How are real estate agents paid with creative financing?

11 Replies

ive got 2 properties I am looking at both with very motivated sellers, divorce and over worked land lord. I should know soon if I get my FHA loan, but if I don't I will be trying creative financing. Question is though, if I do partial seller financing, small down payment+monthly cash flow for several years, how exactly is the agent's pay factored in? Is he paid a percent is the down payment or the overall price? Are there circumstance where he would not get paid for his work and thus be less inclined to bring me deals?

What I have typically seen with owner financing is that you would need to be putting enough down to at least get them through the purchase without having to come out of pocket. That means paying the legal fees, appraisals, inspections, etc. that you typically have to pay for as a buyer, and giving them enough of a down payment for them to pay for conveyance taxes, capital gains taxes, broker fees, or any fees that would typically come out of the sellers side. While this is what I have typically seen, you can always negotiate these things where they pay for them out of pocket. The other question is how the agent is tied into the deal? Does he have a listing agreement with the seller? Buyer representation with you? These things could factor into him getting paid. 

Depends too on what you call "creative financing". Title must pass for an agent to earn the commission, so if title is not to pass until some future date, to get the Realtor on board you'll need another agreement or addendum to the listing to allow that agent to be paid at the settlement of that contract. Seldom will you get a listed property through something creative that doesn't pass title without getting that listing agent on board.

And, some agents will carry a commission back, depends on the circumstances, but something is better than nothing at times. Good luck :)

@Bill Gulley  Wouldn't title pass through if they held a note or did a land contract?  I guess I'm lost on that comment for some reason. 

A not and deed of trust...yes, title is passed, a CFD doesn't pass title until the contract is fulfilled in the future, a special agreement for commissions is then needed. :)

@Mason V.  

Agents can be very short sighted or there brokers can be... back in the mid 80's 20% interest environment RE was DOG TOUGH>. I quit selling homes and only sold land that my clients owned free and clear ( northern Ca.) I then sold all of these owner finance with 10 to 20% down whatever it took to make the deal.. I would take a % of the down and usually half of the monthly payment until paid.. I simply got an unsecured Prom note form the seller with the proviso if the buyer stopped paying my commish ended.. Well you start stacking these up every month and the next thing I knew I had cash flow like crazy my sellers were happy with 9 to 10% owner carry interest rates... So lots and lots of properties for a few years like this.

But some agents if they don't get paid would rather get nothing.. never understood that.

Also don't need to close to owe a fee.. you can do a lease option and not transfer title and pay the agent a commish as in a leasing fee... Like all things RE these things are all negotiable and legal on the payment of commission side on owner finance deals.

Guess that was a history lesson Jay, I know, been there, LOL.

Yep, any installment contract can be negotiated for a commission, just a lease too, but for a listing sale commission the title must pass for the commission to be earned, so the agent needs to modify the ability to collect a fee. :) 

@Bill Gulley  

  title does not have to pass to be OWED a commission.. Although this is rarely contested in practicality there are instance's were commissions are earned and due when title did not pass..

Originally posted by @Jay Hinrichs :

@Bill G. 

  title does not have to pass to be OWED a commission.. Although this is rarely contested in practicality there are instance's were commissions are earned and due when title did not pass..

Did I say that Jay? NO, I did not, I said title must pass to earn the commission under a LISTING SALE agreement used by the local boards to sell a property through the MLS systems. Standard Listing Agreement.

Now, if you have a listing agreement, check the box, sale, lease. installment sale, then you might use that same agreement.

To sell means to convey title in all states. That is an NRA position, not mine.

Now, what some broker does with some seller in some backwoods area will certainly fall to, "all real estate is local". I try to speak to the generally accepted, usual and customary that effects most folks, not the very few exceptions someplace and discussing the exception as if it is the generally accepted view. But thanks for the additional input.  :)

@Bill Gulley  

  not backwoods were these deals get wrangled usually high dollar properties and big money... but your right generally accepted practice  I was just pointing out that title does not have to pass for a broker to have earned and be owed a commission.  :)

Ok off to work I go... hope your enjoying your day.. we have had 65 degree weather here in PDX record highs... !  just enough to tease one that ORegon has great weather !!

LOL, yes, there is providing a willing and able buyer and a seller in default, but we're talking installment sales here.

Lucky you. we had that weather here last week, 69 degrees, not today, last night was -3, if you think you have good weather, check out Queen's Island off the Canadian coast, most northern latitude with a highest average temp zone. 

Don't work too hard. :)

Maybe you all should just drop the word commission and insert the word fee. I have collected tons of fees where a title never passed. What I contracted to do, I did, and earned my fee and got paid. Sometime over the years I took a unsecured note if they passed my smell test. Only had one person try to avoid payment so I got a judgement and he used to tell me you know 90 % of judgments are never collected. He moved to the next county and thought he was free, He had other judgments that I bought when I found out his mother was very sick and not expected to last long and he was the only heir in sight. As I was walking out of escrow with a check to cover the judgments paid in full I smiled as I told him you forgot to analyze your figures, 90% don't pay but that means 10% do, welcome to the 10%.

As for agents not having a clue maybe the other party should just say I can't pay you will you do this for free. Their thinking is it doesn't really cost you anything, your time and out of pocket expenses and lost opportunities don't exist in many peoples minds, it is a well you don't really have anything else to do attitude so you might as well do what I need. As one prospect told me I can't pay you anything but if I win the lottery I'll pay twice what you would have got. Wow, how I could I pass that offer up. Maybe my doctors and the hospital would go for that concept from now on. 

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