2) What better compensation system can I do to better align their interests with mine?  

Can you (the buyer, investor) compensate someone (unlicensed) for helping you for being involved in the purchase process of your investment property?

I come from well-compensated W2 jobs and may return to one and my wife works part time.

How should I negotiate the Realtor's compensation and the contract that should be used? 

@Melina GorositoAs others have mentioned, it depends on the type of property and financing with which you are dealing.In Canada, origination fees are unheard of for residential properties  - unless you are dealing with an off-market lender (which means you cannot borrow from a bank, credit union or other tier 1 or 2 lender).When you move into commercial properties, there are a variety of fees, an origination fee is a possibility, but still not common.If you are using an independent broker who's not being compensated by the lender (which they should disclose), they will charge you a fee for their services (in my experience these fees are negotiable).In our experience, even when paying the lender levied fees associated with commercial financing (lenders admin, legal, etc), the fees are deducted from the funds advanced.  

I'm thinking about flipping this property since it seems like the only option I may have at this point.I've sent an addendum to the seller today to drop her price to 65K to compensate for overages in repair estimates.

Christina, When you consider the momentum of the loss you will have to compensate for once the market at least stabilizes (probably a few years), it is difficult to see how you compensate for that loss.

Another gripe I have is the medicare scare: A way to solve that is to put caps on the pay/perks/compensation of the various layers of the medical/ pharmaceutical and cosmetics industries, and the amount that they can charge medicare recipeints for ANY drug or medical service.We can give illegal immigrants free medical care, the same should be done for our own people. ofgift

That is how I compensate my agent for these services.

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