Should repeat sellers be paying full commissions?

Question

If i am selling a house every month or two should I be negotiating a discounted commission?  I'm having to pay up for deals on the front end so it seems like the realtors are making as much as me on flips.  I dont think there is any way or reason to get around the 3% to the buyers agent but a lower flat fee on the listing side seems more realistic for their time & effort.

Mike Cumbie · Answer

@Larry Flanagan

My repeat flippers have a different rate than my retail customers. However there are a few caveats:

1) House is vacant

2) I can lockbox it

3) Not asked to be at all showings etc

4) Listed at a price I feel it will sell (or at least a plan to get there with an aggressive price plan up front)

5) House is show ready (I'm not asking and answering a bunch of questions about what is left to do)

Account Closed

If you are selling houses with 6 hours of work as a total investment in the process you are a much better agent than I am.

Account Closed · Answer

In my opinion, as an agent.. I believe flat fees will be the way every real estate transaction will be done. Realistically it only takes about 20-30 minutes to draft up the necessary paper work and the "work" for any escrow realistically only takes about 4-5 hours of physical paper work and work for the entire month :)

Nate Monson · Answer

Hey Larry,

As an agent myself I do discount my commissions usually by a point or point and a half when working with a fix and flip client who is listing their homes with me. I'm sure there are agents out there who don't do that but I think it is completely reasonable to encourage your client to keep listing their homes with you by giving them a little additional savings. After all if your doing a good job that should be steady income for the agent for years!

Jason Turgeon · Answer

I used to think that Interior Design was an easy job, not worth paying someone for until I gut renovated my house and suddenly my wife and I had to decide on 1000 little details that I didn't even know existed, all interdependent on each other.  Everything from cabinet height to which 3 shades of white we needed on walls and baseboard and ceiling (who knew there were so many variations of white?) Now we build in a design fee on higher end properties, because it's hard and a skilled designer will actually save us time and money and aggravation.

I used to think that wedding planning was a total BS job until I ran my own wedding and spent I don't know how many hundred hours making phone calls to vendors, researching venues, lining up bands, making hotel arrangements, figuring out table arrangements, figuring out how many staff to hire, picking out silverware, and trying to figure out where to put the tables and chairs. Now whenever I am talking to a young couple planning a wedding I advise them to hire someone to help them. It saves them time and aggravation, and they will likely break even on money saved by using a pro who knows what corners can be cut vs the pro's fee.

Likewise, I used to think being a real estate agent was an easy job and agent commissions were a racket. So I got my license to make some easy money on the side and save a few bucks on my own deals. Then I spent my first few years going to dozens of open houses with unqualified buyers who never closed a deal, figuring out which inspectors and photographers and structural engineers and lenders and home stagers were worth a d*&! and building relationships with them, learning that most of being an agent is actually being a shrink/couple's therapist, and generally not making very much money at all before I figured it out. Now I turn down 75% of the people who want to use me as an agent and only choose clients that I don't think will waste my time. If someone tells me they want a discount, I tell them to hire a discount agent. My time and experience and relationships are valuable, and if I am able to help close a deal in only 12-15 hours of work, it is only because I have a decade of experience (generally unpaid) that made that possible.

If you are a good, solid customer who is easy to work with and respects the agent and their advice and brings them money that is actually easy for them to earn, it's fine to ask for a volume discount. But be honest with yourself. If you are a demanding client and you don't respect the professional that you have hired to market your property for you and you are nickel and diming them and pricing too high and not letting them stage the property to save a few bucks and generally making their lives harder, be prepared to have them fire you as a client.

And if you are at the point where you are selling so many properties that the 2-3% it costs you on the seller's agent side is a significant amount of money, go get licensed yourself and sell your own properties and stop paying anything (except for E&O insurance, staging and photography costs, MLS fees, gas, mileage, and all the other costs the agent is covering in that commission, of course). Many successful flippers and home builders do this. But if that sounds like a lot of work, well, that's why you pay someone else to do it for you.

Jose L Torres · Answer

@Larry Flanagan Hi Larry, If what you expect your agents to do is the three P's (Put a sign on the lawn, Put the listing on MLS, and Pray someone makes an offer), then yes, I guess you should ask for a discount.

The legalities of Real Estate investing and contracts vary from State to State.  No two deals are the same. Getting a proper listing setup in MLS is not a 20 - 30 minute process.  It is more like a couple of hours process when done properly. Effectively marketing your property to sell also takes time and money. When I sell property I am selling it twice.  Once to the general public and the other to the other to agents out there (in and out of state) to bring their buyers to my clients.

Doing a volume of homes with the same Realtor does not mean it takes that person any less time to deal with each property and market each property to help you get the most out of your investment.

Remember, in the absence of value, the only thing that is left is price. A good agent will be a partner to you and will help you expedite and simplify the process of selling those homes so you can focus on your primary and best use, which is finding the next investment property to buy.

Hope this helps you.

Jameson Sullivan · Answer

I think there's a conversation to be had about a lower fee in this situation... Just remember, you chose this particular agent for a reason. Don't lose a quality agent who gets the job done for you over 50 basis points!

Patrick Hill · Answer

@Larry Flanagan

It will vary from agent to agent on how they do business and the volume you are doing with them. From your post it sounds like you're doing roughly 6-8 homes a year and in my opinion, I would agree that constitutes a negotiation discussion with the agent. However there are several factors to consider when discussing percentage breaks as @Mike Cumbie explains above and how many times the agent has actually brought the buyer or was the buyer from another agent. Don't forget unless they are bringing the buyer the agent will only get half of the rated commission you are paying so a drop in commission can hurt the marketing budget the agent has set aside for each listing. Just a few discussion points from my end

Mike Cumbie · Answer

@Anthony Wick

Many people think that you can drive a sign in the yard and sell a property in 24 hours but that is not the case. The sheer amount of fees and signage and advertising is staggering. To actually find the "Highest and best" purchaser you can't just throw it on Zillow (Many people do just that and don't get the traffic or offers they need). Besides the "end paperwork" there are plenty of steps to get there. If you believe that getting a "flat fee" to throw it on the MLS is your best use of cash, then I encourage you to do just that. If I could sell houses successfully for $100 a piece I sure would, heck I would be the only game in town because everyone else would be out of business. If you want retail service then expect retail prices. If you want to do some things to reduce my costs I will happily pass on some savings.

I accept peanuts when the filpper buys low in the beginning and then cut my commission down on the end because we have a good relationship. Some people that will still not be enough, so to that I say "sell it your way and best of luck".

Account Closed · Answer

Doesn’t hurt to ask, but it’s a give and take, so maybe a reward system or something else.  If you are selling a house basically monthly you could do a 1 or .5% credit at closing.  Nothing super fancy.  If they are a amazing realtor that brings in the buyers or sets the home up to sell quick why try and discount it

Joel Owens · Answer

Brokers and agents work for a decide what they believe they are worth.

Some brokers and agents work with residential investors because it could be a steady stream of business for them. That can be the volume model although it can be self limiting sometimes for a broker/agents long term growth. There will always be someone cheaper but not always someone better. So the idea is to constantly learn to get better and better where people seek you out by reputation and it's not about the commission but the ongoing working relationship.

Sometimes if a seller wants excessive marketing one strategy is too have the seller pay for the upfront marketing and if it sells the broker/agents gives back the marketing cost amount at closing (verified credible receipts of course). I knew of an older couple that listed the really expensive houses millions and up in price and they wanted the seller to spend upfront money to have skin in the game because they became more real in price over time to sell.

Other times some sellers will say give me discount on my house I am selling and I will then use you to buy. Then they go buy with someone else for a buyer rebate. The way you curb that is to give the discount off the back end when they buy and not when they sell.

A broker/agent might want a (yearly minimum volume agreement) signed with the investor where the listing discount is based on a certain annual production amount with a tiered system.

Should repeat sellers be paying full commissions?

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