Which broker would you choose?

Question

I'm planning to get my license (just for my own use--to buy properties for myself and get MLS access).

One broker I called requires a 70/30 split each commission. The other requires a fee of $375 for each deal you do, and you have to pay them $35 per month in dues.

I obviously know very little about being an agent at this point, but it seems like the first option would be better if you're going to be doing a smaller volume of deals, and the second option would be better for someone who plans to do a lot of deals.

Jake Kucheck · Answer

This is a pretty simple calculation.

Broker 1 = $0 in Annual Fees

Broker 2 = $420 in Annual Fees

Broker 1 = .7 (Commission)

Broker 2 = Commission - 375

Total equation (Gross Commission = x, Net Commission = Y, T = Closed Transactions):

Broker 1: .7x = Y

Broker 2: [x-(375*T)] - (420) = Y

Now... I don't know your market, or how many deals you intend to do.  But you should.  So plug in the gross commission amount you expect to make on an annual basis for X, the number of transactions it will take you to get to that for T, and solve for Y.  Whichever has a higher Y is the brokerage you should choose.

Bill Gulley · Answer

For a new agent, while Jake point out the computations, there is more to it than that. Who provides the best training, provides the best support, allows you to participate in referrals, who puts you in your market with the better reputation, who provides assistance when you get in over your head????

You can go with the lower cost broker, but if they don't support you, how many deals will you close? OTH, you can go with a higher priced broker and they may provide more opportunities that more than pay their fees.

Like anything else, you may get what you pay for, then again, you may not, it's due diligence........

Bienes Raices · Answer

Thanks for the responses. I've decided to delay getting my license and make one more attempt to buy throught the listing agents by increasing my offer amounts.

Bienes Raices · Answer

@Dion I think I already know what's wrong, actually. My offers used to be accepted frequently a couple of years ago, so I think I am still making offers based on 2010 market conditions. The banks are getting people bidding at or above list price so they don't even bother to counter or respond to my offers anymore.

@Justin S. I don't know the answer to that, I'll have to find out....I only look at houses that are listed at 70K or less.

Justin S. · Answer

Bienes  Raices

Do either brokers have a commission cap?  Meaning after X amount paid to them, do you then get 100% of the commission?

Also what price range are you dealing with?

Karen Margrave · Answer

Bienes  Raices I don't know enough about your situation to say what would be best for you. However; every area in the country is different. The formulas etc. that some go by won't necessarily work in every area. I think many parts of Florida are like Orange County, CA. Here we have few REOS, and on those they can have walls with gaping cracks, broken concrete slabs, ceilings falling down, and "investors" come in and bid them up to over ARV, it's crazy.

All I can say is get to KNOW your local market. KNOW what different areas are selling for and what people are getting for their money. Do comps before making any offers. (If you have an agent, they should pull the comps for you, but you should still try to investigate for yourself)  Try to stay up on the current inventory of listings, and what is selling. If a deal makes sense, do it, if not, walk away.

Here we can go right onto the public version of MLS and get most of the listing information. Also, many real estate offices have websites that search MLS online, that way you can get most of the info, except owners names, contact, etc. to do preliminary work.

As for a license, I'm not saying it's a bad idea, just that if you do that, then learn what you need to know to be an agent. It doesn't mean you have to ever actually work as an agent, but learning the trade won't hurt you.

Dion DePaoli · Answer

Bienes  Raices, IMO, get a license to become a licensed agent not a investor with more access.  I think that is sort of what Karen M. is also advocating, if your going to get a license then you should want to be an agent not just an investor with MLS and a SUPRA.

Having a license doesn't make you offers get accepted any better.  I guess putting in more offers does up the chances by statistical probability but it sounds like there might be problems with your offers in general if you can't even get a call back.

A cheaper and more reasonable approach might be take a couple agents out to lunch and find out what you are doing wrong.  Just because BP people suggests not to use an agent doesn't mean that is a viable solution for you.  Not sure what the BP nation thoughts are with not working with a buyer's agent but I am all for it.  My time is valuable and I need people to carry out my desired actions to get stuff done.  That said, you need to work with a good agent.

I just really think you need to take a moment and do a little self business discovery and figure out what is really broken.  I don't think it is the fact that you don't have a license.  If you do what you always did, you will get what you always got.  Just because you put on a different shirt doesn't mean things will change.

Bienes Raices · Answer

Thanks Karen. Do you think I would be better off just forgetting the RE license idea and making higher offers for the REO properties instead so that they get accepted? I have been trying to go by the "50% rule" for buy and hold, but it just doesn't seem possible to get those 80% or even 90% of list price offers accepted anymore, even on houses that are messed up.

Karen Margrave · Answer

You're right in the fact that having a license does allow you to keep a portion of the commission, access the property, etc. However; paying the fees to get into MLS, get your lockbox key, etc. still doesn't give you the knowledge necessary to be an agent.

My thoughts are that in the long run you'd be better served going to an office where you can actually learn the business of real estate, writing contracts, learning about all the various disclosures, etc. In my opinion it's not just about which option puts more money in your pocket the fastest.

As an agent, contractor, etc., I get sick of hearing horror stories about bad and lazy agents/contractors, etc. Everyone, no matter what your position should know their trade, and act professionally, or stay out of the business!

Bienes Raices · Answer

Thanks, but it sounds like you're suggesting going back to using a buyer's agent again (which I've already done in the past)? If that's not what you mean, why would the agent want to give me MLS access when they aren't getting anything out of it?

I used a buyer's agent for about a year (back when it was easier to get offers accepted on REOs). Then people here suggested going directly to the listing agent, which I've been doing for about nine months. Many of the listing agents do seem to be more receptive to my offers because they will be able to take the whole commission, however it's become so competitive here that none of my offers are ever accepted anymore anyway. I think if I went back to a buyer's agent at this point my offers would look even weaker than they do now.

I've also found it's a problem going through the listing agent as well because they don't answer or return calls sometimes, or I make an appointment to see a property and then the agent calls me back and asks if we can reschedule for the following day, etc. It really wastes a lot of time.

I thought that having the license would speed things up since I could get the codes, visit more houses, and submit my own offers at my own pace, increasing  the number of offers I make, and it would help me understand the process better. MLS access costs about $1000/year here, and the course + various start up fees would be about $1000. I thought that if I found some good deals and possibly do a flip at some point, these annual fees would more than pay for themselves. Is my reasoning faulty?

Which broker would you choose?

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