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Updated over 8 years ago, 03/07/2016

User Stats

196
Posts
118
Votes
Jason Krick
  • Investor
  • Reading, PA
118
Votes |
196
Posts

My Agent will be paid almost nothing...thoughts?

Jason Krick
  • Investor
  • Reading, PA
Posted
I'm finally settling on my first investment property next Thursday (though I've said that before with this property). It is an REO that I believe am getting a significant discount on. When reviewing the paperwork with my agent, she told me that the seller (bank) is only paying her $300! She told me that her broker was upset, but she told the broker I'm a repeat client (bought my primary with her). I'm not supposed to "tell" anyone about it. Not that I would anyway, but I'm guessing it's because of one of two reasons. 1). So that other buyers won't expect the same thing. 2). Politely indicating to me that I could increase the commission on my end. Given a situation like this, is it common for buyers to increase the commission paid to the buyer's agent? Honestly, it is something I would like to do, as she helped me get the property for about $7,500 less than I was willing to pay, and $7,500 less than my lender thought I'd be able to get it for. Could I call the title company and tack some extra money on to my closing costs?

User Stats

41,925
Posts
61,727
Votes
Jay Hinrichs
Professional Services
Pro Member
#5 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
61,727
Votes |
41,925
Posts
Jay Hinrichs
Professional Services
Pro Member
#5 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
Replied

@Jason Krick  well in our neck of the woods EM deposits are 17k  LOL... so its foreign to brokers in other markets.  good luck with the house I am sure you will do whats fair.

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User Stats

196
Posts
118
Votes
Jason Krick
  • Investor
  • Reading, PA
118
Votes |
196
Posts
Jason Krick
  • Investor
  • Reading, PA
Replied

@Jay Hinrichs

Believe me, I realize how small these numbers are, comparatively speaking. Rest assured, I will do what's right.

Thanks for jumping in.  It's much appreciated.

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User Stats

2,770
Posts
3,665
Votes
Aaron Mazzrillo
  • Investor
  • Riverside, CA
3,665
Votes |
2,770
Posts
Aaron Mazzrillo
  • Investor
  • Riverside, CA
Replied
Originally posted by @Sarah Ziehr:

@Jake Thomas@Gino Barbaro@Chris Herman

Can we all be clear that no one is giving any money to anyone. Brokers, realtors and agents EARN their commissions.

I am sure you guys didn't mean anything by using that word, but I think we all need to stop saying a broker is "getting" xyz.  

Peace. 

 That's the best joke I heard all week!  Earn! LOL Good one! 

You might just slip her a few hondos over coffee after the deal closes. That way she gets to pocket it all. Totally unethical, but that's what makes good relationships in the corrupt world of real estate agents and brokers. Most unethical people I've ever met. Right up there with dentists from Minnesota.

User Stats

3
Posts
0
Votes
John Sprague
  • Wholesaler
  • Saint Louis, MO
0
Votes |
3
Posts
John Sprague
  • Wholesaler
  • Saint Louis, MO
Replied

This is a great topic that deserves the proper attention. Let's put things in perspective. There are over 1.1MM Realtors in the Nation. What percentage can speak the investment language? Speaking in GREAT generalities, 5%? Then there is something called the 80/20 rule that tells me 20% of that population will do the lions share of business making them the resident experts. If I apply those thoughts & concepts, then 1% of the Realtor population can offers tremendous value to your investment business. That is an exclusive group. And just like you'd pay a great electrician because they are timely, do quality work, & you don't have any cursory issues, I'd pay your QUALITY Realtor. If they're in that club, they will pay you in spades for what you can compensate them. Make sure that relationship is equitable.

If your asking how the audience feels about what seems to be a low payout, I can only assume you feel that your Realtor might be in that exclusive group noted above & that there is an inequity in compensation. You DO have the power to change that if You wish. AND, in most states, the Realtor has the power to pre-negotiate their compensation to avoid this in the future.

I would start by asking the agent what they think would be a Win-Win for them. They might surprise you. They could say, "buy 10 more of these this year as it helps annuitize my business" or "introduce me to 5 other investors" or "I would like to earn your resale business" (usually at a full commission).

Being an experienced agent in this arena I can tell you the gesture itself holds significant value.

However, they could ask for additional compensation on that deal. If that is the case, you have a variety of options including increasing commission % that you could pay out-of-pocket, offering a flat additional compensation, offering a per event flat rate (I.e. $XX for each offer submitted), etc. I would open this discussion up with their broker to navigate through the legalities & influencing factors of each option.

NOTE: Each state and brokerage has its own set of rules, policy's, & guidelines. I suggest looking up your state board's P&G as it pertains to compensation to educate yourself & using a brokerage that is investor friendly. (Open to doing anything so long as it is legal & ethical).

Final thought, Identify that 1%er and YOU make sure the relationship is a win-win. Most of the 1%ers in the "knowledge" category don't know how to make these transactions make financial sense for them leaving them looking at them as an obligation instead of an opportunity. Help them out with that & you will be able to foster a sustainable relationship with a true professional rather than ripping through 30 inexperienced agents a year.

User Stats

408
Posts
90
Votes
Samuel Sedore
  • Real Estate Agent
  • Kitchener-Waterloo-Cambridge, Ontario
90
Votes |
408
Posts
Samuel Sedore
  • Real Estate Agent
  • Kitchener-Waterloo-Cambridge, Ontario
Replied

Good Post! 20% of your actions achieve 80% of your results I love that analogy.

User Stats

15
Posts
8
Votes
Blake Messina
  • Flipper/Rehabber
  • Orlando, FL
8
Votes |
15
Posts
Blake Messina
  • Flipper/Rehabber
  • Orlando, FL
Replied

If this was an REO, chances are the total buyer's side commission was 2.5% of $17,500 ($437.50). After split with the broker, you see how it ended up around $300.

She would have been aware of this prior to beginning this deal, but I agree it would be nice to pay her extra for her time. $300 is nothing from the sounds of this deal and how much time she spent.

User Stats

2,341
Posts
877
Votes
Shaun Reilly
  • Landlord and Rehabber
  • Newton, MA
877
Votes |
2,341
Posts
Shaun Reilly
  • Landlord and Rehabber
  • Newton, MA
Replied

Good conversation here.

$300 is a crazy small amount to work for as most have pointed out.  Now since you said you got it for $17.5K even at a full 3% they were topping off at $525 before the broker split so there can't be that huge of a surprise for not getting a ton of money on this deal.

Also based on that fact ANY amount you kick back on your end gets it pretty close to the expected amount.  Again that is still peanuts especially if you feel that her advice to you saved that $7.5K.

What I would do would be to add additional commission on my side (Probably $300-$1,000) but then also do the gift card, bottle of wine, gift basket type thing as well.  That will be a nice little extra surprise for her after seeing you already stepped up to level out the monetary compensation.

I think you have the right mindset about building relationships and if this agent did good work for you then you want them to want to keep working with you. 

User Stats

25
Posts
18
Votes
Julie O.
  • Real Estate Investor
  • Westminster, CO
18
Votes |
25
Posts
Julie O.
  • Real Estate Investor
  • Westminster, CO
Replied

I regularly tip my Realtor, and not on the HUD. After closing, if I she's had to do more than usual, I'll give her a thank-you card with cash inside. She can split it with her broker if she likes, but that's up to her. My properties have been so inexpensive, her commissions are always low. Also, if I find an off-market deal, she'll handle it all for a small fee. I send her all of the referrals I can and tip her at every closing. It's hard to find an agent that will submit as many low-ball offers as she has!

User Stats

743
Posts
424
Votes
Brandon Battle
  • Real Estate Agent
  • Buena Park, CA
424
Votes |
743
Posts
Brandon Battle
  • Real Estate Agent
  • Buena Park, CA
Replied

Take her and her family out to a special dinner,buy her kids expensive gifts,and give her gift cards with big amounts and she will be happy.You don't need to screw around with the deal and the paperwork to show your deep appreciation for going the extra mile.

User Stats

172
Posts
66
Votes
Gloria Mirza
  • Real Estate Agent
  • San Jose, CA
66
Votes |
172
Posts
Gloria Mirza
  • Real Estate Agent
  • San Jose, CA
Replied

I like Jay's advice.  I would keep escrow clean and not create issues with the bank by paying her extra commission.  Although it's illegal to give her a "tip" outside of the purchase contract for this purchase, it would be perfectly legal to hire her as a buyers agent and pay her to help you look for the next house.  

User Stats

196
Posts
118
Votes
Jason Krick
  • Investor
  • Reading, PA
118
Votes |
196
Posts
Jason Krick
  • Investor
  • Reading, PA
Replied

@Brandon Battle @Gloria Mirza

Thanks for the input! This is a cash deal, so I don't have to worry about any requirements from a lender. I asked the title company, and I am free to put any amount on the HUD for commission, if I choose to.

Im going to closing in 45 minutes!

User Stats

196
Posts
118
Votes
Jason Krick
  • Investor
  • Reading, PA
118
Votes |
196
Posts
Jason Krick
  • Investor
  • Reading, PA
Replied

Thank you everyone for the suggestions! I closed at 3:00pm today. So, what I did was I came up with what I thought was fair compensation. When I got the final HUD, I saw that the seller increased the original amount of $300. It was still less than I thought appropriate. So I asked the title company to add a some more on my end. That was no issue at all, since I paid cash.

My agent was extremely grateful.  Not for the amount (which wasn't that much), but for the gesture.  On my way home from closing, she told me that the next text she sends me will be for a property that I must come look at before everybody else gets a chance.

I believe I did the right thing morally, and it looks like it will help my future business.

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