[headline h=”1″]Flat-Fee Details[/headline]
Whenever making an offer keep in mind the seller, in consultation with their agent, always lists their property at a price that takes the commission into account. If they want to net $300,000 from the sale of a property, the commission will be padded into the asking price.
Let’s say you buy a house for $300,000. Despite the seller padding the price to cover the commission by first listing it at $350,000 to also provide negotiating room, and still kept it padded when the price was dropped to $330,000 for a lack of offers, your final $300,000 offer stuck just the same. Most important to the seller at this point is the house got sold! Per the listing agreement, the seller owes all agencies involved in its sale $24,000 payable at the time of closing drawn from the buyer’s funds. For bringing the buyer, my portion of the seller’s commission is $12,000.
I charge a flat fee of only $5,000 for any sale under $500,000 USD and the difference from the commission received from the seller is returned to the buyer. In this example, the $7,000 difference between the commission received and my fee is rebated back to the buyer in the form of closing cost credits and/or other purchasing expenses. The buyer actually receives back some of their hard-earned money that they originally put on the table. No one else offers this.
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[callout]Flat Fee compensation provides a savings in the thousands of dollars for the buyer. This chart highlights a $7,000 rebate on a $300,000 purchase, along with other savings examples.[/callout]
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Purchases of $500,000 or above are charged a flat 1% commission of the sales price with the balance contractually due from the seller rebated back to the buyer as described above.
The money saved is real. So why would I charge a flat fee in the first place and offer you back $7,000 on a $300,000 purchase? For your business, frankly; I’d rather have plenty of business than only periodic sales.
I ensure exemplary professional services through the buyer’s representation agreement between us regardless of the price tag of the property being purchased as the amount and quality of that service is more or less the same. I get paid for providing quality service, period. While the seller and his agent are enticed to have you pay more, I’m not. Whether the condo or house you want costs $200,000 or $400,000 my work is essentially the same and so I see no reason to be paid differently.
The more expensive a property sells the greater the savings and that’s just as well. Closing costs are the expense of the buyer in Mexican real estate practices and those costs increase with the price of the property being purchased. The “price of the operation,” in notary parlance, reflect notary, bank and governmental fees associated with the sale.
Another advantage of charging a set flat fee regardless of a property’s price tag is it keeps me focused on getting the right property at the best deal for my clients. A flat fee system keeps a buyer’s agent honest and ensures the buyer gets complete information from which to base an offer.
The savings will vary from property to property including those of equal value. It will depend on the commission rate offered to the buyer’s agency. In the MLS system, where the majority of sales originate, the default commission offered is 4%. Non-MLS properties may offer only 3% whereas others may be as high as 6%. Each property would have its own agreement, exclusive or not, written or not, from which the seller agrees to pay a commission; however, the actual commission offered to the buyer’s agent gets written into the sales contract.
I’ve been asked how I can afford to only charge $5,000 and not be required to take the full commission offered by the seller, as all other agencies seemingly need to. It’s a good question. I work mostly alone with savvy buyers met mostly via the Internet and do not have a large operation. My buyers are indeed buyers and while they may not be ready to buy immediately, neither are they lookie loos. And not only are they buyers but they appreciate saving real money in the process without ever giving up quality of service. I deliver and I’m confident the rewards for my efforts will be made up quite sufficiently through increased sales rather than relying upon periodic commissions.
As with other professionals, I do request a retainer fee but not until after a signed buyer’s agreement exists between us. Further details are included on the Buyer’s Agency agreement page.
Next: Buyer’s Agency Agreement
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[headline h=”3″]Introducing the flat-fee business model to Puerto Vallarta Real Estate[/headline]
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1. Introduction
2. Understanding the Commission-based system
3. Fiduciary Responsibility & Due Diligence
4. Flat-Fee Details
5. Buyer’s Agency Agreement
6. Flat-Fee FAQ
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