[MN] How to Get Hourly Realtor?

[MN] How to Get Hourly Realtor?

Member since 2019 · 30 posts · 10 votes

I'm sure I'm not alone in being frustrated with realtors. My most recent experience I knew exactly what property I was after (like most investors its just a numbers game) and figured it would be a quick and easy purchase (depressed market no other bidders). My realtor didn't have to do a bunch of showings or anything so I engaged him in a rebating deal. I offered him a fixed minimum and if it something gets discovered as a time sink he can take an hourly minimum. He didn't want that and instead countered that he'd just rebate half and I accepted. 

Well a major item was discovered in inspection, etc. (unit has had an issue with flooding and likely fix is extremely expensive). Sure enough because realtor commission structure basically incentivizes him into working against me (I effectively get stuck with 2 sellers agents instead of 1 for me) and keeps trying to downplay it in order to get a deal done. I have to turn to a client who I know buys property likely with these issues and he tells me to probably run from this. I actually decide to make a generous offer reflecting some of the cost to fix, seller scoffs, and my buyers agent acts like a wounded puppy to make me feel bad for wanting to revise my offer in any way over a place that has an expensive flooding problem. Also if you think I just have a "bad realtor", I've met many and he's probably one of the nicer more reasonable ones, but I do feel like the realtor commission incentives even make a good realtor at least a little difficult to work with. Even if something like is fixable with a better commissioned realtor the problem is that I wouldn't know them out of the gate so its not like I could actually trust them until after a few transactions they proved they weren't just always very biased into me saying yes on a deal (regardless of whether its good deal or not).


Is it really too much to ask for letting a realtor take a high hourly rate out of the commission and rebate the rest? In the low chance a deal doesn't go through I'll just roll the hours spent on that one into the next one and the rebate to me on that one shrinks? Its really weird that realtors will agree to like $50-100 from another realtor to help do a showing while one of them is on vacation, but offer them a much higher hourly rate in a rebating deal and so many act like I'm destroying their industry.


I'm a business owner who pays current staff very generously. I also frequently bonus/tip extra when I know someone has given me more useful information than I'd expect or for putting in extra effort. I prefer to put much of my surplus earnings into investment real estate over the years and looking for a long term realtor that has a decent head on their shoulders and while I think all pay structures have their pro's and con's... I'd prefer much less conflicted than the current set up. Note: I'd also rather not get my own license... I am rather busy and I am willing to pay well to outsource certain items.

Any suggestions on finding a realtor that would agree to something like this is appreciated. If you are a realtor in the MN (Twin Cities) market and you're open to a relationship like this feel free to private message me.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
4y

Sounds like you are asking for top notch service from a discount professional. 

The really good agents are not out there looking for an hourly pay or to do rebates....the top ones have so many people begging to work for them that they have way more business than they can handle.

All real estate agents are not created equal, and Im by no means saying all full priced ones are good....but definitely the good ones are not discounting because they have no need to. 

See this reply in the discussion

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  • Rental Property Investor · Souderton, PA · Member since 2020 · 124 posts · 106 votes
    4y

    @Jon D.

    Sounds like you should just get your license.

  • Jonathan BombaciBusiness Member
    Real Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
    4y
    Originally posted by @Jon D.:
    Originally posted by @Jonathan Bombaci:

    @Jon D. first off most agents work for brokerages and have commission splits like 70/30 meaning 30% of the commissIon goes to the broker. They really do not have a legal framework to agree to what you’re asking for because the broker calls the shots and the broker will still want their share of the total commission at closing to cover their expenses. In addition Agents at most brokerages are 1099 contractors, if a broker agrees to pay an agent an hourly wage for services rendered, the broker could then become subject to labor law issues. In MA hourly pay is one of the tiggers for needing to make someone a W2 employee. Labor law fines are not cheap. 

    So don’t bother negotiating with agents, for what you’re asking you’d have to be negotiating with the broker. If you plan to do less than 10-20 transaction per year I doubt ANY broker, even the less successful ones, would risk their business model and expose themself to legal and liability issues, which could be significant, for 1 client. The successful brokers will get this and they’re not going to set a bad precedent to satisfy 1 client regardless of how many transactions that client intends to do in a year. 


    If you do find someone willing to do this, if this isn’t their model for everyone they work with, then I would question their motives and you should expect to get what you pay for. 

    Another example of why this would be an awful idea for anyone that treats real estate as a business is because it will inherently create a conflict of interest for the business owner. Do You think they will bring you off-market or pre-market deals where they could collect the full commission from another buyer? They’ll certainly be motivated to bring it to someone else first, which makes sense from every angle, but you’re paying them a hourly retainer which creates a significant conflict of interest for the brokerage and the agents. One such that if blows up could have very negative results. 

    If you’re just looking for an agent to submit offers for you then do what the bigger investors and wholesalers do and hire a transaction coordinator or administrator with a real estate license as a W2 employee. You will have to go get your brokerage license or negotiate a deal with a broker so your employee can operate as a licensed agent. Then pay your employee an annual salary and still pay the broker a % of the commission or transaction fee at closing, but it’ll be closer to what you’re asking for. 

    I know this is a lot, and probably not the answer you’re looking for but I hope it helps. 

    Best,

    Jon

    Jon,

    I'm sorry, but the information you're putting out there in this post is just over the top and with the nature of my work I know tax laws/contractor vs. W2 rules and tests better than most. There is zero chance than a realtor in any state billing hourly would risk W2 status.

    While there are plenty of large brokerage houses that have commission splits like you mention and therefore have rules in place to protect their split... you and me both know there are plenty that don't.

    Extremist straw man arguments to try to defend an idea that you can't really defend any other way doesn't help anyone nor further better understanding on a forum like this (where people come to learn)

    You cherry picked the labor law exposure and ignored the rest of the explanation. At the end of the day Agents aren’t allowed to collect a commission or hourly pay for real estate transactions it has to funnel through the brokerage. The broker collects the money and then pays the agent their portion out of it. That’s how it works for 100% of all brokerages, agents, and transactions. If you pay an agent $20 outside of the brokerage they can lose their license. That’s a hard rule. 

    I’d say 9/10 brokerages operate off a commission split. Finding a fee based brokerage is the exception to the rule. They do exist but they don’t have much market share. At the end of the day to get what you’re looking for you will need broker approval.

    I know how things operate in MA and NH since that’s where I operate. I know my concerns with paying agents hourly wages, I could be wrong, but I still wouldn’t allow it within our team structure for many reasons. That being said I don’t know your market. I’d recommend you try calling or emailing 5-10 brokers in your market this week and having this conversation with them and see what they say. Or lookup a fee based brokerage on your market and only targeting those agents, but again you should never pay them directly. All $ should go through a broker. 

    You posted looking for a good agent that will accept an hourly wage. Lots of us are explaining why the industry doesn’t work that way. It’s not a conspiracy to rip you off, it’s just not the way it works. We could start a conversation about wether or not it should work differently but that’s not going to help you in near term. Most good agents/brokers will reject what your proposing. That’s just the way the market and the industry is setup today. 

    Best,

    Jon

  • Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    4y

    @Jon D. - If you’re savvy and don’t need full pro representation your choices are:

    1. Get a real estate license and hang your license with the agency that’s best for you (a flat fee broker might charge $1200/year in fees plus $625 a deal and you otherwise keep 100% of all commissions). I believe you get more insights from other agents as a party to the transaction. (From their tone, how strong are the other offers?)

    2. Marry or date or get a business partner with a license

    3. Negotiate the buyer agency rebate (as allowed by law) and write letters like an attorney would and stick to your ideas. In New Jersey, the lawyer sends the repairs requests to the other lawyer, and each lawyer discusses with the client. The real estate agent can work to smooth over the negotiations - ok what things are really important to you that we repair vs give credit for, but if you don’t ask them to engage especially if you feel like they’re working against you like by acting like your requests are unreasonable, then you should ask them to Forward the written requests. Then stick to your plans and walk away if no negotiated settlement can be reached.

  • Member since 2019 · 30 posts · 10 votes
    4y
    Originally posted by @Marc Rice:

    @Jon D.

    It’s still foolish to think they really don’t represent you.

    I'm wondering if this is the worst comment of the whole thread.

  • Property Manager · Lakewood, OH · Member since 2015 · 250 posts · 258 votes
    4y

    Probably not a popular opinion in this community but I think we'd be better off destroying this entire realtor and mls system. 

    Realtors are only driving prices up and they have a mafia like control over the central listing database. 

    Count your days Realtors. You live in an increasingly automated world. 

  • Dahlia KhalafBusiness Member
    Member since 2018 · 71 posts · 42 votes
    4y

    @Jon D. I am a Broker and specialize in investment property. I have been doing this a long time and have never gotten paid unless we closed. Can it be frustrating at times? Absolutely! But, because of my work ethic these clients always end up purchasing at some point and are repeat clients.

    My suggestion-find an agent that is hungry. You are doing what is neccessary on your end to analyze the deal. You just need someone to show the property and write it up. Possibly negotiate on your behalf. 

    Get someone who is maybe newer and more aggressive, just my two cents.

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Originally posted by @Jon D.:

    I'm sure I'm not alone in being frustrated with realtors. My most recent experience I knew exactly what property I was after (like most investors its just a numbers game) and figured it would be a quick and easy purchase (depressed market no other bidders). My realtor didn't have to do a bunch of showings or anything so I engaged him in a rebating deal. I offered him a fixed minimum and if it something gets discovered as a time sink he can take an hourly minimum. He didn't want that and instead countered that he'd just rebate half and I accepted. 

    Well a major item was discovered in inspection, etc. (unit has had an issue with flooding and likely fix is extremely expensive). Sure enough because realtor commission structure basically incentivizes him into working against me (I effectively get stuck with 2 sellers agents instead of 1 for me) and keeps trying to downplay it in order to get a deal done. I have to turn to a client who I know buys property likely with these issues and he tells me to probably run from this. I actually decide to make a generous offer reflecting some of the cost to fix, seller scoffs, and my buyers agent acts like a wounded puppy to make me feel bad for wanting to revise my offer in any way over a place that has an expensive flooding problem. Also if you think I just have a "bad realtor", I've met many and he's probably one of the nicer more reasonable ones, but I do feel like the realtor commission incentives even make a good realtor at least a little difficult to work with. Even if something like is fixable with a better commissioned realtor the problem is that I wouldn't know them out of the gate so its not like I could actually trust them until after a few transactions they proved they weren't just always very biased into me saying yes on a deal (regardless of whether its good deal or not).


    Is it really too much to ask for letting a realtor take a high hourly rate out of the commission and rebate the rest? In the low chance a deal doesn't go through I'll just roll the hours spent on that one into the next one and the rebate to me on that one shrinks? Its really weird that realtors will agree to like $50-100 from another realtor to help do a showing while one of them is on vacation, but offer them a much higher hourly rate in a rebating deal and so many act like I'm destroying their industry.


    I'm a business owner who pays current staff very generously. I also frequently bonus/tip extra when I know someone has given me more useful information than I'd expect or for putting in extra effort. I prefer to put much of my surplus earnings into investment real estate over the years and looking for a long term realtor that has a decent head on their shoulders and while I think all pay structures have their pro's and con's... I'd prefer much less conflicted than the current set up. Note: I'd also rather not get my own license... I am rather busy and I am willing to pay well to outsource certain items.

    Any suggestions on finding a realtor that would agree to something like this is appreciated. If you are a realtor in the MN (Twin Cities) market and you're open to a relationship like this feel free to private message me.

     I prefer an up front pay structure for a lot of the reasons you've mentioned. But to be clear, the idea behind it is not to provide the client "you" services on a discounted rate. Just a better way for the agent and the client have their goals more aligned. I really think you and your agent missed the boat when you both agreed on a commission only structure but also cut that in half. You both screwed yourselves out of a mutually beneficial relationship there.

    As @Russell Brazil said if you're a top agent you don't need to do that stuff. With the way the industry is the top level agents are making a lot of money with 95% of agents making very little. So if you want a discounted agent you can find one but they'll have a skill set to go along with the low pay. Likewise if you want a beast, best get that wallet opened up. 

    Check out this post I wrote a while back. I went into the statistics on this model that I utilize and encourage other investors and agents to utilize in their own businesses. With the level of data I have at my disposal it really puts a lot of things in perspective that most folks wouldn't ever think about.

    THIS is why your Realtor is Ignoring you-DATA says they Should!

  • Dahlia KhalafBusiness Member
    Member since 2018 · 71 posts · 42 votes
    4y

    @James Wise I just ready your original post from a few months ago, and let's be honest, you aren't wrong!

    That being said, what are you charging for an upfront retainer?

  • Real Estate Agent · Chicago, IL · Member since 2017 · 53 posts · 48 votes
    4y
    Originally posted by @Matt M.:

    @Gary Lucido

    Seriously? This guy wasn’t offering $1000/hour. 

    My point is that you dismissed the idea out of hand without knowing what he was offering. At what hourly rate would you accept the deal? 

  • Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    4y
    Originally posted by @Dahlia Khalaf:

    @James Wise I just ready your original post from a few months ago, and let's be honest, you aren't wrong!

    That being said, what are you charging for an upfront retainer?

     I do it an a 1 property per video basis. Price range changes the more videos a customer buys in a package (buy in bulk and save). Generally speaking though, customers are paying an average of $100-$200 per video.

    Or

    1 on 1 phone consults are $799/hour.

  • Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    4y

    @Gary Lucido

    That’s not the point. The OP is clearly trying to save a buck. 
    I am a contractor, if I give you a price of $1000 for a job that’s worth $1000, you offer me $50/hour and it’s a 6 hour job.. go pound sand and call someone else 

  • Real Estate Agent · Chicago, IL · Member since 2017 · 53 posts · 48 votes
    4y
    Originally posted by @Matt M.:

    @Gary Lucido

    That’s not the point. The OP is clearly trying to save a buck. 
    I am a contractor, if I give you a price of $1000 for a job that’s worth $1000, you offer me $50/hour and it’s a 6 hour job.. go pound sand and call someone else 

    He's not trying to just save a buck. He's trying to align incentives better. At what rate would you work by the hour?

  • Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    4y

    @Gary Lucido

    I started to type out a whole long response, but this is really stupid. If you’d work hourly, have at it. And if you are an agent that has to split commission with your office, you’re then working for half that hourly. Enjoy! 

  • Real Estate Agent · Chicago, IL · Member since 2017 · 53 posts · 48 votes
    4y
    Originally posted by @Matt M.:

    @Gary Lucido

    I started to type out a whole long response, but this is really stupid. If you’d work hourly, have at it. And if you are an agent that has to split commission with your office, you’re then working for half that hourly. Enjoy! 

    So you wouldn't work hourly regardless of the rate? $200/ hour? $500/ hour? $1000/ Hour 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    4y

    @Jon D. To preface things, when I started reading this thread I thought "wow, what's this guy's deal, no chance he would ever get through my screeners", and honestly that's still true, the attitude expressed here would get you stopped at the first gates and not a chance of an inch further. 

    That said, after some reading, I have to say, as a Top Performer, I actually agree with much of what you have said (not what actually said but the underlying principles), and have actually been toying with some ideas of adjusting my old R.E. Consulting construct for use in R.E. agency. And this highlights 2 important points, (a) how it's all coming across sounds a lot like "hey, why can't I get great service while paying near to nothing" because (b) the world of R.E. agency has no experience or exposure to such, and works in a VERY regimented manner because most agents have no freedom of anything else, nor out of the box thinking. 

    @James Wise is the closest one to such a construct, at scale, in the open R.E. market, that I know of. And doing a rock-star job of it I might add (yeah, I am envious). Aside from that, someone mentioned R.E. Consultants and I strongly agree with that as that's my background and why i would ever have any comfort of such, because I have some knowledge and experience for how to construct and operate in that manner. 

    To do a timed billing is not as easy as it sounds, the concept is easy although the mechanics to accurately do so free of conflicts, the contracts to accurately cover the entirety of such, not so easy or simple. The vast majority of what an agent will do is not done interactively with the client, this creates a condition for questioning the validity of such billing times. Than there is simply the mechanics issue of the recording of such, I don't know of any agent or brokerage setup for such or that would know where to even start. For example, I operated much like legal council where we had a minimum 15min billing for everything, and worked in those increments clearly stating all would be rounded up for such. Would you be ok with the 5 5 min calls per day receiving 5 separate 15min billings? It's not as easy as one would think. 

    And with the per time billing having's its complexities and the market being what it is, yes the reality is that for most the answer will be to keep it simple and give you the option of accepting THERE terms or "no thanks" because the cold hard truth is they don't need you and your transactions are insignificant in their big picture. 

    And I have a funny feeling that is the actual main issue and source for so much anger, being disregarded and not of importance. In this day and age, the red-carpet treatment for divas starts in the 8/9 digit ball-park, short of that, it's just a distraction. 

  • Member since 2019 · 30 posts · 10 votes
    4y
    Originally posted by @Matt M.:

    @Gary Lucido

    That’s not the point. The OP is clearly trying to save a buck. 
    I am a contractor, if I give you a price of $1000 for a job that’s worth $1000, you offer me $50/hour and it’s a 6 hour job.. go pound sand and call someone else 

    You're so hysterical about what this could mean to your precious sh***y business model hat you have to mislead and engage in falsehoods to prove a point.

    A) If I got my way on this last one I'd be paying more (not less) and would still be working with the same realtor and not have to find a new one because of how badly designed the commission system is.

    B) Not in a million years would I suggest $50 an hour. That is just made up BS.

    C) Let's even slightly edit your analogy (which still doesn't fit, but at least maybe closer to the reality). Let's say a job is 10 hours long and someone decides they want to do 5 hours of it themselves and hire out 5 hours. Normally it's bid at $1,500 for the 10 hours (which equates to $150 an hour). They then offer the $200 an hour for 5 hours ($1,000 total). In theory everyone should be happy. The person that is doing work may get less in total, but a higher hourly rate. Also if it's bid on an hourly basis and not a project basis... if the project takes longer than anticipated doing the work then the person doing it continues to make more instead of pouting mid project (which is sort of the closest example to where I'm at).

  • Member since 2019 · 30 posts · 10 votes
    4y

    @James Hamling 

    I'm guessing no matter what I said, the impression any realtor would get is... "This person is proposing a different payment structure, clearly the only reason why he'd do that is because he thinks we get paid too much... so screw him."

    I think if you actually read through each of my comments I've tried hard to dispell that as a sole or even a primary motivation. 

    I get the response of the top producers who are already killing it financially with the current model going...

    "I'm already killing it so it isn't broken. Too much hassle to take on a client who is set up differently"

    That said I think there have been a few that have chimed in that clearly from their bad response are probably bad/low producing realtors who came to defend the system that is helping keep them poor by giving themselves no method of price or method differentiation like all other industries.

  • Member since 2019 · 30 posts · 10 votes
    4y

    I'll also point out what is maybe one of the best selling points of this model. **Higher tax efficiency.


    If I pay hourly to a realtor all of those expenses should be tax deductible as we go. The rebate comes back as tax free. I'm near 95% sure (based on all similar circumstances) that the rebate is actually considered a reduction in purchase price from a tax perspective. That means full ordinary income deductibility for the realtor costs against a slightly higher deferred capital gain down the road. Given the desirability of cost segregation studies in investment property tax planning clearly this is desirable outcome.

    So even if the investor spends 110% of the what the normal commission would be in hourly charges, said investor still nets out better than if they did it the current method.


  • Mike JuliffBusiness Member
    Real Estate Agent · Minneapolis, MN · Member since 2017 · 18 posts · 13 votes
    4y

    A lot of the replies to this post have gotten way off topic but I will share my 2 cents:

    The psychology behind working for a commission is that there is incentive for the realtors on both sides of a transaction to get a deal done. If realtors were paid by the hour there would be incentive to waste the clients time and upcharge time (5 mins phone call => 15 minutes) as stated previously. There would also be significant trust issues between client and realtor, not to mention some home shoppers could potentially spend a large chunk of savings during their search if it took too long (not unheard of for buyers to search for several years these days). It is an antiquated way to pay someone but it really simplifies things and makes payment easy when it only takes place one time at the closing table rather than hourly/daily/weekly.

    Although your situation might work better (for you) to charge hourly, you would have to trust the agent to be honest with their hours - which means you would need to trust that agent as a person. Is that something you could do after meeting them once? I probably couldn’t. You could maybe get there after you find an agent you like and have worked with them on a few deals.

    Ultimately, I feel like your selection of an agent is not your problem though. I agree that there are some inexperienced ones out there, but if your agent was doing a great job, you were closing on stellar deals and you were satisfied with how the agent performed, then the commission you paid them probably isn’t that big of a big deal in the grand scheme of things. I can’t imagine that paying someone hourly vs commission will make that much of a difference in your net profit anyway (sometimes it will work out in your favor, sometimes in the agents) so it probably isn’t worth the time arguing about. Focus your time and energy on finding good deals and you will be a rich man.

    Deuces.

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