how much do you pay realtors?

Question

This business has taught me to be frugal.  As such, I have a hard time paying the full 6 percent that is standard in my area.  I've sold FSBO a few times and I know that with tight inventory, rehabbed houses practically sell themselves.

But my realtor did me a favor and helped me buy this one on the MLS, so I feel like I need to return the favor.  And I think he expects it too.  But I have a hard time justifying spending 4k for his side of the deal, considering that it will probably only take a few hours of time.  Yet I don't want to be a jerk and offer less.

So how do you guys approach this?  Do you expect a discount with repeat business realtor relationships?  (I've done five deals with this one and sent him a friend).  Is it offensive to say, I'll list with you if you do it for 4.5?  But then I want to make sure I am not cutting the commission for the buyer's agent below market rate.  So how do I say I want to give the other agent 3 percent and you 1.5?  I know how hard we have to work for make a few bucks (no easy profits for me yet).  I still shop with coupons, get price adjustments, etc.   I also know that all the agent will do is put it on the MLS, which I can do myself for 250 bucks.  I want to give him the listing, without giving away thousands, but without it seeming like I'm asking for a favor when I feel like I'm the one giving the favor.  Thanks for the advice

Thomas D. · Answer

The myth of the Realtor is the great white goose of investing. Here how to do it. 90-95% of houses sell on the MLS. That's the conduit that sells it; not your agent. Here are my rules.

1. If the agent brings the house to me I use them to sell it if they give me a discount on the sales side after they made their commission on the purchase. 5% is OK here.

2. If I find the house I use the agent I like to buy it with. I work with 3 to 4. THEN I use a separate discount agent who charges me 1% and the buyers agent gets 3%. This is a business don't give away money just because you feel bad. :(

3. The discount agent uses my pictures. THAT IS ALL THAT SELLS YOUR HOUSE + Price. I hire a good photographer and pay them out of my pocket. This takes the ammo out of the agent talk that they bring value. Its a Facebook culture. Pics sell and price closes the deal.

4. ** Here is my power phrase that helped me weed out stuffy bad Realtors. "yes you can list my house BUT if you bring the buyer I will pay you 3.5% commission. If the buyer comes from another agent on the MLS I will pay you 1%; because what did you really do?" That's why in  Realtor classes to get the license they say "list to live." Listings to sell is easy money with little effort.

Add up the time to write a contract, drive to your house, drive back to their home, answer all calls, show up for termite and other inspections and actually go to close. Add all that time on the clock up and its not even a single days worth of work in accumulation. Would you pay thousands of dollars to someone for 1 days work NOPE.

5. In my opinion open houses never sell your house, ever. Its not a value added in any instance.

Don Harris · Answer

Account Closed "this realtor did me a favor and helped me buy off Mls" How much commission would you be paying such realtor now IF he originally sold the house to another investor?

Dana Whicker · Answer

Exactly, If you get known for nickle and dimming people, that's what you'll get in return. I pay my team their normal rates and somehow it seems to work pretty well.

Russell Brazil · Answer

The standard of practice for flippers in my local market is if you use an agent to buy the flip, you use them to sell the flip. Flippers who do not respect that standard of practice, often get cut off from the services of the good agents pretty quickly as their name gets around the area.  However I will say, that when I do list a property for a flipper with whom I purchased the property, I usually list it for them at 5% as opposed to 6%. I dont do any deals under 5% though, unless I am trying to block someone else's sign from being put up in my farm area.

You do mention that it will only take a few hours of his time? I don't know about your agent, but listing a property takes me a considerably longer amount of time to handle. On a typical flipped property, I am usually advising my client throughout the rehab process to help them make the best decisions on what will get top dollar in the market place.  If it is in a high end area, I may be doing brokers open houses to generate interest, and try to maybe find a buyer off market. Im doing regular open houses. Im spending time on paper work, marketing, negotiating, possibly staging. I am ushering the property though the closing process.  Im also spending a good deal of money out of pocket. My typical listing I spend about $1,000 out of pocket. Now granted my typical commission on a property is about $10,000...while it does sound like in your case the agents cut may be about $2,000 before his expenses and taxes.

Mary Shea · Answer

My realtor takes 1% off if I list a home she found for me with her.  Just ask him. You aren't obligated to use him for the list, so you are each doing each other a favor.

Greg H. · Answer

Totally based on the market you are in.  Some markets drive people to the property and some markets you have to drive people to the property

Thomas D. · Answer

I would disagree. Unless you are in areas that sell for under 40K (AKA super super cheap cities) per property if its priced right and looks good people will show up. And if you are buying under 40k houses why would you ever sell anything. Those things make money like a cash machine. Hello 200$ MORTGAGE. You can cover that mortgage by shaking your couch out at night and picking up the pennies.

Thomas D. · Answer

One thing I neglected to mention. If your agent spends money out of pocket to "advertise" your listing get a new agent. The only thing that sells is PICS + PRICE. Priced right your house will sell in 30 days. If its on the MLS people will find it. They don't need ads or flyers or brokers open houses. Generating buzz is kooky Realtor speak for pay me 3%.

Think about this. If your neighborhood has 500k houses that are beautiful and some nut came by and advertised their own beautiful home in the same neighborhood for 300k you think that house needs a flyer, advertising or brokers open??? No way. Buyers (the market) recognize condition and price only. That house would be bought in under an hour. The market will tell you about your price. Is it deal or not based on how your house looks. You think its beautiful and it hasn't sold in a month well then you are dumb and you need to drop the price because the market disagrees. Let the power of the MLS mass market tell you what to do.

Greg H. · Answer

it's about the time in most of these types of threads to mention that becoming an agent sves the issue

Saying that , as a Broker I often list properties with other agents .  Many of my flips are in different markets and may be several hours away. When I list with an agent I never ask them to discount their commission as I want my property to have their full attention.

If the deal is simple or doesn't warrant it, I either join the MLS in that market or list with a flat fee broker. In many areas you can get a flat fee broker for as low as $99 for 6 months( I can't imagine why a broker would do this ! ) along with 3% to the selling agent

Shawn Thom · Answer

depending on what kind of selling I'm doing I have 2 realtors I use.  One for normal flips and one for selling owner finance.  Both charge discounted fees.    Both are happy for the repeat business as I do what I can to make their job easy and make it a win win for both he and I.

how much do you pay realtors?

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