second of three posts I'm writing today inspired by Brian Larson

In his post Brian suggested that a buyer's agent brings three very valuable skills to a transaction,  Location advice, negotiation advice and closing facilitation. In my most recent post I suggested that a listing agent offers marketing advice, negotiation advice and closing facilitation to sellers

My question is this:  If a buyer or seller does not need everything that we offer than should we be willing to cut our commission to reflect that fact

For example, my buyer has identified the neighborhood he wants, and a list of three well priced homes to see, and he has a pre-approval from a local lender and a copy of his bank statement showing enough cash for the down payment  and closing costs.  He agrees to make a full price offer on one of them, if I pay half my commission toward his closing costs......Lets see....he doesn't need my location advice, or my negotiating skill, all he needs is access to the property and closing facilitation.  Why not give him the rebate?

 In my next post Im going to examine the risk vs reward ratio and why our fees seem so high to  buyers and sellers  and then suggest ways to limit one while increasing the other

Comments (8)

Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

You could always open up your own discount brokerage and do whatever you like.  Otherwise, you'd better check with your PB, who will probably not be impressed with your way of thinking, unless he/she is starving to death.

Some transactions are inded less work than others, but why sell yourself short?  Have you not spent countless hours educating yourself and earning your designations, and learning the market?  Do you not see any value to your service?  How was it that the buyer found you in the first place?  You were trained and prepared to do your job weren't you?  What about those buyer clients you spend a lot of time and money on, and get nothing in return?  Don't you think it all averages out?  If you discount your commission on the "easy" ones, does that mean you need to increase your commission on the "difficult" ones?

It would also depend on who the buyer is.... a first time buyer, or a flipper investor?   That would also be a factor to consider.

Nov 23, 2007 07:20 AM
1SG (Ret.) David Kucic
Hawaii Military Realty, Inc. - Ewa Beach, HI
President and Owner
Ron-I have a "Buyers Incentive Program" that I advertise on my website.  It is sort of like what you are talking about.  What I do is give up to 1% of my commission (based on cooperating brokers commission) back to my buyers IF they enroll in my website to search for their property (I have an IDX link). They must narrow down their search to 5 or less properties.  If they end up closing on one of those 5 then they get up to 1% back.  My philosophy is like yours:  If I didnt spend time, money and resources other than having them look on my website, then they should get compensated for their effort.  To me, its not all about how much I can make off of each clients.  Its more about referrals, providing service different than what others are providing and doing it in a professional way that they expect from a realtor.  With over 80% of home buyers starting their search on the internet, doesn't it just make sense?  Aloha!
Dec 02, 2007 11:08 AM
Ron Parise - Cape Coral, FL


I know I work under the authority of my broker, but she dosent control my thinking only my actions as an agent.  By the way she introduced the concept to me.  when we introduce a buyer to a home builder, we can rebate one third of the commission to the client.
Re  training:no I dont think Ive invested  countless hours, Its was 63 to get the license, and another couple continuing education, but thats the subjejt of a bolg yet to be written. The barriers to entry are nearly non existant...the bar is set way too low.
Its not a question of easy vs hard...Its a question of what part of what I offer does the customer need? I simply posed a question...Thanks for answering

David...I agree Customers come to us much better prepared than they were before the internet...If they do the work, dont they deserve a piece of the action

Dec 02, 2007 11:40 AM
Mike Klijanowicz
Cummings & Co. Realtors - Perry Hall, MD
Associate Broker @ Cummings & Co. Realtors

WOW, I can't believe what I read this morning.  If you keep giving away your money you will find yourself out of business soon!  Sure you will have clients, but REMEMBER you will be doing the same amount of work as me and getting paid for half of it? 



Dec 25, 2007 02:05 AM
Ron Parise - Cape Coral, FL


There no reason to hollar...I merely posed a question

But consider this...IM NOT GIVING AWAY ANY OF MY MONEY. Its not mine until after a settlement All the money belongs to the buyer (and his bank) until then.  I may have worked a little or worked a lot to get there but until settlement I havent earned a dime. and untill then all commissions are negotiable.

Im still back to my question...Given that I offer three things to a buyer Location advice, negotiation advice and closing facilitation and given that at least some of what we get paid is compensation for the risk we take; what if a particular buyer  does not need all three things we bring to the table or if a particular buyer is able to remove the risk we take....., dosent it make sense that he might feel justified in asking for a rebate of some of what I might be paid? I think the answer is yes (and by the way I will always think that some commission is better than no commission)

Since I wrote this I have begun to think in a slightly different direction. Im now thinking of offering my customers the choice of paying me a non refundable fee, up front,  for my services, Call it a consulting fee instead of the traditional commission arrangement. In other words the only way a client can negotiate a lower commission is to pay me up front

Dec 25, 2007 03:00 AM
Stephen Graham
Inactive - Atlanta, GA

Ron - your logic makes perfect sense; a buyer's rebate has its place.

There are many cases where a rebate isn't warranted, especially if the buyer requires a lot of shopping time on an agent's clock.

Oct 22, 2008 09:10 AM ~ Dallas Real Estate Agent Top Team
Dallas Houses for Rent Dallas Apartment Rentals - Dallas, TX

We offer flat fee listing and buyers rebate if a client request or need secure business. 

Feb 03, 2009 12:58 PM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Ron:  If you want to agree to that with your buyer... assuming that you will have much less work to do in his case... I see nothing wrong with it.  It can be done two ways.  One... with a letter from you to the lender saying that you will be crediting so many dollars towards the buyer's closing costs.  It depends on what the financing is as to whether or not the lender will agree to it.  But... secondly... once you are closed and funded... you are free to do whatever you want to with your commission.  Again... I do not know the laws in your state... so check them out... BUT... once you are closed and funded... a commission rebate... as per your buyer's rep agreement with the buyer... should not be a problem.

As for your second idea... the one you explained in comment # 5... I don't like that one as much.  And... how many buyers are even able to pay you an upfront fee ?

Sep 12, 2009 02:57 PM