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Updated about 3 years ago, 09/27/2021

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Christian Weber
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Do I pay the agent as a buyer?

Christian Weber
Posted

Looking into investing out of state (im licensed myself)

Agent out of state I was speaking with told me I would have to sign a buyers agreement that states they must make a min of x amount on a deal and if not I make the difference up (plus office fee). Home are around the 75-100k

Is this normal as if anything I was going to ask for a referral fee but noticing how low the prices was I was going to not do that.

Just wondering if this is standard practice,  I personally dont use those contracts myself with my buyers as if the house doesnt pay enough I dont want my buyer to pay. I will make it up on the next transaction.

Thoughts please

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Wayne Brooks#1 Foreclosures Contributor
  • Real Estate Professional
  • West Palm Beach, FL
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Wayne Brooks#1 Foreclosures Contributor
  • Real Estate Professional
  • West Palm Beach, FL
Replied

Yes, any experience knowledgeable agent has minim amount of commission they’ll be willing to work for. Assuming they are content with 3% gross on $75k, I’d expect the buyer to make any shortfall from that, and wouldn’t be interested in having to pay you a referral fee on such such a small sale.  Some will say, just out of stubborn principles” “no way, there are plenty agents...”, yeah that’s true but a rookie agent will cost you much more than 1-2 difference.

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Russell Brazil
Agent
  • Real Estate Agent
  • Washington, D.C.
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Russell Brazil
Agent
  • Real Estate Agent
  • Washington, D.C.
ModeratorReplied

I charge a minimum. So if thr offered commission is lower than my minimum, my client would need to pay the difference. This will be the case on low priced properties. 

James Wise just had a good post on how little agents make on these cheap properties. On properties that cheap as you are looking at, an agent is making well below minimum wage.

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66
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Christian Weber
15
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Christian Weber
Replied
Originally posted by @Wayne Brooks:

Yes, any experience knowledgeable agent has minim amount of commission they’ll be willing to work for. Assuming they are content with 3% gross on $75k, I’d expect the buyer to make any shortfall from that, and wouldn’t be interested in having to pay you a referral fee on such such a small sale.  Some will say, just out of stubborn principles” “no way, there are plenty agents...”, yeah that’s true but a rookie agent will cost you much more than 1-2 difference.

unrelated - in this market in S FL you have buyers agreeing to pay the difference if the commission is not 3%?? I tip my hat to you if thats true

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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
Replied

You always pay for your agent as a buyer. It's hidden in the higher price you pay the seller, but it's there.

Coming out of pocket just makes it not the fantasy of being free the public has been trained to think. 

A 2020 DOJ vs NAR actiion made it so agents of buyers can no longer lie and say their services are free. They may even have to disclose buyer agent comp. Oh No!

Personally, I've sold a dozen FSBOs.  I say in my ad- if you're bringing an agent, just up the offer by the amount of their commission. And they do.   

My friend just sold his house FSBO for $950,000. Well, it was $950 until the buyer brought their agent in. Then it turned into $985. Buyers agents are never free.

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Wayne Brooks#1 Foreclosures Contributor
  • Real Estate Professional
  • West Palm Beach, FL
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Wayne Brooks#1 Foreclosures Contributor
  • Real Estate Professional
  • West Palm Beach, FL
Replied
Originally posted by @Christian Weber:
Originally posted by @Wayne Brooks:

Yes, any experience knowledgeable agent has minim amount of commission they’ll be willing to work for. Assuming they are content with 3% gross on $75k, I’d expect the buyer to make any shortfall from that, and wouldn’t be interested in having to pay you a referral fee on such such a small sale.  Some will say, just out of stubborn principles” “no way, there are plenty agents...”, yeah that’s true but a rookie agent will cost you much more than 1-2 difference.

unrelated - in this market in S FL you have buyers agreeing to pay the difference if the commission is not 3%?? I tip my hat to you if thats true

Well, I never dealt with buyers buying a $75k property. But as aside, yes I did. Once on a $450k purchase. This was an REO, offering 2%.   The beauty of it for my buyer was since only 2% was offered, very few agents were showing it (since they Didn’t have this agreement with their buyers) and my buyer got it for $50k under appraisal so he was happy to cut a check for $4500.  Also, I had saved him from a big mistake at a foreclosure auction, since I had experience there.

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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
16,092
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10,239
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Steve Vaughan#1 Personal Finance Contributor
  • Rental Property Investor
  • East Wenatchee, WA
Replied
Originally posted by @Wayne Brooks:
Originally posted by @Christian Weber:
Originally posted by @Wayne Brooks:

Yes, any experience knowledgeable agent has minim amount of commission they’ll be willing to work for. Assuming they are content with 3% gross on $75k, I’d expect the buyer to make any shortfall from that, and wouldn’t be interested in having to pay you a referral fee on such such a small sale.  Some will say, just out of stubborn principles” “no way, there are plenty agents...”, yeah that’s true but a rookie agent will cost you much more than 1-2 difference.

unrelated - in this market in S FL you have buyers agreeing to pay the difference if the commission is not 3%?? I tip my hat to you if thats true

Well, I never dealt with buyers buying a $75k property. But as aside, yes I did. Once on a $450k purchase. This was an REO, offering 2%.   The beauty of it for my buyer was since only 2% was offered, very few agents were showing it (since they Didn’t have this agreement with their buyers) and my buyer got it for $50k under appraisal so he was happy to cut a check for $4500.  Also, I had saved him from a big mistake at a foreclosure auction, since I had experience there.

Money well spent.  A good buyer's agent can help you grow, save you money, save your a**!

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  • Investor
  • Scottsdale Austin Tuktoyaktuk
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Account Closed
  • Investor
  • Scottsdale Austin Tuktoyaktuk
Replied
Originally posted by @Christian Weber:

Looking into investing out of state (im licensed myself)

Agent out of state I was speaking with told me I would have to sign a buyers agreement that states they must make a min of x amount on a deal and if not I make the difference up (plus office fee). Home are around the 75-100k

Is this normal as if anything I was going to ask for a referral fee but noticing how low the prices was I was going to not do that.

Just wondering if this is standard practice,  I personally dont use those contracts myself with my buyers as if the house doesnt pay enough I dont want my buyer to pay. I will make it up on the next transaction. Thoughts please

It's a lot cheaper to have an agent in the city you are buying in than going there yourself without an agent. A local agent knows the neighborhoods, nuances, local landlord laws, paperwork, title, escrow and so on. 

Don't step over dollars to pick up pennys. Pay the agent their fair due. 

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Christian Weber
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Christian Weber
Replied

interesting - the agent has been doing RE for 1.5 years and doesnt own any investments himself which is why I was wondering on that. As an agent myself I wouldnt have my clients sign that and when I see them try to enforce it on reddit etc all it does is great a bunch of angry home buyers/sellers.

Appreciate the insights

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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Replied
Originally posted by @Steve Vaughan:

You always pay for your agent as a buyer. It's hidden in the higher price you pay the seller, but it's there.

Coming out of pocket just makes it not the fantasy of being free the public has been trained to think. 

A 2020 DOJ vs NAR actiion made it so agents of buyers can no longer lie and say their services are free. They may even have to disclose buyer agent comp. Oh No!

Personally, I've sold a dozen FSBOs.  I say in my ad- if you're bringing an agent, just up the offer by the amount of their commission. And they do.   

My friend just sold his house FSBO for $950,000. Well, it was $950 until the buyer brought their agent in. Then it turned into $985. Buyers agents are never free.

 I've sold $200 Million+ at an average closing price around $100k.....(So like a crap ton of deals for those keeping score at home) and I have never seen a deal where the buyer's agent's commission amount is not disclosed at some poont during the transaction. Whether that be the purchase agreement,  or the closing disclosure, or most often, both.

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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
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  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Replied
Originally posted by @Christian Weber:

Looking into investing out of state (im licensed myself)

Agent out of state I was speaking with told me I would have to sign a buyers agreement that states they must make a min of x amount on a deal and if not I make the difference up (plus office fee). Home are around the 75-100k

Is this normal as if anything I was going to ask for a referral fee but noticing how low the prices was I was going to not do that.

Just wondering if this is standard practice,  I personally dont use those contracts myself with my buyers as if the house doesnt pay enough I dont want my buyer to pay. I will make it up on the next transaction.

Thoughts please

Thinking about asking for a referral? Bro, just ask them directly how much they want to punch you in the face.

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Christian Weber
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Christian Weber
Replied
Originally posted by @James Wise:
Originally posted by @Christian Weber:

Looking into investing out of state (im licensed myself)

Agent out of state I was speaking with told me I would have to sign a buyers agreement that states they must make a min of x amount on a deal and if not I make the difference up (plus office fee). Home are around the 75-100k

Is this normal as if anything I was going to ask for a referral fee but noticing how low the prices was I was going to not do that.

Just wondering if this is standard practice,  I personally dont use those contracts myself with my buyers as if the house doesnt pay enough I dont want my buyer to pay. I will make it up on the next transaction.

Thoughts please

Thinking about asking for a referral? Bro, just ask them directly how much they want to punch you in the face.

I dont quite understand your comment? 

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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Replied
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:

Looking into investing out of state (im licensed myself)

Agent out of state I was speaking with told me I would have to sign a buyers agreement that states they must make a min of x amount on a deal and if not I make the difference up (plus office fee). Home are around the 75-100k

Is this normal as if anything I was going to ask for a referral fee but noticing how low the prices was I was going to not do that.

Just wondering if this is standard practice,  I personally dont use those contracts myself with my buyers as if the house doesnt pay enough I dont want my buyer to pay. I will make it up on the next transaction.

Thoughts please

Thinking about asking for a referral? Bro, just ask them directly how much they want to punch you in the face.

I dont quite understand your comment? 

I believe that if you were to ask for that referral fee, you'd find more people would want to punch you in the face than work with you as your agent.

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Christian Weber
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Christian Weber
Replied
Originally posted by @James Wise:
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:

I believe that if you were to ask for that referral fee, you'd find more people would want to punch you in the face than work with you as your agent.

So in the 200mil $$ of homes you sold / your career you never referred one out for a referral fee? Is that not one of the benefits of having a license?

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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
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James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
  • Real Estate Broker
  • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Replied
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:

I believe that if you were to ask for that referral fee, you'd find more people would want to punch you in the face than work with you as your agent.

So in the 200mil $$ of homes you sold / your career you never referred one out for a referral fee? Is that not one of the benefits of having a license?

 I don't know where you're going with this question. You aren't making any sense man.

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Kamil Baldyga
  • Real Estate Agent
  • Fayetteville, NC
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Kamil Baldyga
  • Real Estate Agent
  • Fayetteville, NC
Replied

Hey Christian, I'm an investor specialist agent in the Fayetteville, NC area. It is very common to have a buyers agreement that has the buyer paying a premium, making up the difference for commission. Reason being is that investment properties are typically lower cost and the agent's commission is not enough for the time and effort they put in (investment properties also tend to be more complicated and troublesome type of transaction). Agents gotta eat too. On our team, any property purchased over 120K has no buyer premium.

Hope this helps, let me know if you have any questions!

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Christian Weber
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Christian Weber
Replied
Originally posted by @James Wise:
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:
Originally posted by @James Wise:
Originally posted by @Christian Weber:

I believe that if you were to ask for that referral fee, you'd find more people would want to punch you in the face than work with you as your agent.

So in the 200mil $$ of homes you sold / your career you never referred one out for a referral fee? Is that not one of the benefits of having a license?

 I don't know where you're going with this question. You aren't making any sense man.

Sorry (fyi the YouTube is hilarious) - I meant in regards to your comment asking for a referral fee would go down poorly, so I am wondering have you never asked for a referral fee on any deal as you have done a tonne of volume. 

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Christian Weber
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Christian Weber
Replied
Originally posted by @Kamil Baldyga:

Hey Christian, I'm an investor specialist agent in the Fayetteville, NC area. It is very common to have a buyers agreement that has the buyer paying a premium, making up the difference for commission. Reason being is that investment properties are typically lower cost and the agent's commission is not enough for the time and effort they put in (investment properties also tend to be more complicated and troublesome type of transaction). Agents gotta eat too. On our team, any property purchased over 120K has no buyer premium.

Hope this helps, let me know if you have any questions!

Much appreciated - what is a typical buyers "premium" fee you charge? Is it just a standard 3% or a round number? 

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Guy Barlow
Pro Member
  • St George Utah
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Guy Barlow
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  • St George Utah
Replied

@James Wise you would ask for a referral if you sent a client to them wouldn’t you? What’s the difference?

  • Guy Barlow
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    James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
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    James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
    • Real Estate Broker
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    Replied
    Originally posted by @Guy Barlow:

    @James Wise you would ask for a referral if you sent a client to them wouldn’t you? What’s the difference?

     You guys - The amount of money currently involved in the deal is not enough for the agent to want to work with him. The agent basically said, "hey bro, on top of the X I am making I need you to also pay me Y or I am not working with you" He's already said he won't work for what's being offered and you want to ask him to do the job for what's less than what's already being offered.

    In what world does that sound like it's going to go over well?

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    Guy Barlow
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    Guy Barlow
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    Replied

    @James Wise I didn’t think of it that way. Thanks for spelling it out for me.

  • Guy Barlow
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    James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
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    James Wise#1 Questions About BiggerPockets & Official Site Announcements Contributor
    • Real Estate Broker
    • Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
    Replied
    Originally posted by @Christian Weber:
    Originally posted by @James Wise:
    Originally posted by @Christian Weber:
    Originally posted by @James Wise:
    Originally posted by @Christian Weber:
    Originally posted by @James Wise:
    Originally posted by @Christian Weber:

    I believe that if you were to ask for that referral fee, you'd find more people would want to punch you in the face than work with you as your agent.

    So in the 200mil $$ of homes you sold / your career you never referred one out for a referral fee? Is that not one of the benefits of having a license?

     I don't know where you're going with this question. You aren't making any sense man.

    Sorry (fyi the YouTube is hilarious) - I meant in regards to your comment asking for a referral fee would go down poorly, so I am wondering have you never asked for a referral fee on any deal as you have done a tonne of volume. 

     Sure I have collected and given out referral fees before. But there are a few things to unpack with this question.

    1. A referral fee for sending someone a client is not the same as asking for a fee for yourself just because you hold a license. That's a prick move and will make you seem very punchable.
    2. Most agents would not even be interested in the type of referral you are offering if there were to be an actual client in your scenario. I can't explain it any better than how I did in the thread that @Russell Brazil linked earlier in this thread, so I'd recommend you'd read that thoroughly to get an understanding as to why this type of referral never really goes anywhere.
    3. Thanks for the love on my show. I appreciate that, but if you were to want to work with me as a buyer's agent (Agents for all over the country buy from me) and you asked me to kick you a referral for the commission on your sales, I'd still advocate punching you in the face, even though you're a fan of the show lol.

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    Christian Weber
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    Christian Weber
    Replied
    Originally posted by @James Wise:

    I guess I just dont see the difference in referring a client to an agent and referring myself to an agent as at the very bases of it, it is a transaction of a licensed agent passing the details of a qualified buyer over to another licensed agent. Just because the agent is also the buyer doesnt change the fact that the process is the same. I dont see it and thats ok we disagree
    If anything it will be an easier transaction with someone who has done business before and understands contracts, time lines, not getting a new credit card the week before closing etc or is a cash purchaser then a brand new buyer that will need to be walked through the process, have the hand held etc. But each to their own

    thanks for the insight

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