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Cashback from RE Agent

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  • Sep 19th, 2013 5:21 pm
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Sr. Member
Sep 16, 2009
693 posts
481 upvotes

Cashback from RE Agent

How much is a reasonable amount to ask from RE Agent? Buying a rental property in Ontario for 200 K
28 replies
Deal Fanatic
Jun 29, 2007
6041 posts
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Vancouver
Interesting question. I have done it once and I am thinking of doing it again. It depends on a number of factors.

1) Do you know the agent? Have you worked with him before?
2) How much work is he doing? Is he driving you around, selecting the property for you, doing a ton or research for you, have spent a lot of time on you already, is he getting you a really good deal, etc. Figure out how much his commission is and decide what is a fair commission based on $/hr of his time spent/expenses.

Some agents earn $10,000 just for doing 5 hrs of work, which I think is way too much.


oasis2002 wrote: How much is a reasonable amount to ask from RE Agent? Buying a rental property in Ontario for 200 K
Sr. Member
Sep 16, 2009
693 posts
481 upvotes
Speedy1 wrote: Interesting question. I have done it once and I am thinking of doing it again. It depends on a number of factors.

1) Do you know the agent? Have you worked with him before?
2) How much work is he doing? Is he driving you around, selecting the property for you, doing a ton or research for you, have spent a lot of time on you already, is he getting you a really good deal, etc. Figure out how much his commission is and decide what is a fair commission based on $/hr of his time spent/expenses.

Some agents earn $10,000 just for doing 5 hrs of work, which I think is way too much.

I guess I should rephrase the question. How much is he making? Ballpark.
Deal Guru
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Oct 24, 2012
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Montreal
oasis2002 wrote: I guess I should rephrase the question. How much is he making? Ballpark.
2.5% maximum, and that's gross (before expenses, kick backs to the agency, income taxes).

I can see people asking for a cash back when they're selling AND buying, but you're just buying, he's already getting half of what a normal client would do (selling & buying).

As for Speedy1's comment about making 10,000$ just for 5 hours of work, well that's the thing with peolpe working on commission. They can works 20 hours for random people that never end up buying or never back down on the price, thus never selling, then never renewing the contract. They get zip/nada on that work. It averages out with that 10,000$ for 5 hours of work.
Sr. Member
Sep 16, 2009
693 posts
481 upvotes
alkizmo wrote: 2.5% maximum, and that's gross (before expenses, kick backs to the agency, income taxes).

I can see people asking for a cash back when they're selling AND buying, but you're just buying, he's already getting half of what a normal client would do (selling & buying).

As for Speedy1's comment about making 10,000$ just for 5 hours of work, well that's the thing with peolpe working on commission. They can works 20 hours for random people that never end up buying or never back down on the price, thus never selling, then never renewing the contract. They get zip/nada on that work. It averages out with that 10,000$ for 5 hours of work.
Yeah lets not get into all that really. We all pay taxes, we all have expenses. RE Agents are not gifts of god to mankind that they wouldn't. Any commission any broker pays is built into the cost of the buyer and the seller. So i am paying the agents indirectly.

Anyhow,

I am just surprised its that low for a low $ transaction - if that's accurate. I would think that a % model works for bigger dollar amounts not a 200 K property and some flatter number for a smaller dollar figure.
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Nov 23, 2005
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oasis2002 wrote: Yeah lets not get into all that really. We all pay taxes, we all have expenses. RE Agents are not gifts of god to mankind that they wouldn't. Any commission any broker pays is built into the cost of the buyer and the seller. So i am paying the agents indirectly.

Anyhow,

I am just surprised its that low for a low $ transaction - if that's accurate. I would think that a % model works for bigger dollar amounts not a 200 K property and some flatter number for a smaller dollar figure.
As a buyer, you are not paying squat. Seller is. If you want to save your money, go into the transaction without an agent.
Deal Guru
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Oct 24, 2012
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Montreal
oasis2002 wrote: I am just surprised its that low for a low $ transaction - if that's accurate. I would think that a % model works for bigger dollar amounts not a 200 K property and some flatter number for a smaller dollar figure.
It's 5% for the seller to pay out to BOTH agents (buyer's agent and seller's agent), hence the 2.5%, they split 50/50

They don't have a floor price, you just get less agents interested in working to sell for you if the house is worth too little to make a good commission, then you end up with the cheaper agents.
Sr. Member
Sep 16, 2009
693 posts
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boyoflondon wrote: As a buyer, you are not paying squat. Seller is. If you want to save your money, go into the transaction without an agent.
You are always paying for it no matter which way you look at it. If the agents didn't exist, and you bought using an online system, pricing would come down by that 4%/5% and you would pay less.

In fact, mathematically it is always in every agents interest to get the price as high as possible because that increases the commissions for both the buyer and sellers agent. And as a buyer you as a result get a bigger mortgage. Don't fool yourself or someone else into believing you don't pay as a buyer.
Sr. Member
Sep 16, 2009
693 posts
481 upvotes
alkizmo wrote: It's 5% for the seller to pay out to BOTH agents (buyer's agent and seller's agent), hence the 2.5%, they split 50/50

They don't have a floor price, you just get less agents interested in working to sell for you if the house is worth too little to make a good commission, then you end up with the cheaper agents.
So at 200 K that would mean the agent gets around 3 K assuming he gets 1.5% of the 2.5% on 200K
Deal Guru
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Oct 24, 2012
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oasis2002 wrote: So at 200 K that would mean the agent gets around 3 K assuming he gets 1.5% of the 2.5% on 200K
No I mean he would get maximum 5k$ if he gets 2.5% out of the 5%.
Member
May 23, 2013
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oasis2002 wrote: In fact, mathematically it is always in every agents interest to get the price as high as possible because that increases the commissions for both the buyer and sellers agent.
I definitely don't agree with 'always'. In theory, sure, but in reality, not quite. The value of an agent's time comes into play, so if you think about it, they can actually under-price your property by $10K in order to make a quicker sale - they can save a ton of time and effort, and they're only out $250 (2.5%) whereas the difference is much, much bigger for you. I think there's a perception that interests between RE agent and client are always aligned because of % commission, but that's not the whole picture. Not saying that you can't trust any RE agent, but it's something to be aware of.

I'm from BC, we generally do the 7% on the first 100K, 3% on the remaining amount - not really a flat number for smaller figures, but not a flat percentage regardless of amount.
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Nov 2, 2012
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Hamilton
Where in Ontario?
Are you already tied to an agent? Have you signed paperwork?

If you are in the GTA, I would check out www.homes4less.ca

They will give you significant cashback without you having to ask.
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Nov 23, 2005
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alkizmo wrote: It's 5% for the seller to pay out to BOTH agents (buyer's agent and seller's agent), hence the 2.5%, they split 50/50
5% is VERY optimistic! 3-4% is more realistic. I sold my last house for 3.5%.
Deal Addict
Jun 29, 2009
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Toronto
boyoflondon wrote: As a buyer, you are not paying squat. Seller is. If you want to save your money, go into the transaction without an agent.
That sounds very much what an RE agent would like you to believe.

You do realize the seller gets the money from you to pay both RE agents? so technically it's your money being used to pay the agents commission (in fact the commission for the buyer agent is signed by you)
Deal Fanatic
Mar 24, 2008
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damnos wrote: That sounds very much what an RE agent would like you to believe.

You do realize the seller gets the money from you to pay both RE agents? so technically it's your money being used to pay the agents commission (in fact the commission for the buyer agent is signed by you)
True, but why hire a buying agent if you're more than capable of looking for a house yourself? In some cases, realtors don't add any value whatsoever.
Member
May 2, 2010
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boyoflondon wrote: 5% is VERY optimistic! 3-4% is more realistic. I sold my last house for 3.5%.
That means the selling agent took a hit. Commission is basically always 2.5% for the buyer's agent and then the seller's agent agrees to reduce their fee, often because you bought a house with them where they easily made their 2.5%.
Deal Addict
Aug 14, 2007
2434 posts
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Waterloo
oasis2002 wrote: You are always paying for it no matter which way you look at it. If the agents didn't exist, and you bought using an online system, pricing would come down by that 4%/5% and you would pay less.

In fact, mathematically it is always in every agents interest to get the price as high as possible because that increases the commissions for both the buyer and sellers agent. And as a buyer you as a result get a bigger mortgage. Don't fool yourself or someone else into believing you don't pay as a buyer.
seriously? What would you rather make $1000 in 1 day or $2000 in 30 days?
Not to mention it is actually in the interest of the buyers agent to get house as low as possible.
Which agent would you pick? The agent that can only get a house for you at list or a tad under, or one that can get you 15% off of list? If the agent could only get 1/2 a percent off of list, they wouldn't be in business long as word of mouth would get around.
Deal Guru
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Oct 24, 2012
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ksgill wrote: True, but why hire a buying agent if you're more than capable of looking for a house yourself? In some cases, realtors don't add any value whatsoever.
It's not as easy to visit a bunch of houses without an agent. You'd have to wait for an open house, or contact the seller's agent to arrange a visit (who will then pocket the whole commission).

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