After silently watching the BP forums for about a year, I'm ready to find my first investment property. There are a couple of houses on MLS in the West Chester, PA and North Wilmington, DE areas that I am interested in, so I thought a good start would be to find an agent who could give me some feedback and show those properties to me. I made contact with a Realtor outside of BP and let them know that I was a new investor who was searching for houses on my own, but also would be interested in having an agent help with properties on the MLS. We set up a face to face meeting and talked about what I was looking for. At the end, the Realtor told me that he would be happy to work with me, but that he would require a exclusive buyers agreement to do so. I politely declined and left, saying I wasn't ready to sign into an agreement. So, my question is whether this is normal or not? It doesn't make sense to me to have to sign an agreement that would require me to pay him a buyers agent fee regardless of how I find the house. If the Realtor brings me the lead or takes time to show me a MLS property and I buy it, then of course he deserves to be paid. But if I find my own FSBO property or purchase from a wholesaler, why should I be obligated to pay him? I understand that in a retail situation where a home buyer wants a full service agent, this might make sense, but I don't need his help learning how to be approved for financing, and I don't need his help on leading me through the steps of buying a house. Is my expectation realistic? Do the investor-friendly agents on this site require their investor clients to sign agreements requiring the use of their services? Is exclusivity expected? Even though Southeast PA is not far from Northern DE, the houses in these two areas are quite different, and in this first experience with a Realtor it was clear he was familiar with one of those markets but not the other. Can I not use a separate Realtor for the two different markets to make sure they are experts of their respective areas? Edit: I just saw a thread from 3 years ago on this issue, buyers agent exclusivity , so I guess the answer is that many agents ask for it, but the advise is that REIs shouldn't enter into such an agreement. That means there are Realtors that don't require this, perhaps here on BP?

Buyers agent contract requiring exclusivity

Rental Property Investor · Nolanville, TX · Member since 2008 · 130 posts · 88 votes

7y

@Steve H.

This is totally normal! The agent is going to put time in scouring the MLS for you, pitching properties to you, showing you homes, etc. Lots of work in it. Also, when you find that property, they're not off the hook. They're going to setup all closing and get everything setup for you, regardless if you found it. It's the only way they get paid.

My wife is an agent (I'm the investor) and has investors looking for freebies all the time. They suck up time and effort and not want to pay out for the time. It's a business. They have credentials to get on the MLS. Recommend you get your license and find a broker if you don't want to pay, but even a broker is going to take a slice.

4 Reply

Irene Nash

Realtor · Member since 2018 · 138 posts · 174 votes

7y

The question is, are you willing to pay someone who does some work for you, and if so, how much?

On the one hand - speaking as an agent - I'm not crazy about buyer agency agreements because they often rope buyers into working exclusively - and for a long time - with someone they know little about, who sometimes turns out to not be as competent as they have the right to expect them to be. I've seen this quite a bit.

On the other hand, it takes a lot of work to be a good (emphasis 'good') buyer's agent, find you properties, vet them before sending them to you, do research on them when necessary, and then show them to you.

It's actually really hard to be a good 'half' buyer's agent, as in, "my client is pretty sure they know what they need to know" (sometimes true but sometimes not), "so I'm just acting like an upgraded Zillow and sending them stuff, but in order to really do my job correctly I need to vet the properties and give my opinion, but that takes a lot of time and this person is totally happy to ditch me and buy without me so really, why spend all that time doing that." Not fun, not fulfilling.

Investors especially, in my experience, tend to take a more hardline view of things and it seems more of them have read the same books (basic theme, "do what it takes to get the deal and agents are fat cats who don't really deserve to get paid anyway - also thank you for the book royalties which I would never have gotten if I had just written a book about how it's fair to pay people for the work they do").

So... if someone spends weeks or months finding and researching properties for you and then you happen to find a FSBO or something else that works out for you without them, do you owe them nothing? The time they spent for you is work spent away from other clients, away from their family and/or dog, and/or time spent not sitting on the side of a river sipping a beverage of choice. It is valuable (aka, worth money) time.

At the same time, I would be pretty hesitant about signing a multi-month agreement with an agent before I had gotten a chance to see what they were like to work with. Plenty of buyers end up with crappy agents this way.

In my opinion, a reasonable approach is to sign a much shorter agreement, i.e., one or two weeks, to see what it's like to work together. If you like the agent, great, sign on for longer and understand there's a lot more to buying a good investment property than just finding it. If that doesn't seem reasonable to you then it's likely you're the kind of investor who's going to feel better not working with an agent at all. Either is totally fair as long as all parties are in the know, IMO.

In terms of the different areas, I would recommend just telling each agent (DE and PA) about your concerns and needs for expertise. You can modify a buyer agency agreement (which usually includes huge search areas) to the areas you feel you need area-specific expertise in. You might get a little less 'oomph' from each agent, but probably still enough to serve your needs. I believe it is fair for you to expect to be able to work with an expert in each area. Good luck.

4 Reply

Gregory H.

Real Estate Agent · Philadelphia, PA · Member since 2013 · 451 posts · 369 votes

7y

My broker requires I have that signed contract for their records, but I only have buyers sign it when they're making an offer on a property that I showed them. I have no desire for my client to feel "trapped" working with me, any can walk at any time, if I'm not adding the value for them, I don't deserve a commission. If they find something off market and want to do it themselves, thats fine, but I can almost guarantee that unless they're an experienced investor, they're going to mess it up, badly.

6 Reply

Lynn McGeein

Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes

7y

I am an investor and an agent, and I would never sign or ask a buyer to sign an exclusive agreement. I have worked with several good agents, and none ever required us to sign exclusive buyer-broker agreements. So there are many agents out there who will not require them. I am required by state laws to have buyer sign, at minimum, a non-exclusive buyer broker agreement as it must be disclosed in writing that I represent buyer's side in an offer before the offer is presented to seller so that it's clear to all parties that I'm not working as an agent for the seller's side. The agreement states specifically that commission will be worked out with the seller's side, no hidden fees for the buyer and no ties to future sales.

1 Reply

Drew McCrory

Member since 2019 · 18 posts · 3 votes

7y

Some agents require an exlusive agent agreement still but many do not. It was more common practice years back ensuring that the agent wouldn't put in a ton of time prospecting homes, scheduling appointments and showing houses all for the client to buy from another agent or a FSBO. These days many buyers are hesitant to sign the agreement so a lot of agents stop requiring it. Also, (this may differ state to state) but in Ohio if your finding homes on the MLS the seller will be paying your agents commisions, not you. Actually many FSBO will even agree to pay the buyers agent a commision for finding them the buyer.

1 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

7y

So you want someone to provide you professional services for free?

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3 Reply

Ryan B.

Investor · Indianapolis, IN · Member since 2015 · 126 posts · 141 votes

7y

Originally posted by @Russell Brazil:

So you want someone to provide you professional services for free?

That's not what he said at all. For any property where the agent put in work, the OP was on board with the agent getting paid. OP felt uneasy about an agent claiming a fee for a property that the OP did all the work for an never involved the agent.

I agree with the OP. I have an agent I work with and I've bought probably 10 properties from the MLS using him. I've also bought properties where he isn't involved in the slightest. My agent gets fees when he's involved.

2 Reply

Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

7y

As an investor and agent, I have mixed feelings about this. My state requires that we present contract terms to clients and give them an opportunity to sign an agreement, as well as explain their rights if they do sign and their rights if they do not.

I typically do not ask clients to sign an agreement until we make an offer, and often, that agreement is exclusive to that property.

I look at it as my burden to earn each client's trust, and generally, that has served me well- I work hard to give every client excellent service.

However, there have been times that (note that this is always novice investors) will send me endless listings and property addresses and ask me to call agents, drive by for them, do video walk throughs, etc; essentially invest many, many hours on their behalf, only to find out that they've bought a property either with another agent or off market in order to save money (ie; not pay me for my time and expertise after I've educated them on our market). It doesn't happen often, but it does happen. Those "investors" tend to get a bad reputation quickly and find it hard to network and partner in our small market.

On the other hand, I have clients that put tons of their own work in finding deals and rely on me to help them with their due diligence and analysis. Those investors are in it for the long term, and always pay me for my time- even negotiating my fees in to off market deals. It doesn't always have to be a commission on an MLS property.

If you want professional advice and expertise, discuss with your agent how they will be paid and work to mutually establish trust. This is a two way street and your reputation will spread quickly- good or bad.

3 Reply

Derek GendigPro Member

Broker / Investor / Property Manager · Indianapolis, IN · Member since 2014 · 125 posts · 42 votes

7y

Each Agent/Broker operates as an independent contractor so, in most ways, they are "the owner of their business." While they will have operating stipulations and other guidelines set forth by the brokerage they are associated with as well as regulatory license law etc., the Agent is free to operate as they see fit with respect to having exclusive agency agreements in place. With that being said, we encourage our Agents to do so if they are working with serious buyers as they will have personal time invested, they will provide assessments and share knowledge with the buyer, they will have travel and wear and tear on their vehicle, etc. At the end of the day, most transactions call for the seller/wholesaler to pay the Agent, not the Buyer. While some will argue that they can get a better deal without having to pay an Agent, this may or may not be true, however if you are not familiar enough with the state real estate laws nor have the resources to protect yourself in the case that another Agent or wholesaler takes advantage of you then I would encourage you to use an Agent anytime purchasing a property.

0 Reply

Steve H.

OP

West Chester, PA · Member since 2018 · 20 posts · 7 votes

7y

@Irene Nash Thanks for the suggestions about starting with a limited time agreement and also modifying it to cover specific areas. I hadn't considered the possibility that buyer's agent agreements were negotiable.

@Russell Brazil No, i'm not expecting services for free. My question was whether it was reasonable to only pay the agent commission for transactions that they were involved in in some way. In one of the areas I'm interested in, there are very few houses for sale on MLS that meet my 3 bedroom criteria (like 5 houses). I would like an agent to help show 2 or 3 of those to me and of course they would be paid if I purchased one of these houses. If they find a house prior to it being listed on MLS, of course they should be compensated. But how about if there isn't much activity from the agent (again, due to the specific area i'm interested in) but I find a house for sale not on the MLS?

0 Reply

Steve H.

OP

West Chester, PA · Member since 2018 · 20 posts · 7 votes

7y

Originally posted by @Corby Goade:

If you want professional advice and expertise, discuss with your agent how they will be paid and work to mutually establish trust. This is a two way street and your reputation will spread quickly- good or bad.

I think this properly summarizes the sentiment of this thread. Thank you to all. My initial reaction to the agreement proposed to me was "no way I'm signing that", because I was not given any time limit that it would stay in effect and full exclusivity was expected. However it does appear that there are agents out there that are more flexible in with the buyers agent agreement, and it is up to me to find the right agent where there is mutual trust between us such that I want to work with the agent and the agent wants to work with me.

4 Reply

Rich O'Neill

Contractor · Chadds Ford, PA · Member since 2015 · 567 posts · 460 votes

7y

@Steve H. obviously this is a touchy topic, especially for the agents here. I think part of the equation that was not discussed here is: do you fully expect to buy something off the MLS, even if you also buy something that might be off market or FSBO? If you are only planning on buying one property in the relatively short term, then this is a valid request, even if you guarantee them something small, say a few hundred dollars. This way they won't have the fear of you purchasing a FSBO or off market deal and they wasted their initial time. If you are planning on buying multiple properties in the short term, and one of them happens to be a FSBO that the agent doesn't participate on, they should not be worried about that because they will get their commission on the MLS deal they bring you a few months later.

@Drew McCrory also mentioned that many FSBO's will agree to pay buyers agent commission. This is important because an agent is not only good for finding the property, but they know how to get you to closing, especially on your first deal. If you find the deal maybe you can negotiate part of your agents commission into the deal.

Long story short, if you fully intend to get your agent a full commission in the next few months, then I don't think you should sign an exclusivity contract and assure them they will get at least one commission in the near term. If you are only buying one property in the near term and there is a chance the agent walks away with nothing, I would promise them at least some small fee on the deal, or more if it is an MLS deal.

The other option that I don't think was discussed is to go directly to the listing agents. Most listings on BrightMLS (our local MLS in SE Pa and beyond) get syndicated to Zillow within a few hours of posting. If you are worried about buyers agents then do a little more legwork yourself and find the deals on Zillow, then go direct to the listing agent for showing access and negotiate some of their commission into the deal. If you come to terms, they can often refer you to someone in their office who can act as your agent at a discounted commission since they didn't have to market to find you or do the work of finding the property, they just have to get you to closing. I have used this before and it works really well, as long as you understand that you are never being represented by the listing agent, and only partially by the referred agent since they likely have a personal relationship with the listing agent.

1 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

@Steve H. it is really your choice. Any good agent is going to request exclusivity. Why would someone want to spend time helping you if your intent is to just find an FSBO and cut them out? New investors like yourself are very time consuming. Again, any experienced agent knows this, so that is just another reason for them to request exclusivity. If a realtor is willing to work without exclusivity, I question why they place so low of value on their time - maybe they are new and have no customers. You want a realtor who is in high demand, because they are the ones who bring you deals and help you close deals.

My personal opinion, I think anyone new to investing needs a realtor. Even if you do an FSBO deal, it is still good to have representation. A realtor can walk you through the process and prevent you from making costly mistakes.

Like I said, it is your choice. The other option is any time you find a property on the MLS, you can call the listing agent and setup a showing. More work for you and in the end, you will still be paying buyers commission plus you won't have representation.

1 Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

7y

My $0.02: It really depends on what you are asking of the agent.

"Forward me things on the MLS that fit my criteria on an automated drip, I'll call you if I like something." - No.

"I want to write 10 lowball offers a week!" - Yes, or agree to a generous rate of hourly pay for the agent.

2 Reply

Noah Gouldsmith

Wholesaler · Kansas City, MO · Member since 2019 · 10 posts · 7 votes

7y

@Steve H.

Hey Steve, congrats on taking action. I am also fairly new to REI and had this same question a few weeks ago. After parting ways with the first realtor I was working with (had no idea about investing/demanded buyers agreement) I met the current realtor I'm working with at a local meetup. When he asked if I was comfortable signing a buyers agreement, I was upfront with him about my plans and he was able to write in a clause that he would not represent me on any off market deals that he doesn't bring to me. It has worked out great so far. (1 under contract and looking for deal #2!) Hope this helps, Best of luck!

1 Reply

Mike CumbieBusiness Member

REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes

7y

Hi @Steve H.

I guess it really depends on the expectations. Generally I don't use many exclusive agreements, it depends on the situation. Someone wants an auto MLS search on some random criteria Fine here you go, call me if you find something interesting. If you like it we can setup a showing and then write an offer. I advise, write and coordinate, then all is well in the world.

If I find something that is off market and fits a criteria. I send it to the clients that are solid and loyal to me. The ones that buy a $15,000 property, fix it and list it with me for $120,000. The ones we find a paint and carpet deal for $45,000 and list with me for $95,000. None of them have an exclusive with me, sometimes they buy FSBO/Auction/Estate attorneys, but we stay in communication. They give me an opportunity to bring a quick buyer in, they let me look at something before being listed to bring in some first time home buyers for a retail gig when done. There are contracts and there are relationships.

1 Reply

Steve H.

OP

West Chester, PA · Member since 2018 · 20 posts · 7 votes

7y

@Noah Gouldsmith and @Mike Cumbie , thanks for the encouragement that one can find Realtors that are willing to modify the buyers agreement so as to be beneficial to both parties. Again, at the end of the day, no exclusive or indefinite contract would be needed if the relationship is mutually beneficial.

0 Reply

Andrea Townsley

Real Estate Agent · Gainesville, FL · Member since 2019 · 63 posts · 52 votes

7y

@Steve H.

I’m a brand new agent so take this FWIW.

Part of the issue is that there can be confusion over who the buyer was working with and which brokerage gets a commission if there is no exclusivity agreement. Most of the arbitration ($$$) that happens at the local boards is over who gets commission for bringing a buyer.

Ethically, I always ask if someone is already working with an agent. If they say yes, I’m not going to waste my time pulling listings or any such thing. There is always the chance they will find someone else to work with, usually unintentionally, so having that agreement in place helps if there is ever a dispute over commission.

That said, my husband is an investor and if their company finds something off market, I’ll pull comps but they need to deal with the real estate attorney and closing themselves if I’m not getting paid. My time is valuable, too.

Investors can be particularly difficult to work with bc deals can be harder to find. I almost never find anything on the MLS to suit them. My role is more when they are ready to sell again, so it does partially behoove me to help with the front end of the deal so I can get paid on the flip side.

0 Reply

Andrea Townsley

Real Estate Agent · Gainesville, FL · Member since 2019 · 63 posts · 52 votes

7y

To add, it's not that hard to monitor the MLS yourself via Realtor.com. If you want to see something, contact the listing agent and ask for a showing. They'll be happy to get the full commission and not deal with a buyer's agent.

0 Reply

Brad Baker

Flipper/Rehabber · Charleston SC · Member since 2019 · 78 posts · 43 votes

7y

@Steve H.

As a new investor there is a high chance that you are going to be asking your agent lots of questions and for highly valuable consultation work and for lots of showings. And you're not even willing to sign an agreement that guarantees him the right to get paid. Is that fair?

0 Reply

Steve H.

OP

West Chester, PA · Member since 2018 · 20 posts · 7 votes

7y

Originally posted by @Brad Baker:

@Steve H. And you're not even willing to sign an agreement that guarantees him the right to get paid. Is that fair?

It's not that cut and dry. If an agent has shown me lots of properties and did work for me, then of course the agent should be compensated if I utilize the agent's service during the buying process of one of those houses. But there may be off-market deals, auction purchases or other non-MLS transactions that never involve an agent from start to finish. If I were to purchase a house from an auction and the agent was never involved in any way, why should they be paid for that? Different agents have different specialty locations. If I am looking for houses in two areas 1 hour drive apart, it makes sense that the agent I use for these two areas could be different.

I know my question struck a nerve amongst some of the members in this subgroup, and rightfully so since this is an agents' forum. But to any other new investors with this question who have been reading along, I will summarize the experience I have gained since starting this thread:

1. In considering a Realtor, meet with many of them and have an honest conversation of what you expect and find out what they expect. Some agents require exclusivity, others do not. After the first agent I met required exclusivity, the subsequent agents I met with did not. Everyone does expect to be compensated for their services, and I agree.

2. My local REIA ran a seminar on finding an investor-friendly agent. The invited guest speaker was a Realtor that did not require exclusivity and explained why it worked for him (answer: trust and repeat business). Just because an agreement is non-exclusive doesn't mean that the investor is trying to take advantage of an agent in any way.

3. Build relationships of trust that are mutually beneficial. If an agent helps me out with a deal, I will gladly compensate them because I want their assistance with the next deal too. But on the flip side, if I work on a deal myself that did not involve an agent, they should not expect to be paid on it. It goes both ways.

0 Reply

Brad Baker

Flipper/Rehabber · Charleston SC · Member since 2019 · 78 posts · 43 votes

7y

I've worked with very few investors in my sales career.

Think about it: If I come across a killer off-market property that can be bought for 70% why am I going to go call Mr. Investor so that I can earn a measly 3%? I'm going to buy the property myself and go for the 15%-20% PROFIT! If you are wanting to find deep discounts on property you should not be using an agent anyhow and you should start marketing to distressed sellers and properties.

2 Reply

Tony Gunter

Investor · Canton, GA · Member since 2014 · 728 posts · 500 votes

7y

IMHO, 99% of the time an agent working with an investor is going to be a losing proposition for the agent. Best and fastest way I can think of to go broke as an agent. Exception would be a buying whale, but they play the agent field too.

Investors, by definition are cheap. Look at a million properties, lots of low ball offers that are going to be rejected. So, heavy time commitment with low ROÍ. Sure, sign me up...NOT!

This is one reason why I got my own RE License, and now I love the agent I work with. Admittedly, not the solutions or everyone.

1 Reply

Jacob Fitzgerald

Realtor · Angleton, TX · Member since 2019 · 87 posts · 39 votes

7y

@Steve H.

I would send my investors who have an agreement a deal quicker than I would with someone who I don’t with...

From an agents perspective what would keep you from having multiple agents looking for you and you choosing one even if they didn’t send you the deal...

Either way it’s normal for them to ask it’s an agents way to see how serious someone might be.

1 Reply

Steve H.

OP

West Chester, PA · Member since 2018 · 20 posts · 7 votes

7y

@Jacob Fitzgerald From an investor's perspective why would I want multiple agents looking for me in the same area, and why would I choose an agent that didn't send me the deal? Of course I would want to work with the agent that sent me the deal because that would encourage them to continue sending me deals in the future.

It is actually exactly this reason why I originally asked if exclusivity was required by all agents. Why should the buyer be required to use a specific agent (due to exclusivity) if that agent _didn't_ bring the deal to the buyer?

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Buyers agent contract requiring exclusivity - is this normal?

Buyers agent contract requiring exclusivity - is this normal?

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