All Forum Posts by: Paul Clements

@Russell Brazil Several people have already touched on it, and no it's not an ideal situation, but we have a large number of things in common and have some mutual friends. If I had a long line of non-business-related single people at my beck and call who that applied to, I would pursue elsewhere; but that's not how life is. And yet again, it's a one-off transaction. I've seen many relationships arise from a business/workplace context, whether they left it behind or continued working together.

@Brian J. How is it cheap to have the seller pay the agents' commissions in accordance with the terms the seller set out? Last time I checked, that's called normal. 'Broker fees' are BS; the broker's fee is the broker side of the commission, and in this case they're taking half the commission. It was her obligation to disclose fees as much as or more than it was mine to ask (much more hers, given that their terms were well out of the ordinary). I'm a lot older than her with a lot more obligations, and believe me, it's a decent wage and more than most people make. So you will pay any ridiculous, undisclosed fee that someone hands you just because you've been out with them a couple times?

@Mark H. Porter  I agree in general, but it's a one-time transaction that's essentially already over with. I'm getting my license in a few weeks.

She's not my wife or girlfriend, we've been talking like that for a couple/few weeks and been out twice. I'm not paying a $1k ridiculous, previously undisclosed fee that I wouldn't pay to someone otherwise. As it is now (after me kicking in the 0.5%), she's making money on the deal that equates to a decent hourly wage, which is the only reason I'm paying the 0.5% in to begin with - I wouldn't have done so if it was an easy deal with minimal work on her part. Her broker cut her a 50% break on the fee so she has to pay a couple hundred back in exchange for discounting me. To say again, she doesn't even support the fee and didn't really put up any resistance to me negotiating it down.

@Bob Reinhard   Thank you. I fully agree with you, this started out as business only; I'll have my license before the next deal, so there won't be any more mixing. It's not clouding my judgment (to a large degree), it's just a question of fairness to the other person and me not getting ripped off. If there were a $10k fee necessary to close the deal, it would still make plenty of sense, so there are no questions there. Appreciate your thoughts and I can tell you come from a place of greater experience.

@Bruce Woodruff  They call it administration fee, I believe it may also be called broker fee, broker service fee, service fee and a lot of other BS names that junk fees have.

@ Steve K I'm open to being a regular agent and look forward to see how it goes. If I just do it for investing reasons, I will see if I can find a brokerage with near-zero annual cost/overhead. We spoke further today and hashed out a balance that will be fair to both parties with nobody getting beat up too much. Yes I could've played hardball and left her with a triple-digit commission for weeks of work including late night weekends etc (sporadic but 30-40+ hours on ground plus gas etc; paperwork phone calls to others researching for me on MLS etc), but that didn't seem right.

@Mike Hurney   I think not, but I guess we'll see; by hanging out I mean earliest stages of dating, that's millennial speak. I agree with your sentiments on fees but I explained my rationale for paying some of them, in line with Steve K's thoughts.

@Dustin P. Yes, that's the case here. Agent works full-time in another job and I believe makes the large majority of her income from that, not real estate. She's actually been fully amenable about the whole thing from the start and hasn't pushed for anything, she just sent me the agency contract and it said what I described. She has agreed to all of my proposals so far including going from $1k to $150, and if I stuck to 2.5% and no fees she'd probably agree to that too. The issue here is really just the involvement of the brokerage and the broker's buyer agency contract, as well as fair compensation for services rendered. If someone does a job for me I pay fairly regardless of the letter of the contract or lack of contract.

@Corby Goade
Thanks, I'll consider that. One factor is that I will be representing a company (which may involve others), which will provide a buffer between myself as investor and the seller's agent. I'd like to at least have the option to represent myself. An even bigger reason I am getting my license than saving money on commissions is so that I'll be able to access properties as quickly as I want on my own schedule, as often as I want, and stay there as long as I want (e.g. to inspect vacant properties and submit offers with inspection waived) without depending on anyone else. If I feel the need to enlist a seasoned agent to negotiate the deal, I will still have that option.

Have you ever heard of the following scenario? She is saying she may have to cover the remainder of the admin fee. That seems to be common based on some of the responses above? If I were to 'negotiate' her commission down to 2.5% / demand it go to 2.5% or try to push the sale outside of her brokerage/make her sub-agent as suggested above, would it ever be possible that the brokerage would bill her for that missing 0.5%? The only reason I am offering the full 3% is so that she doesn't get hosed by having to cover the ridiculous admin fee, which I'm not sure she knows/knew is ridiculous beforehand. Like I said above, I feel she should make X off the sale for the work she's done with me, and she won't make that if she eats the admin fee. That's the only reason I'm putting up the 0.5%.

@Dwayne Poster The reason I'm not requesting her to pressure the seller to pay her 3% is this: the property was purchased for $170k in 2005 (the guy paid way too much) and is being sold for less than that now. The loan balance on the property plus the 5% commission is equal to 99.9% of the offer price, so dollars away from being a short sale. The seller doesn't seem to be flush with cash and I suspect the property will be sold to someone else within a few days if I hardball him to cover my agent's fee. 

@Steve K. Yes, that's precisely what's going on here and the sale price is a little less than that. That is the reason I offered to cover it; maybe half for that sake and half for the personal dynamic. Whereas most of the other properties we were looking at are in the $250-350k range. My question is whether they do indeed have to eat it or not / eat it in full or part, etc. If they have to eat it in full she'll come out about $200-300 less than a 2.5% commission without an admin fee involved.

I'm definitely not bringing it up with her broker or commission. I'm not canceling/torpedoing anything either, the sale appears to be going forward; the fact is I was getting my license in the very near future anyway, and would have done my own deals in the future regardless of who represented me on this one. Several weeks back, early in the goings, she said she was going to send me the agency. I said something to the effect of, no rush, I am fine signing a buyer's agency and we can do that later (without me knowing the details of it; I assumed it just meant they would represent me, not that I could owe fees/commissions outside of the scope of the purchase contract). She is young (20s), never owned a home, and has been an agent for less than a year, so I don't think she necessarily knew that their fee structure was that unusual.

I basically said what you said verbatim when I first brought it up with her. That I assumed she would be getting 3% and was willing to cover the difference, but that I thought the admin fee was way overboard, and that the admin fee itself should be built into the commission. All the broker does (for buyers) is administer, there should be no separate 'administration fee,' and if they can't cover their expenses on the half of the commission they take (assuming a commission of 5-6%), they should go out of business IMO. 

Thanks. I didn't sign the buyer agency yet and not necessarily going to, I just verbally agreed that I would pay the 0.5% differential + $150, which comes out to $940 total. Her broker signed the purchase contract already and is aware of the transaction, so it seems it may be too late for her to work for the seller this sale. 

All things considered, I agreed to pay $150 fee and the 0.5% (mainly because I was expecting it to be 3%, and so that agent, who has put in probably 40-50 hours in person with me counting commutes and a lot of time beyond that, doesn't have to possibly kick that shortfall back to broker and earn next to nothing on the sale). Not thrilled about either but don't want to hold up deal which has gotten a lot of attention from buyers, and it's a fairly low-priced property (all told it will be $940 additional). Down the road will make sure everything's hashed out in advance, and not paying a spread or any fees over commission.

Will have license fairly soon and the next commission(s) will go to me. Going to hang license at another brokerage so I don't have to kick anything back other than their cut of the commission (I doubt they'd charge their own self-representing agents the admin fee? but you never know), or have to hit customers with the commission differential and huge admin fee. 

My impression is that in addition to a low likelihood of offer acceptance, you may be being a little aggressive here. Going from 11 tenants to 57 in one transaction is a big jump. You could buy a couple smaller buildings that wouldn't require any on-site or full-time staff and are closer to asking price (maybe like two 8-12 unit buildings), give some of your cash back to the bank, and see how you do. I have no experience in single family but I suspect it may be a bit of a different animal than multi (higher turnover, lower credit tenants, etc).