Agent's Commission
Hello,
I am considering purchasing a 4-plex for my first deal. The property seems to be underpriced and fully rented. This property is listed with an Agent who has a 3%/3% commission. Since I have no agent representing me, (ie - no buyer's agent), am I entitled to the 3% to be credited back to me? I have no real estate license, so I just wondering how this works. Am I within my bounds to ask for a 3% discount since I have no agent? Thanks for your response.
You're not going to get the money. You could ask the agent to reduce their commission by whatever amount was set for the buyer's agent (usually half, but not always). They may or may not agree to this.
Personally, I'd let the agent make their money on this and let them know that you want more deals like this coming your way. The agent will be much more willing to work with a buyer that lets them make money too instead of trying to squeeze every last nickel out of the deal.
Roger
You're not entitled to the money, but as Roger said, you could ask the agent to lower their commission. However, I think you're better off looking at this a different way. Worry about getting the property for the right price. Let the seller deal with his agent. If the seller isn't happy with the price, they can ask the agent to give back some commission. I'd hold off on touching this point unless you get stuck over the final couple/few thousand. If you and the seller are 20 grand apart in your final figures, this question is probably moot.
In the past I have used the tactic of talking with the listing agent and saying that I was not a realtor and I would be willing to work directly with them for 1% back of their commission. I would tell them that I had a perfectly capable realtor that if they did not want to give me commission, I would reward my realtor with her standard 3%. Business is business and if they get pissed off at this type of negotiation, they probably don't have the type of business sense to work with me long-term anyway.
GL
I agree with the previous poster, tell the agent you'd like a little kickback because your not bringing an agent and he is getting a fat commission...if they balk then just bring your own agent to the table.
I did this to my agent recently, he found a property for me, by an old RE agent that had retired, my agent got paid a total commission of 4%, 3% for representing me, and 1% for representing/finding her. It worked out for everybody involved very well.
Your posts are a huge help, thanks! Since I am the one who sourced this deal, I will probably use a buyer's agent to handle all of the paperwork. The seller's agent typically does not work with investment properties, so I do not forsee any gain to me by allowing them the full 6%. So, bringing in my own agent to "take care of everything" seems like the best alternative.
Thanks again.
I guess what your future plans are would come into play. If this is a one time purchase and you're done, try for whatever you can get. If you plan to be a regular buyer let him make his money and you will likely find it was money well spent.
Every realtor has a list of people he knows he can count on, they get the first call when a property is coming on the market. The really good deals never have a sign in the front yard, they are sold before that happens. They also get a call when something changes. The seller expresses they are getting frustrated and might take a lower price, he calls the people on his list and say's "hey guy, how about you throw me an offer on such and such a property" If he says he wants an offer, he gets an offer. Someone makes an offer using a buyers agent, he doesn't want to lose that 3% so he calls, he just keeps saying "can you do better" until he has a better bid than the outside one. Bottom line, if someone using a buyers agent purchases an investment property it's because they paid more than any of the realtors own buyers were willing to pay, IE they overpaid.
Consider the value of having an agent on your side when buying REOs. People love to talk, if you listen bankers will tell you what the opening bid will be at the sherriffs sale, and realtors will tell you what the bank really wants for that REO.
What is the value of lock box access? Might seem like a small thing, but being able to look at properties at your convience and as long as you like without someone looking over your shoulder is nice. Maybe that makes the difference when it comes to bid time, having already done your inspections you can put in a bid without all the contingencies. Equal dollar bids, one with contingencies, one without, no brainer who gets it. You probably even win with a lower bid.
I'm not going to haggle over a few % on one deal, I want the big payoff. After you are a proven buyer a kick back will probably be offered anyway.
One of my fathers favorite stories, his realtor called him with a hot new listing and wanted him to look at it right away before anyone else found out. My father said that since he was in Canada at the moment that would be hard to do. An hour later the realtor called him back and said congratulations, you just bought a house. My dad laughed and said "ok, how much did I pay, where is the house at and did I get a good deal?"
Great comments guys,
I have two great realtors after working with at least 20-30 other realtors.
To me I guess I don't take it personal, I see it as strictly numbers. If the realtor said no to a 1% kickback, then I would not be angry at all becuase I know my realtor would be more than happy to get 3% for doing very little as I was the one to find the deal.
As far as working hard, congrats on that and you are to be commended on the number of calls you get, however, I don't see how that translates to taking a 1% or 3% reduction on a commission.
Well first of all it won't matter what your great Realtor is willing to do unless he is the listing agent. So unless he is actively out there getting listings, then what price he will charge is pointless. Then, may I ask you, what is the difference between what a buyers agent does or what you will have to do in a buyers situation without a Realtor? And you still must sign a "Dual agency" contract with the listing agent, so you are represented by the listing agent. Most buyers do not have the know-how to do much of the required items.
We had a buyer for a property we had for sale. It was a dual agency, but he claimed he was an active investor and knew what he was doing. He kept saying that over and over. Near closing time, we called to confirm everything was ready to go. And he said no, that he decided to switch to a line of credit instead of a mortgage. He had forgot to do a title search and we had to tell him, he didn't know he had to. Closing was now two days late and our seller was pissed. We ended up getting our "active investor" to sign a form releasing the seller from liability in case something came up on the title search. That taught me that you just can't trust people to do what they're supposed to without constant watch. That is a key point of any agent. A glorified babysitter, lol. If any time a buyer wanted me to trust them to get their job done with no help from anyone else, I would definatly think twice about accepting their offer. There are many good investors and there are many people on their first or second deal that call themselves investors. Finding a good deal isn't nearly as hard as making sure the person will come to the closing table with cash in hand.
Quote:
On 2004-09-03 12:54, ray_higdon wrote:
Great comments guys,
I have two great realtors after working with at least 20-30 other realtors.
To me I guess I don't take it personal, I see it as strictly numbers. If the realtor said no to a 1% kickback, then I would not be angry at all becuase I know my realtor would be more than happy to get 3% for doing very little as I was the one to find the deal.
As far as working hard, congrats on that and you are to be commended on the number of calls you get, however, I don't see how that translates to taking a 1% or 3% reduction on a commission.
I agree with you Ruman and that is certainly one reason I could not be a realtor, I'm sure you run into a lot of incompetent people! Whereas I am not a seasoned veteran, I have managed a few deals without a realtor at all and a few with only the listing agent.
Thanks for sharing your comments, GL
General comment based on the posts I've read over the last few weeks.....I'm not a realtor, but I must ask, why is it that folks want the realtor to come down on their comish? Has the attorney, title co, or lender been asked to reduce their fee to make it work?
Everyone has their place in the deal. While realtors are not a necessity, they are very valuable in the game. Treat them with the same regard as you do your contractor, attorney, etc. and you will find good deals will come more often than not. As investors, time is best spent putting deals together and executing. If someone else can help you source them, all the better.
If you are not asking your lender to come down on his commissions and or fees, you are losing a few hundred dollars per deal.
If you do a lot of deals as an investor you are not a poor sap looking for a handout. You make everyone around you money, the realtors, lenders, attorney's, all the above.
I think people confuse negotiating with being rude to people. And if the 1 or 2% is what makes something a deal, it's way too tight to be a deal. Not every deal fits the mold of even asking for a discount on commission, but saving 1 or 2% on 10% of your deals spread across a year can be a big difference.
Quote:
On 2004-09-04 20:19, learntherules wrote:
General comment based on the posts I've read over the last few weeks.....I'm not a realtor, but I must ask, why is it that folks want the realtor to come down on their comish? Has the attorney, title co, or lender been asked to reduce their fee to make it work?
Everyone has their place in the deal. While realtors are not a necessity, they are very valuable in the game. Treat them with the same regard as you do your contractor, attorney, etc. and you will find good deals will come more often than not. As investors, time is best spent putting deals together and executing. If someone else can help you source them, all the better.
Ray, obviously you still haven't found that good realtor yet or we wouldn't be having this discussion. After test driving so many perhaps the time has come to look at yourself. Perhaps you are not a good customer and the agents aren't inclined to give you the treatment that they may be giving to others. Why could that be? I'd say that the minute you ask for a commission discount they rule you out. I have worked with 3 realtors, 1 wasn't very good, she couldn't get the hang of what I wanted and insisted on trying to sell me what she would want, the other 2 are great.
I agree about not taking it personal and it being strictly about the numbers, and to haggle over a piddly 1 or 2% when there is real money to be made just doesn't make sense to me.
What is the value of being offered properties before they actually get listed? What is the value of being given a call when a seller gets fed up and wants an offer asap? What is the value of getting a call when the listing agent gets an outside offer that might get accepted and he wants to beat it with his own buyer? What is the value of lock box access? What is the value of getting bottom line info on what the bank really will take on that REO? What's the value of knowing what properties will be available as REOs 4 months ahead of time? What's the value of having your offer presented is a positive light because the realtor really wants you to get the deal, especially on REOs when the bank is out of state and clueless to the local market, the realtors word makes or breaks the deal. Hard to place a dollar value on it, but it's alot more than 1% off a few deals.
As to your comment about using or threatening to use a buyers agent. That just wouldn't fly at all here. If the offer had a chance of getting accepted and would make it a sweet deal the listing agent would be on the phone to his buyers and have a better offer in no time. If he was blind sided and had no time to get a buyer he would just advise the seller to wait a day or two, most will listen. You better bet that if you get a deal using a buyers agent you probably overpaid.
Maybe it is all a location sensitive issue, I don't know, perhaps you just can't get the benifits of a good relationship living in a heavily populated area. Or maybe trying to negotiate the commission really is just rude.
My market is really tight on rentals, I commonly have renters lined up before I even close (another benefit to lock box access) and I usually spend a month on rehab after the close. I have never advertised a property, unless you call my truck in the driveway and a hammer on the front step advertising, there just isn't a need to. But, I had a family move with only 1 weeks notice, so I put an add in the paper, we had an openhouse for 1 hour and collected applications. The first young man on the scene was obviously from a family of negotiaters, I could almost see him sitting on the floor legs crossed listening to dad and grandpa brag about what great deals they had nogotiated, taking it all in. He tried to wheel and deal with me before he even looked at the house, completely not understanding the market. As people kept coming and filling out applications and pleading with us to choose them, he quickly gave up the negotiations and just wanted the house any way he could get it. I found his attempt to negotiate inappropriate, and since my opinion was the only one that mattered...
Good comments Mykyle, luckily I have two great realtors that bring me deals consistently, and a lot are pocket listings.
My way isn't for everyone and I'm OK with that.
Good luck!
I'm a broker/investor and am uber flexible in my deals to make things happen for purchaser and seller. One problem I've run up against in NY is there is a law that doesn't allow brokers to give clients a "rebate". It's easy if your a listing agent, but tough on the buy side.