“Bonus” Real Estate Agent Commissions

[Richard Smith]

Hello all, fairly new to the REI world, but seem to be getting a foothold.

I was wondering if anyone gives their agents "bonus" commissions. As a REI I'm understanding the idea is to buy as cheap as possible. In turn, when working with an agent, this would seem to automatically disincentivize an agent to help negotiate a lower buying price.

So, in the event that a great agent helps you land a deal for less than you were expecting, and hurting their own commission, does anyone compensate their agents with some of the savings?

Thanks!

[Ronald Allen Barney]

Originally posted by @Richard Smith:

Thanks @Ronald Allen Barney! I understand a lower price isn’t always possible, but I was just wondering if this is common practice in this scenario. Also, I’m just getting started, so I don’t yet have the momentum to purchase multiple properties a year. My agent is good and dealing with me, but I am also taking their time and looking at properties far below their average client buying prices. I’m seeing it as the same work for less compensation, at least short term. Especially with so many buyers out there in a higher range. But this is my first time working with an agent and don’t completely understand how an agent thinks. Any further insights are much appreciated! 

 A typical owner-occupier buyer, once they buy, you won't hear from them for at least five years.  An investment buyer not only has the potential to buy again sooner than that but he will probably know other investors and recommend an agent that provided good service.

With that being said, it's a common doctrine among realtors to "chase the sellers and let the buyers chase you".  That's because on average it takes about 8 hours of realtor work to take a seller to close, and about 40 hours of work to do the same with a buyer.  If you did get good service and lots of hours labor out of an agent, let him know it's not going to waste, you'll be back for more when ready, and if anyone you know asks you'll recommend him or her.  That'll keep the agent engaged.

The situation where an agent will start to let go of a buyer is if they're on like the 10th property and still no offer yet.  They start to see it as diminishing returns.  If you're running the agent all over town, offering nothing on anything after several showings, that's where a bonus commission might be wise.  "I'm not just a tire-kicker, honest!"