Need Help! Question for Realtors

[Josh Koett]

I want to fix and flip a home. Specifically add-a-level to a single family and upgrade the initial first floor. If the home purchase price is 300k and the ARV is 450k, would a realtor agree to waive the 3% buy commission if we draft a contract that I would sell with them at 3% for the higher ARV value five to six months later? That works out to be $9,000 for the initial 3% commission waived, instead for the $13,500 commission on the sell later. That's $4,500 more that would be guaranteed I would sell with them. What about the same contract above, but this time if I decided to hold onto the property for 2 years to avoid capital gains tax. This time the commission might be even higher with appreciation. Is this something reasonable? What are your thoughts and how else could I structure this? Thank you

[Mike Cumbie]

Hi @Josh Koett

Everything is negotiable in real estate. That being said, I personally would not go with that myself. It sounds like "I would gladly pay you Tuesday.... or 6 months or up to two years possibly... maybe.... for a hamburger today". I have people I deal with often that buy a low end property (300K is not low end here) and I pull in a couple hundred dollars total. Then when they sell I pull in a couple thousand (plenty of work between point A and point B). We work in volume and I don't make a killing by any means. If someone I never met said "Help lock in this place in and hopefully later it may be worth something and if so I'll pay market rates for the second part..... unless I wait longer and something happens, in which case I may take a better offer". I would politely decline.  

You are saying buy initially is: $9,000 Commission (-broker fees, - taxes, minus time) just waived... agent takes all insurance/time/risk and writes it off for 6 months to 2 years.

Sell is: $13,500 (- broker fees, - taxes, minus time, minus advertising, minus equipment, pictures, lockboxes, posts... fees) if you actually get the property up there and the value holds in 6 months to 2 years. Hope there is no real time in inspections, resets, contractors, building inspectors, showings etc.

So reversed it would be. Would you perform $9,000 worth of work today (absorb all fees/taxes/splits/expenses)  and if things all go well I will give you the opportunity to make $13,500 in 2 years (minus all fees/taxes/splits/expenses) ?

Not saying it can't happen, I would just be surprised to see that agent around in 2 years.