Real Estate Agent asking for money

31 Replies

Hi Everyone,

I am fairly new to real estate still but I am on the hunt for my first rental property. I have been in contact with some real estate agents.

I have one real estate agent that has asked me to sign an agency agreement and $300 in order for me to work with him. I am wondering if that is a normal thing or is this a red flag.

Any thoughts on this would be much appreciated.

Thanks,

Sean

The "agency agreement" (If it is like NY), simply states who they are working for at that moment (Not a contract for future work). It is required for us so that I can say I represent you while we talk (state mandated so that if I really work for the seller you know it), you are not locked into me though. 

Now an "Exclusive right to represent" is different, that usually says "Hey you are hiring me for 6 months" or some such. As far as the cash upfront, I don't and don't know an agent that does, however San Diego it could be common practice.

good Luck!

Originally posted by @Mike Cumbie :

The "agency agreement" (If it is like NY), simply states who they are working for at that moment (Not a contract for future work). It is required for us so that I can say I represent you while we talk (state mandated so that if I really work for the seller you know it), you are not locked into me though. 

Now an "Exclusive right to represent" is different, that usually says "Hey you are hiring me for 6 months" or some such. As far as the cash upfront, I don't and don't know an agent that does, however San Diego it could be common practice.

good Luck!

Hi Mike,

Thanks for the info. This is an out of state realtor in Missouri. I took a closer look and it is a "buyers exclusive agency contract" that is stating that this realtor will work with me for 6 months and is requesting additional compensation of $300 upon signing of this agreement for his time and expenses during those 6 months.

From what it sounds like, I should not need to pay any money for a realtor and should avoid this guy.


 

Originally posted by @Mindy Jensen :

@Sean Abrahamsen, agency agreement is standard. What is the $300 for? I don't know any agents who charge to work with them. I'd find another agent, personally.

Hi Mindy,

It is a "buyers exclusive agency contract" that is stating that this realtor will work with me for 6 months and is requesting additional compensation of $300 upon signing of this agreement for his time and expenses during those 6 months.

 

Hi @Sean Abrahamsen , buyer exclusive agency contracts are normal. I prefer not to use them, I rather build great rapport and establish a relationship where my clients wouldn't consider using another agent. I have seen other agents via online trap clients into these contracts early in the process, then under perform. And/or not understand the Investor mindset and goals. Investors are different than a home buyer. Therefore interview agents until you're confident you have the right one. It's important you feel comfortable, and know your agent has your best intention, and truly act as your fiduciary.  If they're just trying to get you to sign a contract without leading with value, that's a red flag in my opinion.  Definitely do NOT pay $300 to pass go.  

I disagree.  I like the idea of charging a small fee up front ($200 to $300).  There are too many people who want all the expert advice and then drop the agent like a rock as soon as they get their answers/info.  My broker has 30 years of experience in real estate investment, commercial real estate, and rental management.  He can provide market analysis and real estate investment planning for his customers that is tailored to their specific needs and goals.  He is thinking about charging a small fee upfront to be credited back to the buyer/or seller at time of closing.  This shows that the customer is committed to him and prepared to actually move forward with their investment.  And if they don't buy or sell anything, then they got an amazing education at a very cheap price.  (I feel very lucky to be working with him.  I'm learning a ton every day). 

Originally posted by @Kristin Kiddy :

I disagree.  I like the idea of charging a small fee up front ($200 to $300).  There are too many people who want all the expert advice and then drop the agent like a rock as soon as they get their answers/info.  My broker has 30 years of experience in real estate investment, commercial real estate, and rental management.  He can provide market analysis and real estate investment planning for his customers that is tailored to their specific needs and goals.  He is thinking about charging a small fee upfront to be credited back to the buyer/or seller at time of closing.  This shows that the customer is committed to him and prepared to actually move forward with their investment.  And if they don't buy or sell anything, then they got an amazing education at a very cheap price.  (I feel very lucky to be working with him.  I'm learning a ton every day). 

Thank you for your perspective Kristin. I understand the idea behind charging an upfront fee to make sure the customer is committed but how do I know that this agent will not just take my money and I will never hear from him again. I just haven't heard of anyone charging an upfront fee, but I am new to this game so I wanted to understand where this was coming from.

 

I would not sign an exclusive agreement, nor would I pay a fee for an agent I did not know.  Why? Because I went thru 4 agents when I was looking for a house for me. I was in a new town and it took me a few to find the person I wanted to work with. 

Sometimes a phone coversation isnt enough - you need to interact, tour, maybe even make offers, to find out if the person you are working with is who you need 

Soooooo nope.  No exclusivity and no fee. 

@Sean Abrahamsen I’m a Realtor in Missouri and have considered asking for a “retainer” fee at times, especially when dealing with out of state investors. Often, I’ve contemplated this more heavily when dealing with some BiggerPockets Community Members. A large contingent want something for free.

I’m an expert in my local area and my time is my most valuable asset (especially in a relatively inexpensive market), and I can at least understand this Realtor asking for a retainer. The $300 isn’t really a life changing amount of money, they’re just wanting to make sure you’re serious as we (Missouri Realtors) get California investors calling everyday because our property is so cheap. This reply is meant to be ready with minor amounts of sarcasm and eye rolling.

My thoughts- if you really like/trust this Realtor and believe they are the local expert and will bring you the deals you ask for, then pay them the $300.

Personally, I sell a fair amount of off market property and that is part of my value and the value of working with me. Certainly wouldn’t fault you if you’d decided not to work with this person and find another Realtor, though.

@Sean Abrahamsen

Sean I’m an agent in MO and I’ve never heard of anyone ever charging money upfront or if we are even allowed too. Now there is a way for him to be compensated additionally by you in a deal in case the buyers commission is lower than normal but that is typically agreed upon in the agency agreement.

@Sean Abrahamsen You would get it in writing that the fee you are paying would be credited upon closing.  Then I would make sure the title company is made aware of the amount because they are the ones who calculate all the closing costs you would be asked to pay.  

Hi @Sean Abrahamsen if you're actually considering hiring this person, I'd strongly recommend getting some references from other OOS investors like yourself who agreed to this guy's scam. Maybe the realtors on this thread can correct me if I'm wrong, but I thought the 3% commission at closing was the compensation you earn for all the hours you spend? Shaking down unsuspecting investors is what gives you a bad name. 

Here's how the scam goes: you pay this guy $300 for the privilege of him emailing you a bunch of junk listings. At the end of the 6 month contract, since he's technically held up his end of the deal, he walks away with your $300. 

With that said, I get that realtors have to deal with a certain number of 'tire kickers' and that gets old quick, but a $300 fee to receive the listings this realtor can't pawn off to his local network is wrong, flat-out. 

At the end of the day, this is just a reflection of supply and demand though. If this realtor is getting away with charging a $300 fee, it's only because the market supports it. Just one more sign we're nearing hyper-supply...

So I made a few calls to a some colleagues that work with OOS investors and in some cases it has become common place where the agent is asking for a "retainer" to work with OOS investors. Most have come to this mindset after they have been cut out of deals by the investor going directly to the listing agent, or owner, if off-market, and also as I previously mentioned the buyers agent % was extremely low and to the point the compensation was not beneficial to the agent for the time spent finding the property. Its a catch 22 for most agents, as we want to build a relationship and do business with OOS investors but in the end we really don't have any protection as it relies on complete trust until all parties are under contract. 

So in this case its probably not a "scam" as some have alluded to but I would still be cautious moving forward as many don't charge an upfront fee to assist in finding investments.

@Sean Abrahamsen   1st mistake why are you using an agent ?  I have done 100s and 100s and 100s of deals never using an agent ( Well about 8 years ago for a couple till I found a better/ more efficient way ) Connect with consultants that have props they can flip to you. Most of the time you will get a better deal, MUCH less paperwork, 1 page contract, and less run around . 

Good LUCK 

@Sean Abrahamsen I haven't insisted on exclusive buyer broker agreements or charged retainers yet, but I've seriously considered them.

To this point, I've taken the @Kenneth Donaghy route and depended on providing expert advice and treating every client like they were my own Mom or Dad - but boy oh boy, have I been burned by it.

I have put in an awful lot of work with both retail buyers and investors, only to have them turn to dust for one reason or another. 

One buyer failed to renew his professional license and lost his job just a week before closing - and that was after a year long search for a unicorn property.  Of course, he blamed it on racial discrimination, not the fact that he had no job.

A couple I just recently worked with, spending several weekends showing a dozen or so properties found one they liked and put an offer in with another agent. 

Several times I've put in crazy amounts of time, mileage and effort to then hear that "my Mom's best friend has a nephew whose 2nd cousin is a Realtor.  We have to buy through him".

I'd have no problem crediting that payment to them at closing.  It's not about the $300, which in the big picture amounts to nothing.  It's about being sure that the buyer is willing to put their money where their mouth is and not wasting colossal amounts of my time - which as a self-employed person, is really the only asset I have to make a living.

I think moving forward, I'll do one showing or maybe a few on the same day.  By that point, the buyer should have a pretty good feel for me and how I work.  If it's a good fit, great.  At least sign the exclusive buyer's broker agreement.  I'll have to think through the $300 fee some more though.  I think that may cost deals that would otherwise have worked out to everyone's benefit.

Originally posted by @Sean Abrahamsen :
Originally posted by @Mike Cumbie:

The "agency agreement" (If it is like NY), simply states who they are working for at that moment (Not a contract for future work). It is required for us so that I can say I represent you while we talk (state mandated so that if I really work for the seller you know it), you are not locked into me though. 

Now an "Exclusive right to represent" is different, that usually says "Hey you are hiring me for 6 months" or some such. As far as the cash upfront, I don't and don't know an agent that does, however San Diego it could be common practice.

good Luck!

Hi Mike,

Thanks for the info. This is an out of state realtor in Missouri. I took a closer look and it is a "buyers exclusive agency contract" that is stating that this realtor will work with me for 6 months and is requesting additional compensation of $300 upon signing of this agreement for his time and expenses during those 6 months.

From what it sounds like, I should not need to pay any money for a realtor and should avoid this guy.

 

 My guess is he doesn't want an out of state California investor to waste his time and believes if you are willing to pay $300 that it shows you are committed. A good realtor does value their time so it is not completely illogical. There are a ton of CA people who want to get into out of state investing and many are flaky or not committed. Maybe he has just been burned too many times. Buying properties in Missouri is way different than CA.

@Sean Abrahamsen

Studying for my license in San Diego currently and have purchased through two agents here personally.

Like everyone else said, the agreement is standard and you’ll do that with any agent. The $300 is not. The only money you should pay in the whole process starts with earnest money when you make an offer.

Good luck!

When I work with out of state investors, I also request a retainer. Most out of state investors, are not actually investors, and are just tire kickers. It helps weed out the legit people from the people wasting your time. My retainer fee though is considerably higher than what youve been asked to pay.

I would never use a realtor then snake them behind their back but I do know it goes on and its totally wrong.  I cut off ties if im not happy and its a mutual feeling.

Before you give any money go out & talk with the realtor to get a feel for them because you may or may not click.  I know if i'm giving a few hundred bucks up front and don't know you I'm already pissed because the same way the realtor don't trust me, well I don't trust him/her either.  If im comfortable with them id sign it with the agreement that if im not happy with them I get my money back in 30 days...lets be fair on both sides because its a two way street?

I guess its like signing up for MD with VIP service where you pay a service fee and the doctor themselves will pick up the phone or call you back within minutes.

Originally posted by @Sean Abrahamsen :

Hi Everyone,

I am fairly new to real estate still but I am on the hunt for my first rental property. I have been in contact with some real estate agents.

I have one real estate agent that has asked me to sign an agency agreement and $300 in order for me to work with him. I am wondering if that is a normal thing or is this a red flag.

Any thoughts on this would be much appreciated.

Thanks,

Sean

That doesn't sound right, I'd consult with another agent.

 

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