Friend is a real estate broker is 1 % a good rate?

Question

Hello,

A friend helped us find the home we would like to purchase and is helping secure the loan. Is 1% a good deal for us to give him for his help? What do brokers usually take from you?

Thanks!

Answer 1

1% is a fair amount for a broker to make on your loan. You might also want to compare the rate however, as brokers also make money on the back from yield spread. As a broker I generally structure a deal for somewhere between .75% and 1.5% depending on what needs to be done to close the loan. The more work I need to put in, the more I expect to be paid...

Answer 2

The commission for a RE agent will vary. More so these days with the web.

The custom has been between 5% and 6% with that amount split between the seller's agent and the buyer's agent. For listed property the agree fee is noted in the listing and will be paid by the seller for both agents (legally slightly different but that is how it looks). Therefore you as the buyer do not pay directly. Your offer price has the commission built in.

You can decide to pay your agent directly. It is rare, not generally suggested and likely not needed this time around. I have done in for specific reasons.

Assume that the split is really a 4 way split and it more or less goes as follows:

Assuming 6% total commission based on the listing price.
3.3% to the selling broker. That is the main office broker.
That office splits the commission between the office and the listing agent (seller's agent). Assume 50/50 but it might be closer to 30/70.
The buyer's agent's office get 2.7% in this example.
That office then splits with the agent so maybe the agent is getting 50% of 2.7%. Maybe more.

The above is an example and the internal splits can vary based on the relationship the agent has with their office. They might also have fixed fees to pay for the MLS, a desk fee, insurance and any direct expenses (car, fuel, etc).

Agents do not make anywhere close to 6% after all the splits and expenses. Some still do very well. Most work pretty hard to make a decent wage.

Final comment. Focus on buying the right house and getting a great price. If you can get the price reduced by 5% or more and the agent was key to the negotiation they have largely paid for their fee.

Answer 3

Your friend is a mortgage broker, not a real estate broker, and 1% is the going rate.

A real estate broker is like an agent, but higher level.

Answer 4

If they are a real estate broker, you do not pay them ... the seller does. If they are a mortgage broker, then 1% is ok, but watch for other fees mortgage brokers tend to charge.

Answer 5

The agent for the buyer gets paid by the seller's agent at closing. You owe him nothing. It may even be illegal for you to pay him depending on local and state laws.
Take him to dinner or send a fruit basket.
The VERY best thing is a referral and letter of recommendation.

Answer 6

that should already be in your contract with him as your Realtor. He is also making money off of you on the loan? Does he also sell suits? watches? prepaid legal? What a disaster waiting to happen. Use a professional who is an expert in one field and does it full time.