Agent Commission Rebate

irvinehomeowner said:
Whoah... 100% cut... how does your broker stay in business? You would think he would get a small slice of that cheese.
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Easy...not a lot of hand holding and service plus he collects $50/month to hang a license from each agent and he gets a $495 transaction per escrow per side ($990 if you are a dual agent).  He has licenses in 4 states including California and Nevada so the nice thing for me is that I can hang both my licenses with him for the same price (2 for 1 special, I guess).  I'll go on the record and say that the big national brokerage chains are a complete waste and never provide the services to justify the cut that they take.  Any agent trying to tell you that going with an agent from one of their large brokerages is better than going with an agent from a small broker or individual broker is only fooling themselves.  I used to audit Prudential Real Estate Affiliates in my Big 6 (4 now) CPA days so I know all too well how much money the Franchisor makes.  I guess the only good thing about those large brokerage chains is that it is a good place for newbie realtors as they get the mentoring and hand holding that they need.  My broker does collect a 20% cut on my commercial transactions since he hires a lawyer to review all the documents as there is a lot more risk to him getting sued on commercial transactions versus residential transactions.
 
Well... another benefit of a big chain broker is the advertising, name recognition and resources at your disposal when you are listing a home.

Real estate as a whole has quite a bit of stigma behind it... so it is important you work with someone you can trust.

That being said, if I ever were to get into real estate (I've thought about it... twice)... I would probably go the more independent route since it wouldn't be my full-time gig (plus I'm also not a very good salesperson).
 
irvinehomeowner said:
Well... another benefit of a big chain broker is the advertising, name recognition and resources at your disposal when you are listing a home.

Real estate as a whole has quite a bit of stigma behind it... so it is important you work with someone you can trust.

That being said, if I ever were to get into real estate (I've thought about it... twice)... I would probably go the more independent route since it wouldn't be my full-time gig (plus I'm also not a very good salesperson).
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Come on IHO, don't tell me you are buying into the propaganda that they try to spoon feed you via their commercials.  So what if a big brokerage advertises and has a brand name recognition.  It's advertising and promoting the brokerage and not the agents.  All those large national brokerage chains are nothing more than middlemen create a sucking sound.  They should collect no more than 10-20% of the commission in my opinion (if you were to see the margins that the owners of these large brokerage chains made and the amount the Franchisor made your head would spin).  It may only be marginally easier to get new clients if you have a big brokerage name behind because of brand name recognition, but I will argue that service and networking are build a book of business and makes an agent successful.  There are no additional resources that a big national brokerage chain (other than throwing up the listing on their website) provide to a listing agent that aren't available to an agent at a small broker.  Instead of handing over may commission to a broker, I rather give it back to my buyer so they can benefit from it and as a thanks for their business.

Don't sell yourself short IHO, I think you would make a good agent.  You have a good head on your shoulders, keep a close eye on the market, and would probably do great representing all those FCBs looking to buy in Irvine.  haha
 
Trust me... if I could speak FCB language... I would make the attempt.

But I can't just say "8" and "Good Feng Shui" all day.

I'm not saying big chains are better or worse... just saying that sometimes it does count to *other* people. I'm sort of a no-brand name guy but I do prefer Nike shoes over all others.
 
Trojanman,

Do you see any benefits to working with a branded brokerage, or do you find me a complete fool to hang my license with Coldwell Banker?
 
IrvineRealtor said:
Trojanman,

Do you see any benefits to working with a branded brokerage, or do you find me a complete fool to hang my license with Coldwell Banker?
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My problem isn't with the agents deciding to work at these large brokerage chains, it's with the how much the large brokerages take from you guys.  I understand that they provide agents a nice office, transaction coordinators, and a big recognized name behind them but you definitely aren't getting back what you pay them in terms of the commission splits.  The choice to work at a large brokerage versus a small one or even being your own broker is a personal one.  I personally see very little value in working under a large brokerage where you may have a higher perceived value of doing so.  Also, I'm sure there are some clients out there that prefer working with an agent from a large brokerage chain like IHO mentioned because of brand name recognition and it gives them that warm toasty feeling inside.  Like I said, I've audited Prudential Real Estate Affiliates (the Franchisor) and Prudential California Realty (large brokerage chain of Pru) for several years and saw for myself first hand how high their operating profits were so maybe that has made me a bit biased.  I will say, that if I didn't know my way around real estate I would definitely not have started out working for my broker and opted to go to a large brokerage where I could have gotten hands-on mentoring and training.
 
I'll try asking a different way...

Why do you think I hang my license with Coldwell, who takes their 20% + 6% franchise fee, when I could hang my license with a family member who holds a broker's license (and allows me to keep/rebate/donate/do whatever I wish with 100%)?
 
IrvineRealtor said:
I'll try asking a different way...

Why do you think I hang my license with Coldwell, who takes their 20% + 6% franchise fee, when I could hang my license with a family member who holds a broker's license (and allows me to keep/rebate/donate/do whatever I wish with 100%)?
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I can only speculate, but I would assume that you believe that you receive more in benefits/value than the amount that you have to give up in commission splits and fees.  If I'm wrong let me know.  I'm sure many of us are curious why you have chosen to work under a larger brokerage chain and why Coldwell instead of ReMax, Pru, or some other large brokerage chain.
 
Larger companies are a dual edge sword. On the one hand many consumers do find comfort using a big name company like Starbucks, while fewer seek out the smaller retailers like "The Lost Bean"  in Tustin for example. Both offer the same product, but the side benefits sometimes draw more people to larger companies than smaller ones. The negatives are that larger brokerages tend to frown on commission rebates and other available sales tools smaller companies can offer. Don't know about CWB, but Re/Max AKA Altera is pretty ferocious about keeping the 6% mantra going within their ranks.

There isn't a better business model out there between company models. The essential transaction is a simple sale, based on trust and ability more than rebates. Thank important currency does not reside in the sign on the door, but the person you work with.

My .02c

Soylent Green Is People. 
 
sgip said:
Larger companies are a dual edge sword. On the one hand many consumers do find comfort using a big name company like Starbucks, while fewer seek out the smaller retailers like "The Lost Bean"  in Tustin for example. Both offer the same product, but the side benefits sometimes draw more people to larger companies than smaller ones. The negatives are that larger brokerages tend to frown on commission rebates and other available sales tools smaller companies can offer. Don't know about CWB, but Re/Max AKA Altera is pretty ferocious about keeping the 6% mantra going within their ranks.

There isn't a better business model out there between company models. The essential transaction is a simple sale, based on trust and ability more than rebates. Thank important currency does not reside in the sign on the door, but the person you work with.

My .02c

Soylent Green Is People. 
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Very valid points.  I would contend that it is the large brokerage chains that the ones that want to keep the status quo in terms of how real estate sales are done even though the landscape has changed significantly with the advent of the internet and websites like redfin, zillow, etc.  No longer are agents the holders of the key to the blackbox. 
 
I would have to assume there HAS to be other benefits to working with the big chains because even the most experienced agents who already have a network, a referral base and even an area they "specialize" in stay with them.

If it were as wasteful you say, wouldn't "established" names break away from their broker and form their own to give themselves a better bottom line? I think the bigger brokers favor being a listing agent, whereas a buyer's agent can probably be more independent.

Again, recognizable name does count for many people. Sometimes new buyers/sellers are more comfortable walking into a nice big office and seeing all the bells and whistles. It's oftentimes easier to sell a Dell notebook than a Prostar one.
 
I too am curious about what keeps IR2 at Coldwell. 

IR2 seems to me the top of the heap and most able to strike out on his own successfully.

I also tend to think that IHO has something, it is easier to be independent as a buyers, as opposed to listing, agent.

This is a great thread, thank you all for sharing.
 
Last chance, and one last hint (in relatable terms):

Is it better to be King Leonidas and his band of 300 Spartans, or Xerxes and his massive Persian army?
(there is a right answer)

-IR2

 
I could understand how some people may lean towards using an agent from a large broker but my experience with the sale of our home in LA and my parents experience is that it comes down to the agent.  The agent that we had used to sell our home worked at Remax and one on of the top listing agents in our neighborhood.  To our surprised, he wasn't as responsive as we liked, very hard to get a hold of, and passed us off on his assistants a lot.  :mad:  Sure the big name and nice office of the broker looked great but the lack of hands on service nullified all of that for us.  My parents had a very similar experience with a Coldwell agent when they sold their home in Orange County.

Even though usc works for a small broker that in no way gave us pause to consider using his services.  We found him to be great with his service and was very knowledgable about the market and best of all found us our dream home out of nowhere.  So it really does come down to the agent and not the broker the agent works for.  You can bet that when the time comes to sell our home usc will be the first person we call.  He started out being our agent and now we consider him one of our friends.
 
It's best to be both.

As I've alluded to before, Mrs. Deuce carries a separate broker's license and clients that want a "rebate-style" working relationship can run their transaction through her license (unless the client is from a CB source, obviously).  This is a true 100% split, with no per-transaction fees to be paid to anyone else, so she can keep/rebate/donate any way she sees fit, and that is set up in the agreement.  With her license we can be faster, more skilled, and more flexible than the large brokerages might allow.  For instance, if/when IPO decides the time is right to buy a home, he won't be paying a dime for RE services. He doesn't know this yet, and has never asked, but the amount of business that I've generated off of his referrals has more than paid his toll.

I hang my license with CB for several reasons. 
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[*]- The branding and advertising are obvious and we couldn't compete with their spending to promote listings ahead of other properties; they spend $1M/week and if I tried, I'd run out quickly. :-(
- The big brokerages are also the 800lb gorilla if/when a transaction goes wrong.  They've got a heavy legal team and more deep pockets to protect the client for when things go pear-shaped.
- Clients also benefit from a connection to the rest of the community of professionals that are out there, by getting advance info on properties that will be coming to market, but aren't ready for open advertising, yet.  I wouldn't get that acting as a "lone wolf" and I certainly wouldn't get that calling names and throwing around disparaging remarks haphazardly.
- I wouldn't discount the training, that is provided, either. For example; this year there was a revision to the residential purchase contract and there were 4 material changes made.  Not knowing those changes could be costly to a client.  Better service requires being better educated.
- And always remember that the agents are independent contractors and generally can set their own terms, if they are set up in advance. Although there is speculation above to the contrary, I know factually that many of the big broker agents will vary from the 6%, as I compete with them daily.
- CB also provides relocation connections and other "lead-generation" tools that trojanman mentioned that offset the fees I pay to the brokerage.  If I sell an extra 4 homes per year (that I would not have otherwise been connected with) it likely pays for itself, beyond the other benefits.
[*]
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As Blueberry mentioned above, the Spartans got the glory and even though they lost in the end, he wanted to be Leonidas. 
Other clients just want to win and choose to be the "irresistable force" of Xerxes.
As a service professional, my job is really very simple: to ask what the partner wants to do, and get it done to the best of my ability.  With my unique position, I'm just fortunate to have more tools at my disposal than most.

My goal is to treat people right, like trojanman has with iceman, obviously.  Referrals keep the bills paid.

-IR2
 
There's still some question on the agent rebate.  This is a quote from escrow officer:

"Please be aware, I requested the lender to tell me if you are not allowed to receive broker credit.  They have not instructed me to clear your credits.  If at funding, underwriting does not allow all of your credits, you may have to bring in additional funds."

So right now, I have paid all funds to close assuming the credit goes through.  But I'm nervous that if the lender says not to allow the credit, that my close could be delayed.

What were to happen if I actually just put more funds to close into the escrow account? 

For example, my credit was for 10,000.  Before closing, I decide to add another 10,000 into escrow account. 

Option 1.
The lender decides to use the agent credit.  Do I get the 10,000 paid back to me?

Option 2.
Lender refuses agent credit.  The 10,000 is now used for closing.  But I don't get a delay.

It seems to me like as an insurance, I should just deposit an additional 10,000 into escrow to ensure there are no delays?

 
annabanana said:
There's still some question on the agent rebate.  This is a quote from escrow officer:

"Please be aware, I requested the lender to tell me if you are not allowed to receive broker credit.  They have not instructed me to clear your credits.  If at funding, underwriting does not allow all of your credits, you may have to bring in additional funds."

So right now, I have paid all funds to close assuming the credit goes through.  But I'm nervous that if the lender says not to allow the credit, that my close could be delayed.

What were to happen if I actually just put more funds to close into the escrow account? 

For example, my credit was for 10,000.  Before closing, I decide to add another 10,000 into escrow account. 

Option 1.
The lender decides to use the agent credit.  Do I get the 10,000 paid back to me? Yes.

Option 2.
Lender refuses agent credit.  The 10,000 is now used for closing.  But I don't get a delay.

It seems to me like as an insurance, I should just deposit an additional 10,000 into escrow to ensure there are no delays? No. If lender won't accept the credit you will be given plenty of notice (from escrow) with the precise additional amount you'll need to close.  It would be time (and money) better spent to stay in contact with your lender.

-IR2
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annabanana said:
There's still some question on the agent rebate.  This is a quote from escrow officer:

"Please be aware, I requested the lender to tell me if you are not allowed to receive broker credit.  They have not instructed me to clear your credits.  If at funding, underwriting does not allow all of your credits, you may have to bring in additional funds."

So right now, I have paid all funds to close assuming the credit goes through.  But I'm nervous that if the lender says not to allow the credit, that my close could be delayed.

What were to happen if I actually just put more funds to close into the escrow account? 

For example, my credit was for 10,000.  Before closing, I decide to add another 10,000 into escrow account. 

Option 1.
The lender decides to use the agent credit.  Do I get the 10,000 paid back to me?

Option 2.
Lender refuses agent credit.  The 10,000 is now used for closing.  But I don't get a delay.

It seems to me like as an insurance, I should just deposit an additional 10,000 into escrow to ensure there are no delays?
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Some lenders will not allow a buyer's agent to credit a part of their commission for their buyer's closing costs (recurring and non-recurring).  I know that SunTrust doesn't allow the credit and Bank of America didn't allow it for most of 2009 but they do now (might be an underwriter call).  In the case where the lender did not allow me to provide the credit to my buyers, I worked with the listing agent by having the seller give the credit to my buyers while they reduced the buyer's agent commission by the same amount (yes, those listing agents did give me a little grief about it but I just told them that the buyers were my close friends). 

As for your questions...

Option 1. - You would get the $10,000 back so long as you were not getting any part of your required down payment back.  Remember that the credit can only be used for recurring (property taxes, insurance, HOA fees, etc) and non-recurring (lender costs, title/escrow, recording, etc) but not for your down payment or your pre-paid interest.

Option 2. - The underwriter will inform your lending officer whether the credit will or will not be allowed before the loan documents are generated upon giving you your loan commitment (full loan approval).  That'll be about 3-5 days before you close.

As for depositing the $10,000 into escrow as insurance....there's no need to do that.  Most buyers deposit/wire their funds into escrow the day they sign the loan documents.  If the lender doesn't OK the credit, then you'll just deposit whatever the escrow company requires via the estimated HUD-1 closing statement.

Btw, the following lenders allow the buyer's agent credit to buyers:

Wells Fargo, Provident, Bank of America, MetLife, GMAC, and Lending Tree.
 
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