Off Market deal etiquette - agent representation

[Dylan J.]

My family and I are wondering what exactly the etiquette is when working with an agent and trying to find an off market deal. Should I be reaching out to current owners to find out if they are willing to sell their property and get more information about the property? Or should I be sending them to my agent if I am interested for them to do that work for me? Any help would be greatly appreciated!

[Lydia S.]

A couple of options exist.  
If you have a Buyer Broker Agreement in place with your agent, it may include the language that says all inquiries go through the agent, as well as what amount of compensation is due to them with any purchase you make as their client. So if you have such an agreement, they should be one making the connection with the off market property owner, even if you find it or hear about it somehow. Part of the agent’s process will be to reach out and find out how much compensation the seller would be able or willing to commit to, versus how much compensation you are responsible for.

If there is no buyer broker agreement in place, you are free to do as you wish, however, if you want representation and were hoping the seller will pay your agent, the agent should be the one to reach out to the seller first to make inquiries and secure a compensation agreement with the seller.  If you personally reach out to an off market property, the seller may say they will not pay your agent, leaving the compensation up to you.

[Mike Dymski]

Quote from @Lydia S.:

A couple of options exist.  
If you have a Buyer Broker Agreement in place with your agent, it may include the language that says all inquiries go through the agent, as well as what amount of compensation is due to them with any purchase you make as their client. So if you have such an agreement, they should be one making the connection with the off market property owner, even if you find it or hear about it somehow. 

This is the kind of stuff that led to the NAR lawsuit.

[Russell Brazil]

Quote from @Mike Dymski:

Quote from @Lydia S.:

A couple of options exist.  
If you have a Buyer Broker Agreement in place with your agent, it may include the language that says all inquiries go through the agent, as well as what amount of compensation is due to them with any purchase you make as their client. So if you have such an agreement, they should be one making the connection with the off market property owner, even if you find it or hear about it somehow. 

This is the kind of stuff that led to the NAR lawsuit.

How so exactly? I find no correlation between a buyer agency agreement and what the NAR lawsuits were about?

[Mike Dymski]

Quote from @Russell Brazil:

Quote from @Mike Dymski:

Quote from @Lydia S.:

A couple of options exist.  
If you have a Buyer Broker Agreement in place with your agent, it may include the language that says all inquiries go through the agent, as well as what amount of compensation is due to them with any purchase you make as their client. So if you have such an agreement, they should be one making the connection with the off market property owner, even if you find it or hear about it somehow. 

This is the kind of stuff that led to the NAR lawsuit.

How so exactly? I find no correlation between a buyer agency agreement and what the NAR lawsuits were about?

Rules to make it easier for a buyer to negotiate fees or use no agent at all.

When I was an SFR buyer, I used/worked with my agent for every deal (purchase and sale). She was the linchpin for my investing. We would walk properties and make offers on the spot. No contract needed, and she would be pleased if I found a property through another agent or on my own. I am huge supporter of agents and the industry (and there are areas for improvement).

[Russell Brazil]

Quote from @Mike Dymski:

Quote from @Russell Brazil:

Quote from @Mike Dymski:

Quote from @Lydia S.:

A couple of options exist.  
If you have a Buyer Broker Agreement in place with your agent, it may include the language that says all inquiries go through the agent, as well as what amount of compensation is due to them with any purchase you make as their client. So if you have such an agreement, they should be one making the connection with the off market property owner, even if you find it or hear about it somehow. 

This is the kind of stuff that led to the NAR lawsuit.

How so exactly? I find no correlation between a buyer agency agreement and what the NAR lawsuits were about?

Rules to make it easier for a buyer to negotiate fees or use no agent at all.

When I was an SFR buyer, I used/worked with my agent for every deal (purchase and sale). She was the linchpin for my investing. We would walk properties and make offers on the spot. No contract needed, and she would be pleased if I found a property through another agent or on my own. I am huge supporter of agents and the industry (and there are areas for improvement).

 Well the Department of Justice literally wants every buyer to have a buyer agency agreement going forward if they are working with a Realtor. Once the settlement is approved a buyer won't be able to use a Realtor without a written agency agreement. 

That's why I was confused with your statement. Your read on the lawsuits is the opposite of what the government's read is. Required agency agreements will be the new norm going forward, not what caused the lawsuits.

[Dylan J.]

I appreciate your help, Lydia! So, please correct me if I'm wrong, but here's what I understand... 

Since I do have a buyer/broker agreement signed, I should not reach out to any off market deals I find or hear about, but rather refer that information to my realtor with whatever information I have to ensure they have first contact with the seller

[Lydia S.]

Quote from @Dylan J.:

I appreciate your help, Lydia! So, please correct me if I'm wrong, but here's what I understand... 

Since I do have a buyer/broker agreement signed, I should not reach out to any off market deals I find or hear about, but rather refer that information to my realtor with whatever information I have to ensure they have first contact with the seller

With an agreement in place, yes.

[Lydia S.]

@Mike Dymski

What I described is not what led to the lawsuit.  

Each Realtor, agent or Brokerage may work for whatever compensation they desire and must outline it clearly in their agreements with their clients.  
Compensation is negotiable, always has been, and either the seller and/or the buyer will be responsible for any agreed-upon expenses per their listing contract or buyer broker contract.
Disclosure about compensation is more important than ever, and remains at the discretion of the representative and their clients, hence the need for those agreements which will be a requirement after the settlement.

Buyers and sellers must know how their representatives are compensated and by whom before they commit to a working relationship.  If I have a buyer client who has contractually agreed to whatever fee we discussed, and they are interested in an off market property, you bet I will attempt to save my client money by negotiating all or some of my compensation from the seller. That’s my job, to represent my client’s best interests, negotiate to help them best achieve their goals, abiding by all the laws, Fair Housing and Code of Ethics along the way.

If someone doesn’t want to sign an agreement with me, they are free to consider another Realtor® who has a different business model and practices, or even go forth unrepresented.  Fortunately, no one is forced to do something they don’t want to.

[Steve Vaughan]

I wouldn't bother hunting for off-market opportunities with a BAA in effect. 

It's a ton of work and the reward is a lower acquisition price because there are no commissions to be paid.  

Lose the price discount,  lose the incentive.  

[Brennan Clark]

If you have a Buyer Agency Agreement in place you may not have a choice. If not then you need to ask how confident are you in handling a real estate transaction yourself?

You can absolutely be successful investing without an agent, and there are plenty of investors who have been successfully investing for decades without one. However, if you don't have much experience with purchasing real estate, or are unfamiliar with your local area, then it may be beneficial for you to work with an agent regardless of where you are sourcing your deals from.

Your agent should be providing value beyond whatever amount they are charging you, and if they're not it may be time to find someone new to join your team!

[Caleb Kim]

When working with an agent and trying to find an off-market deal, it is important to follow certain ethical principles. In your case, you will have to decide how exactly to begin the process of discussing a possible deal. If you are interested in a specific property, you can start by contacting your agent and communicating your interest to them. He will be able to contact the current owners and present your offer, providing you with professional support at all stages of the transaction.