I Found A For Sale By Owner - How Does My Agent Fit?

Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes

I have a real estate agent helping me find duplex properties in my area. She is a friend and also an investor. She has provided me with several listings to consider and shared her knowledge of the market. I found a possible duplex as a for sale by owner. I ran it by agent and she thinks it is a good choice as well. She told me that she would do the contract for $1375 and that the buyer and seller usually split that cost. Is this normal? I am new and this will be my first real estate property as well as my first for sale by owner purchase.

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Account Closed

Dallas, TX · Member since 2013 · 4k+ posts · 744 votes

12y

@Justin Aymer,

I think that is more than fair. She has help you, please don't put her out in the cold over a few pennies. My 2cents,

Joe Gore

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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
@Justin Aymer,
I think that is more than fair. She has help you, please don't put her out in the cold over a few pennies. My 2cents,

Joe Gore
5 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
12y
Keep the real estate agent out of the deal . There are pleanty of real estate contracts out there , I believe there are some on this site . I bought my first house FSBO , I got a contract from the office supply store and added a few extra things , I t was easy ( I was 23 years old ) My second purchase was another FSBO , I went to my filing cabinet and found the same contract (blank) and used it again , we added a few clauses we both agreed on . My 3 rd purchase was with a real estate agent , WHAT A PAIN IN THE A$$ . . My 4 thand 5 th purchaces were FSBO still using the same old contract that I used 27 years ago and things sailed right thru . If this is a friend charging you $ 1375.00 for less than 1/2 hour of work , I will be your best friend for $ 250.00 more .
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Account Closed
Flipper/Rehabber · Angier, NC · Member since 2013 · 7 posts · 1 vote
12y
Justin, Agent and investor here. Here is what I would do, tell your agent you don't mind signing a agency agreement with her and allowing her to represent you, as long as she gets paid from the seller. Most FSBO's will pay some sort of buyer's agent fee as long as they don't already have an offer from someone else with no fee.
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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
@Russ Lockamy,
Most sellers already have an agent so the seller needs to pay both if the seller doesn't have the agent, I just she be happy with 1% or 2% to work with the buyer.

Joe Gore
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Justin Aymer
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Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Account Closed I plan on keeping her in the deal. She has helped me a ton in this process already. I couldn't leave her high and dry. I just didn't know what is normal with a for sale by owner deal.

@Matthew Paul That is exactly how the Owner of the property feels! He isn't thrilled that I have an agent.

@Account Closed Thanks for the input. That is a good idea. When you say seller pays - does that mean knocks off money from the sale price? How does that work?
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Eric Black
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
12y
@Matthew Paul So you're telling him to screw his friend who has been helping him? That's one way to ruin a friendship and guarantee that they won't help in the future. Hope you don't have to ask all of your friends to pay you $250 for the privilege. Had he been looking on his own then it would be a different story but he solicited her help.

@Justin Aymer If you value the friendship then pay what she is asking or negotiate something you feel is fair based upon the amount of time and effort she has put in. If you want her to help you in the future you'll offer to pay her something for her time. If you don't feel it's worth $1375 and she's not willing to budge then you need to evaluate the relationship and decide what is best for you, not only now but in the future. Moving forward you may want to discuss how you will deal with deals you find on your own. Let her know that in the future any deals you find on your own, you'll handle on your own, if you're comfortable doing it yourself. If not, then offer to pay her what you feel is fair.
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Bryan L.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
Disclaimer: I am a combo investor/Realtor myself (in that order).

If your agent is a good agent, she will spend a lot more than 1/2 hour on it. And she very likely might save your more than $1300 somewhere along the way. Let her do her job. See if she can negotiate a better deal for you. Have her arrange the closing with the best title company in town. Have her review the settlement statement to make sure that it's correct. Have her get you a discount at Lowe's (she should be able to do this with no cost to her through lowesrealtorbenefits_dot_com). Can she get you a discount anywhere else? I do so much business with my title company and termite guy that I get special pricing. Does she know which termite companies are legitimate and which ones will lie to you or do a half-a$$ job (it's real easy for a termite inspector to tell you that there are bugs when actually there are not, and it's real easy for them to treat the house with a watered-down juice)? Who's the best home inspector in town (best quality and best prices)? Who's got the best insurance. The best mortgage programs? Where is the septic tank located? Was it permitted properly?
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Justin Aymer
OP
Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Eric Black To be honest, I am not comfortable doing this on my own at this stage in my investing career. I am happy to work with her, but I have no idea what a fair price is and how this part of the deal is supposed to work.
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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
@Eric Black,
I agree with you and if he decides to cut her lose over a few pennies, then start finding deals on his own and one day the seller says I have an agent, and it just might be the same agent you kick to the curb and guess what you might not get a good deal very small world in the real estate business.

Joe Gore
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Justin Aymer
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Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Bryan L. Thank you for your input.
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Account Closed
Flipper/Rehabber · Angier, NC · Member since 2013 · 7 posts · 1 vote
12y
Joe Gore You are correct. Many FSBO's advertise that they will compensate buyer's agents and are just trying to save some on the listing side. Justin Aymer you should have your broker contact the seller directly to negotiate her fee. I suggest insisting on signing a short term buyers agency agreement with your agent before you have them talk with the seller. List this home on the buyer agency agreement as the property she is helping with and that she will be paid by the seller's proceeds of the sale at closing. Until you sign an agency agreement with an agent they are a "free agent" (i.e. they work for who pays their bills). Some might say that you should go around the agent because the seller will sell for less money. But if you have a great agent and take care of them, they will save you more in negotiations and bring you more deals down the road.
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Ron Jones
Real Estate Investor · Houston, TX · Member since 2013 · 31 posts · 16 votes
12y
There is no normal in this situation. To say the seller will pay your agent is ridiculous. It's FSBO. If the seller wanted to pay an agent they would have listed it on the MLS. That being said everything is negotiable. The seller has a net number in mind. It's your job to extract that number from them and not to pay more. Then pay your agent what you feel is right. If your agent had not been spending time working with you a few hundred word be fair but since they have been working with you something in the neighborhood of $1000 would be fair. Similar thing happen to me recently on a raw land deal. It was a deal the agent showed me 6 years ago. Came back on the market FSBO. I happened to see a sign on it and called. I called the agent and told them I was negotiating directly with the owner who was an agent. My agent said that was fine and to not worry about it. I paid her some cash north of $1000 cause it was the right thing to do.

edit.

I see several post while I was typing mine. Lots of good advise.
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Andrew S.
Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
12y
You haven't told us how much the property lists for but it looks like the 1375$ might be about 1% (maybe less). That's a very fair commission for a situation like this, in my opinion. Well worth the money to maintain a business relationship and a friendship on top of it. Plus, if she spends time and resource on helping you with the process and coaching you along then consider it an investment in your education.
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Justin Aymer
OP
Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Ron Jones Thank you for your input. That is a stand up move that you did.

@Andrew S. The property is listing as $50,000.
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Zach SikesBusiness Member
Residential Real Estate Broker · Edmond, OK · Member since 2011 · 452 posts · 183 votes
12y
Justin Aymer - *Disclaimer - I am an agent. It's very likely that your agent can save you money on this deal. I've helped investors that bought properties that used inspectors they found online (against my recommendation) and that same inspector missed many things on future deals. When you try to save a couple dollars, sometimes it can cost you. Also - the most important thing to remember here is to show some loyalty to your agent. As you build your "team" for investing, a good agent can make you a ton of money. Keeping a great relationship is worth $1375 now and more deals down the road vs saving a few dollars now.
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Andrew S.
Investor · Raleigh, NC · Member since 2013 · 1k+ posts · 708 votes
12y
@Justin Aymer - OK, that's closer to a regular 3% buyer's agent cut but still not unreasonable. You may be able to have her convince the seller to pick up her commission. This is the arrangement I have with MY buyer's agent for when I dig up FSBOs or drive-bys, etc
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Account Closed
Flipper/Rehabber · Angier, NC · Member since 2013 · 7 posts · 1 vote
12y
Justin Aymer based on the list price and your earlier post that the seller isn't happy having an agent involved, they may not be willing to pay the agent. You can always specify in the agency agreement that if your agent cannot get the seller to pay any commission you will pay her "x" amount. But if she's good and can get her fee from the seller then you've saved some $.
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
12y
@Justin Aymer others have touched on the compensation and how to deal with the agent relationship. As for "who" is paying essentially you are no matter what. If the FSBO has a net number he wants, say 50K, and your agent is getting a $1375 fee then your purchase price will essentially be $51,375. If he is willing to sell at his full price $50K and pay your agent out of that then you're paying $50K and he is netting $48,625. But either way her fee affects the amount of money you pay no matter "who" pays the cost that money still comes from you in the end, it only affects the buyer in what his net number is. But as I said if he wants a net $50K you could just pay him $51,375 and his net remains unaffected.
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Justin Aymer
OP
Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Matt Devincenzo That is a good point. Thanks for clearing that up for me.
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
12y
Originally posted by @Eric Black:
@Matthew Paul So you're telling him to screw his friend who has been helping him? That's one way to ruin a friendship and guarantee that they won't help in the future. Hope you don't have to ask all of your friends to pay you $250 for the privilege. Had he been looking on his own then it would be a different story but he solicited her help.

How would it be screwing his friend? He found the deal , the agent did no work on the deal , and $ 1300 dollars is a bit high for a "friend " to help with a contract . The best way to ruin a friendship is to involve money . If a RE agent brings me a deal , I pay , If I find the deal I dont pay a RE agent .

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Eric Black
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
12y
@Matthew Paul The point you're missing is that the friend HAS been helping him, looking for deals, evaluating the deal he found and sharing her knowledge, and it sounds like he asked for the help. That doesn't sound like "no work" to me. It doesn't sound like they discussed this scenario, him finding his own deal and how they would handle it, when he solicited the help.

"I have a real estate agent helping me find duplex properties in my area. She is a friend and also an investor. She has provided me with several listings to consider and shared her knowledge of the market."

I also agree that $1375 is a bit high, especially for a friend but that's why I also suggested he negotiate that amount if he doesn't feel it's fair.
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Steve Chaisson
Nashville, TN · Member since 2013 · 86 posts · 40 votes
12y
Everything is negotiable in real estate.

There is no such thing as a "standard" for who pays for an agents commission in this situation. The value of a good agent as a friend and a mentor should absolutely be considered in the situation. How much time has your agent invested in you providing you with education and a vision in the market to get you to the point where you are able to make a decision? Additionally, if the agent has written an offer for you in the past, do you have an existing buyer's agency agreement in place?

There are several issues to consider here. Did you discuss the possibility that you may search for properties not listed by agents? If so, how will you handle future situations like this? Is your agent comfortable with a flat fee arrangement or possibly one point on the deal if you find it?

One value that a good agent provides is a comfort level with both parties involved that the transaction will be handled professionally. At the same time, if you introduce an agent after the fact, you could possibly offend the seller, especially if they don't have the expectation to pay an agent.

You will find that many experienced investors work with a network of agents to find them good deals. At the same time, you need to be concerned with properly taking care of your agents who find deals for you. This could include relisting a flip property with them, even if you relist at a discount.

I would consider asking this question of the seller - "Are you willing to pay an agent half of a six percent listing commission to write the contracts and professionally assist in facilitating this transaction?". If not, is the seller willing to split the cost of bringing an agent in the mix? If you communicate the fact that your agent is experienced and works with a good title company to assist in the closing, the seller might be agreeable to this. In certain situations it could be a deal killer.

There are no fixed answers to these questions. They are all specific to a deal. I'm an agent and a broker myself - and I certainly don't consider myself a free real estate tour guide. I bring deals to people who take care of me in return. It's all about having the vision to create "win-win" situations.
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Justin Aymer
OP
Homeowner · Belleville, IL · Member since 2013 · 40 posts · 3 votes
12y
@Steve Chaisson Thank you for your input.
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Account Closed
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
@Steve Chaisson,

I think a seller would be happy to pay half the commission, as long as they are getting FMV for their property. Now flip the coin over and when the investor sells the home are they going to pay half of the commission.

Joe Gore
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Steve Chaisson
Nashville, TN · Member since 2013 · 86 posts · 40 votes
12y
@Account Closed - I think there is a balance in maximizing the value of a transaction and properly recognizing the present and future value of the players in the transaction. The seller may very well be willing to pay. As an investor, I would consider myself sophisticated enough to not need an agent, but at the same time if it's the glue that holds a deal together I'm not going to ignore an agent on principle.
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