a realtor found an FSBO. i called owner, set up deal. commission or finder's fee?

Question

my situation is like this:

1. i've been working informally with an agent whom i like very much. she's mentioned a couple of pocket listings to me and shown me a few houses (~4). however, we've never signed any paperwork.

2. she mentioned a house in my target neighborhood that's FSBO. i told her i was interested in learning more but didn't hear back from her the next day. so i took the initiative and looked at the house, called the owner and set up a time to meet with him.

3. the property is by far the best potential deal i've seen so far, and as soon as i started talking to the owner, all my instinct told me 'i just need to do business one to one with this guy. having a realtor is just going to get in the way here.'

4. however, i don't want to jeopardize my relationship with this agent in the future. she seems like the right 'scout' (and agent for future properties that come through the MLS) on my team.

my instinct is to just be upfront and tell her i what happened, and that i want to pursue this one on my own and it if goes through, give her a finder's fee of $1,000.

thoughts? what do i do BP friends?

Joel Owens · Answer

Would you have known about the deal otherwise??NOThe right thing to do is pay the commission.The agent should have called up the FSBO and gotten a one time showing agreement signed where if they did not want to list it then they agree to pay a commission if the agents buyer purchases.All the agents income for real estate related activities has to go through the brokerage. An IC agreement between the brokerage and agent will spell out what the splits are etc. and under what conditions a fee is due. ( For example a brokerage might not take a fee on the sale of an agents personal residence etc. or give them one no commission owed investment property purchase for themselves a year. ) On the commercial real estate side if buyers pull any funny stuff with me I NEVER,EVER work with them again period. Too many serious purchasers in the marketplace. I have commercial lenders that blacklist buyers as well and these people that are buyers have tens of millions of dollars but they are shady.It's not just about how much money you have but how you conduct yourself in business deal to deal if you want to be respected for the long haul and have constant deals brought to you. If you don't think the word about buyers or sellers who stick it to brokers and agents doesn't get around .... think again.Hope it helps.

Yoni Levin · Answer

Absolutely pay the commission. Is 3% worth getting more deals? Yes. Working consistently with an agent is an investment. This reminds me when my friends are trying to decide whether to tip 15 or 20%. I tell them just for having the thought they should do 25%. Be generous and it will all come back to you multiple times. I'd take them out to dinner on top of all of it to celebrate."It's not tipping I believe in. It's overtipping!" -Vincent Antonelli (Played by Steve Martin in My Blue Heaven)

Russell Brazil · Answer

As an agent I would expect a commission. If I did not receive one from you, then I would cut you lose as a client. Things like that are one of the biggest mistakes I see investors make, alienating all the Realtors in their area. Realtors can be a great source for investors. For example whenever I get an "unsellable" listing, I got to the investors I know to see if they would be interested in buying it. Of course someone who did not pay me a previous commission would not get access to these deals.

Kevin Siedlecki · Answer

I agree with the "pay the commission" crowd. It's just the right thing to do. Are you going to work up all the offer and remedy documents on your own? A realtor can and should do more for you than just get your feet in the door of a property.

Joel Owens · Answer

Finders fee would have to go through the brokerage and after split would be next to nothing. If the fee is larger than what the commission percentage would have been then that is different.

Jeremy Pace · Answer

Honestly, licensed real estate salesperson isn't supposed to receive compensation for RE related activities from anyone but their broker (unless they themselves own it blah blah).The right thing to do is to give her a commission, even if it is reduced. You could also talk to her broker, and work out a simpler fee-based arrangement with him/her, which they could then pay the salesperson for their efforts.

Aaron Crow · Answer

It is a 2 way street, if you benefit but she does not then she will not bring you pocket deals anymore. I would pay her a commission.

Jesse T. · Answer

Does the deal work with a 3% commission?What type of investment is it - buy and hold or flip?If it is a flip is she the right agent to sell it? If she is - I would give her something informal and then list with her at 7%. If she isn't the right agent - at least give her a shot at the referral.For buy and hold - the rental listing and management might be an opportunity for her, but you probably should give her at least a partial commission at this point.I would not go the finder fee route(a payment directly to her) - I would either give her a commission through her brokerage or do it informally.

Jean Bolger · Answer

Just to clarify: a lot of FSBOs are open to paying some sort of co-op commission to a buyer agent- the money they are trying to save is the listing agent's cut of the deal. (frankly, if this were not the case on this house your agent might not have even mentioned the house to you, especially since you don't have a formalized buyer agency set up.) So you probably won't be on the hook for any commission anyway, the seller will be paying it.And since it's your first deal, you'd be better off having someone with a little more experience on your side of the negotiations, too. Good luck!

David Miller · Answer

incredibly helpful @Joel Owens, @Yoni Levin et. al. i just want to move forward in a way that makes everyone win. will let realtor know i want to buy. if this all works out it will be my #firstdeal. will keep you looped. thx again everyone!