How do you know how much you should pay a Realtor out of your wholesale profit?

Question

I have a Realtor i am working with and she seems to be really fare.  She said she has worked with a lot of wholesalers before and that is a plus for me.  She also said she wanted to make sure i get to keep the MAX amount of profit possible which i thought is a good quality in a person i want on my power team because its humble and i personally would like to pay extra for people with that mind set in helping vs receiving.

I was wondering how to determine what would be a fare way to pay?

She mentioned a few possibilities like a percentage so i wanted to know what is a good rate that others would recommend.

Say i get a property on contract for $60,000  the ARV is $140,000 and sell it for $75,000 and earn $15,000 Assignment fee.  Out of the $15,000 what would be a fare %?

Also another factor in this is... I have a list of Buyers to Sell properties to on a continues basis and for the first 2 deals i split the deal 50/50 after its 20/80 and i keep %80

in the scenario above from the $15,000 i would keep $7,500 since its my first and out of that i would pay fees to the Realtor.

Any ideas what seems fare in this scenario?

Also how do you go about officiating it? Maybe a contractual agreement?

If its the contract for the property that i sign to assign to the buyer would it be part of the terms i add to the contract?

I'm looking forward to your reply's

Thank You

Jassem A. · Answer

The agent got $250 on the last house that was wholesaled to me

Leland Titus · Answer

Hi Kenos. I am a Realtor. I also own my own brokerage, this allows me much more flexibility on how I get paid. If the Realtor you are working with works for a larger company and depending on how the deal is structured they may be contractually obligated to their company and MLS to charge certain amounts. That being said all commissions are negotiable and if you can bring value to the relationship you should be able to negotiate a pretty good deal. My suggestion if the realtor your working with is part of a big box store see what they are willing to offer and then also talk with an independent.

Kenos Duff · Answer

Thank you all.  Joe, It does make sense to have a % commission because in my case i am finding the properties and i have the buyers.  I do my own comps and i only getting comps from agents for a second opinion to be more accurate because they have MLS access and the closest thing i have is Realtor.com and i know i have to work with the agents for foreclosures and bank owned properties so in that case i was wondering does the agent get paid commissions from the seller?.  Otherwise if %6 is the ongoing rate i will discuss that with my agent and see if it seems fare.   If my agent does find the buyer 50/50 is fare to me however my buyers list is at 80/20 so i keep%30 more.  I do plan to do Virtual Wholesaling nation wide so thank you Nancy your info helps :)

Dean Heyboer · Answer

Joe thank you for the good info. I live in Michigan did not know some of that stuff Thanks.

Joe Trometer · Answer

Hey Kenos,

I have my real estate license (in referral, I don't actively sell) and there are laws we have to follow in Michigan.

We earn a percentage (usually 6%) that is divided among listing and selling real estate offices and then split again between real estate agents and their brokers, on the Sale of the property.

In other words, real estate agents and brokers earn their commission at the closing table of the property sale.

It is unlawful (here in Michigan for sure) to accept any sort of addition money or gifts, as a licensed agent or broker, other than the earned commission at the closing table.

Example:  When I was actively selling as an agent, a Title Company representative would stop by our office and bring donuts or a party tray of snacks.  He had to stop doing that because the intent was for our office to return the favor and bring him business.

Now if an agent wanted to charge a fee for service other than a commission, it would have to be approved and paid to the broker and then paid (or split) to the agent.  In our office, anything like that, our broker would contact the office attorney or the real estate board to make sure any money or gifts collected other than a commission was on the legal side.

I would think that if you purchased the property with your agent they would get that commission.  Then promise your same agent the listing when you sell the property to earn that 2nd commission as well.  They would earn 2 commissions per property that way.

To reward your agent with more earned commissions would be to establish a working relationship with them on repeat business and of course send them referrals with your friends and family when they want to buy or sell their home.

In the past I had a favorite agent I was working close with to find me a fixer upper.  Meeting for lunch and picking up the tab was no harm.  We talked about the local market, exchanged ideas, then went and looked at a few houses.

So I would check with your agent's broker and or call their local real estate board of directors before paying anything other than the commission stated on the purchase contracts that are paid at the closing table.

Again, the best reward a real estate agent might get are referrals from you on other buyers and sellers.

You keep the profits on your wholesale deals - you earned that!

And will give you the money you need to do more deals with your agent.

Hope that helps you out some Kenos,

Cheers,

-Joe

How do you know how much you should pay a Realtor out of your wholesale profit?

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