Expectations of Investor Buyer's Agent

[Allison Park]

I am just starting my investment journey, so have only used Real Estate Agents to assist with buying and selling my primary residence. In those cases, the compensation % for seller and buyers agents was set and I signed a 6 month commitment. What is the current status quo for Real Estate Agents for investors in terms of compensation and contracts. I don't want to sign an agreement with any one agent because I would be looking for which ever agent could bring me the property fitting my requirements. I am completely capable of searching with Zillow, so I would be looking for deals that are not in MLS or coming soon and ~10% below market or so. Also, I would not be on a particular timeline to buy something, would wait until I really liked a deal that fit my strategy. Also, I am hearing that recent legislation has affected buyers agent commissions. How does that affect things?

[Bruce Lynn]

The new standards are yet to shake out I think and it probably does cause some indigestion for investors and agents both.  In the past I would often show investors 1-2-3 properties without a buyer's rep agreement as we got to know each other.  Often pretty quickly....see something online at 1pm and I'm meeting you there at 2pm to see if we can lock it up before someone else did.  Now we can't do that.  We need a buyer's representation agreement signed before we can show.  That probably in most cases for me, will result in a delay between the time you call and the time we can prepare that document, get it to you to review and sign, and then schedule a showing.  If I am going to take time to prepare it, then I am going to want some kind of commitment from you to stick with me.  Maybe it should have been that way all along.  If you are new to investing we also need to spend some time somewhere, maybe 1hr to talk about your expectations and the realities of the market and see if there is correlation.

Interestingly enough I think with the NAR lawsuit some expected commissions to go down. Early indications as I expected is that they have gone up slightly. My though is the weak agents are going to get lost in the shuffle. If they were part time and weren't up to date on training, most probably go away. The good news for you as an investor will be likely you get a better and more experienced agent. Bad news you may also have to cover your own commissions. If you think about it in any industry less transparency and more friction in the transaction will increase fees/commission vs reducing them.

I like the idea as an investor of having different agents, a team of agents maybe 3-4 bringing me deals, but I think less of that will happen now as all will have to have you sign some kind of agreement up front. What if all of us send you the same property and you have 4 agents. We're probably not going to take the risk if we're busy agents to play that game. We want to be committed to you and you to us. Finding properties to me is about 5-10% of the work in closing a property. Zillow actually is probably not a great resource for finding properties anyway. The public searches are pretty limited in scope for a true investor. We have much more robust capabilities in MLS that typically in most areas aren't available to the general public. For example searching on keywords in both the description and private remarks that aren't shown to the public. I have all kinds of specific searches set up for my investor clients to help find the best deals. Short Sales, Bank Owned, $/sqft, school district, days on market, etc.

Off market deals I say are not really the bread and butter of most retail agents. We focus and specialize in "on market" MLS deals. Off market is really just a marketing term. Most are very much on the market and subject to bidding. Just go to one of the Friday afternoon 2pm 1hr showing windows of most wholesalers and see another 25-30 investors there "inspecting" the property. If you want off market deals, typically the best deals are the ones you are going to source on your own, not from an agent or wholesaler. You're going to buy some lists, like a preforeclosure list and mail and call and mail and call and mail and call until you get them to meet with you and then you strike the deal. You have to think, if we do that and we get the call we are going to try to list for maximum value to the broad market as we have a fiduciary duty to do that. It might just be every rare instance we get someone that doesn't want to list, just needs cash offer and quick close lets say before foreclosures and they might call on Friday when the sale is the next Tuesday. That's when we call you, so cash deal, not hard money, no financing, need to close it on Monday. Those deals are pretty rare though in my experience, we don't get those every day. Those we also give to our know resources that stick with us, not to the free agents who haven't yet signed a buyer's rep.

Sounds harsh I know, but that is often the reality of the situation as I see and experience it.