Should we pay real estate agent?

14 Replies

Here is our situation:

We have recently just switched real estate agents and he has spent a little time finding us a rental property to purchase (2-4 units), probably 3 weeks in total. During that time he has gathered information on a few properties as well as showed us 1 property that we were not interested in after walking thru.

Now for the dilemma, we just found out that a friend of ours has recently listed a condo of his and we are interested in buying it. However, he has already signed a contract with his own REI and is stuck with them for 1 year. Should we bring our REI into the deal and pay him even though we found the deal on our own through a mutual friend? We like this agent and we want to stay in good standing with him and continue to work with him in the future.

Any advice on this situation would be appreciated.

Trent

You wouldn't be "paying" your agent.  He'll get the buyer agent side of the commission, 1/2, just like the property he found for you.  The owner is paying the full commission either way. So yes, certainly use your agent.

When you say REI are you referring to an agent?

The way I am understanding this scenario is that you are going to use the sellers agent as your agent because the seller has signed a year exclusive with them.  Correct?

If so, why would that impact you whatsoever? As a buyer, working with a realtor doesn't cost you a dime so that cannot be the issue.

Is the seller saying they will negotiate a better price if you use their agent? If so, I would highly recommend using an agent that is representing you.  If the seller cannot understand why you would want to do this than I would walk away, even if the seller is your friend.

As a seller, if he is smart, he will realize that he has a qualified buyer (you) that fell into his lap and that if you want an agent and he loses 2.5-3% so what?

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

What if the seller's agent agrees to lower his commission  % if we do it without an agent? 

Odds are in the agreement that the sellers realtor has signed with the seller, it outlines the commission he will receive upon the sale/closing of the property.

Keep in mind that in the business of real estate there are going to be costs that are associated with doing business.  Don't worry so much about what others are getting paid.  A realtor can provide a lot of benefits for you and especially an agent who is representing you and only you in the transaction.

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

Sorry @Michael Noto that is what a meant by REI.

And yes that is correct, our friend mentioned trying to get his agent to agree to a lower commission % in this case representing the buyer/seller because he found the buyer on his own. The issue for me would be not including our agent and hindering our relationship, even though it would potentially save us some money.

@Trentan Moore  You could go that way, but as your agent I'd certainly kick your *** to the curb.  You may think this is a biased view "from an agent", but it's just ethical business.  When I was Not an agent, and we were moving to a different city an agent spent 3 Saturdays showing us houses.  I couldn't see paying market prices, so I ended up buying a house at a foreclosure auction instead.  I cut the agent a check for $2500 for his time and local area education.  Just the right thing to do.  Now you know why agents wants buyers to sign buyer agreements.  If he had showed you 30 houses, you might still have the same temptation.

The real purpose of a buyers' agent is not finding a property.  So try to let go of the fact that you found this on your own.  I have found every property I every purchased and told my agent I wanted to see it.

The purpose of a buyers' agent is to protect your interests. Both through their professional activities and through your ability to go after them if they fail to do so (they carry E&O policies for a reason.)

The buyers' agent doesn't cost you anything, he is paid by the seller.  I would personally run from a sale where the seller's agent was suggesting that we cut out our agent.  Slimy move, and again, the buyers' agent exists to represent YOUR interests.  The sellers' agent has no obligation to you.

BTW, your friend signed a 12 MONTH listing agreement?  Insane.  And another reason not to rely on the seller's agent.

If you want the condo, just put in an offer through your agent.

Good idea.  Good luck with your purchase.

Also think of it as incentivizing your agent to spend his time and money working with you to accomplish your investing goals. This might be a softball for him but think about all the curveballs he is going to have to deal with in the future helping you to find your next deal. 

@Wayne Brooks you are a good man. 

This post has been removed.

Originally posted by @Trentan Moore :

Thanks @Wayne Brooks and @Richard C. for great advice.

 I will certainly include our agent into the transaction.

 Good choice.

If you are using financing the amount of money you would save is not much compared to the damaged relationship with your agent. 

Originally posted by @Trentan Moore :

What if the seller's agent agrees to lower his commission  % if we do it without an agent? 

Colorado specific answer.  Your state may differ:

The listing agent will rarely lower their commission without a good reason (such as you have a great history with them or you've promised this is the first of a dozen deals you will do with them). They like being able to "double-end" a deal. (Sounds dirty, doesn't it?). And when they do so, they no longer represent your best interests or the seller's. They become a transactional agent at that point and you end up having to sign papers indicating that you understand they are NOT representing you. At that point, they are just there to babysit the deal.

It is so worth it to have an agent that is really looking out for you. They have a team of appraisers, inspectors and even contractors and handymen that they know, trust and recommend. If you end up using the listing agent, you might also end up using their appraisers and their inspectors and since they aren't really looking out for you, it's tough to say whether the appraisers and inspectors are on "your side" or not.

One of the things my agent always says is that *finding* the properties and showing them is not the hard part of his job.  The hard part is the price negotiations, the appraisal negotiations, the inspection negotiations as well as working with engineers, mortgage brokers, surveyors, etc.  My agent builds a calendar for the deals we do and keeps me on track, making sure I'm doing what I'm supposed to be doing and that all the third parties are doing what they are supposed to be doing.  His advice on market conditions, pricing, labor rates - hell, even what kind of rose is that and does it need pruning in the fall - is totally invaluable and I wouldn't even consider doing a deal without him.

if that agent was able to hook them on a ridiculous 12 month contract it is highly unlikely he or she is going to give you any type of break

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