Buyer broker?

Question

Bryan H. · Answer

Hi @Joel Owens I've worked with commercial brokers before and I know deals are much more difficult than just about any residential deal. I've seen negotiations go on for a year before they were agreed to, so I understand why you wouldnt want to reduce your rates - you earned it.

@Nicolas  Gonzalez That's exactly the point of the author, you get what you pay for. He only used buyer-brokers when he did his own analysis, comps etc. He just needed someone to get him in the door and make the offer. Which is basically what I have done. I haven't found anyone that seeks out properties that fit my criteria, runs comps, runs rent comps, does the analysis and then presents it to me.

@Kizzy Robb The book is "Investing in Duplexes, Triplexes and Quads" by Larry Loftis, so it's probably the same one.

I found that Redfin does what was referenced. http://www.redfin.com/buy-a-home/refund.

Kizzy Robb · Answer

@Bryan H. - I read the same thing in another book that was on BPs list of must read books. This book was about investing in quads and the author encouraged the same for the same reasons.  It's very interesting to consider and I wonder if certain areas have more buyer-brokers than others.  I am looking into it though.  Please share your findings.  I'll do as well.

Steve Morris · Answer

the buyer broker he gets 1/2 of the broker commission or 1.5% the sale at closing.

Have no clue where the 1.5% came from.

If I'm a buyer's broker, I usually ask for 50-50 on the commission.

Brandon Roop · Answer

I'm currently reading this book and am trying to get more info on the "buyer broker" concept mentioned.  I realize this post is a little dated, so I'm wondering if either @Bryan H. or @Kizzy Robb have gained any additional knowledge or experience on this subject since this post?  I am doing the leg work of finding properties myself.  I just don't know the buying/selling process well enough to even try to buy a place without a broker/agent involved in handling the paperwork.

Nicolas Gonzalez · Answer

"you get what you pay for"

Joel Owens · Answer

Bryan that sounds like a buyer rebate. According to the GOV website here currently it appears NC allows buyer rebates.

http://www.justice.gov/atr/public/real_estate/rebates-details.html

Never have heard of Larry Loftis. Any broker giving away half of commission before business expenses is very weak in my opinion. It never comes up with my clients on commercial transactions. In fact they are always making sure I get paid fully for the services I provide.

Why would I want to do twice the work for half the money? Any smart investor recognizes a broker that is an investor themselves wants to get the highest return on investment.

If it's a head broker they can determine what they will work for but if it's an agent or assistant broker etc. they have to do what the brokerage wants as it's the head brokers client. The brokerage might not want to be seen as a discount shop or causing problems for their other agents confusing the brand of the company and it's message.

If you have a 100k house at 3.0% that is 3,000. Half of that is 1,500 before expenses. If you are an agent you will be getting less than that after your cut. Brokerages have gotten wise to this and if buyers agents do this with clients without running by their broker the brokerage usually has a clause in the agents IC agreement (independent contractor).

It usually states if the buyer agent gives a rebate the brokers cut will come off of what WOULD have been the full amount.

So if 3,000 total and the brokers cut is 30% and the buyers agents says hey I will rebate 50% of 3,000 then the buyers agent gets 3,000 by .30 = 900 to broker, 1,500 to buyer, 600 to buyers agent! lol Boy that agent is really screwing themselves as you can see. The head broker isn't going to pay for their stupidity. A broker/ agent needs to increase their worth through knowledge, connections, and inventory. If they do that cutting commissions doesn't come into play at all. I think trying to squeeze a rebate out of a broker/agent and  cut them off at the knees every time will not build a lasting relationship. I have also seen strategies in SFR where they tell a buyer broker to list at a low commission and they will pay them more upon resale of the rehab or the seller buying another property. Then instead they go through someone else and do another rebate again. I have been hearing for decades how discount brokers will take over the business. Many of them have come and gone in  flash. There will always be people wanting something for next to nothing and then some people will work for that. There is all kinds of business out there so you choose what you will stand for or you will fall for anything. Too much drama in SFR space which I why I love commercial.

No legal advice

Buyer broker?

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