How much should I pay my agent for an off market deal?

Investor · Milwaukee, WI · Member since 2015 · 76 posts · 23 votes

I'm going to sell my duplex in Michigan to one of the tenants that has been living there for 6 years. I've only owned the property for 6 months. This is going to be an off market deal. The tenant and I have come to agreement on price and there won't be any contingencies. The tenant won't be using an agent. We will need my agent to process the purchase agreement and title work...and anything else I'm not aware of that agents typically do. Does anyone have a opinion on what percentage I should compensate my agent at? I, the seller, will be represented by the agent and the buyer will be seen as the agent's customer.

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Nick Watkins

Investor · Jenison, MI · Member since 2016 · 158 posts · 79 votes

10y

IF you are selling off market I would use a good title company and sell by owner. This will save you money and still be legally done correctly.

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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
1-2% total. Or pick some flat number.
It depends, in part, on how you want that agent to prioritize spending time on/with you in the future.
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Arthur E.
OP
Investor · Milwaukee, WI · Member since 2015 · 76 posts · 23 votes
10y
We were kicking around the idea of 3%. Does that sound reasonable?
1 Reply
Robert Orel
Investor · Lansing, MI · Member since 2014 · 27 posts · 9 votes
10y
3% sounds pretty high as you've already done most of the work for the agent. There's really not much left to do but order title work, inspections, get the mortgage in place if there is one and schedule a closing. And of course fill out the offer, lead form, and disclosures if the agent is involved if you haven't done this part already. When I was an agent I would have put this deal together for 1% but hey that's me.
1 Reply
Nick Watkins
Investor · Jenison, MI · Member since 2016 · 158 posts · 79 votes
10y
IF you are selling off market I would use a good title company and sell by owner. This will save you money and still be legally done correctly.
7 Reply
Arthur E.
OP
Investor · Milwaukee, WI · Member since 2015 · 76 posts · 23 votes
10y
It should also be said that I have a very good relationship with this agent and I am very interested in making sure that she's paid correctly. I don't want to do FSBO...I don't have time to learn how to do a 4th job.
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Josh Kundrat
Chicago, IL · Member since 2015 · 77 posts · 39 votes
10y
If you are not actually listing it with an agent I would just use a good real estate attorney and title company, there really is no reason to give them 3% for that amount of work
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Mike Smith
Tempe, AZ · Member since 2016 · 22 posts · 7 votes
10y
Arthur Edmund As others have said - just use a title company. You don't have to learn a 4th job - you just let the title company do their job.
2 Reply
Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
10y
Arthur Edmund The last property I sold this way was in Colorado The buyer had a lawyer draw up the offer. ($250) Then I called the title company. The buyer got the loan and the title company did the rest. It was fast simple and painless for all. RR
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
Originally posted by @Arthur E.:

It should also be said that I have a very good relationship with this agent and I am very interested in making sure that she's paid correctly. I don't want to do FSBO...I don't have time to learn how to do a 4th job.
Pay her the 3%, feel good about it, and find some way to mention in passing that you know you could have gotten a flat fee lawyer to do it. She might show you some love next time she spots some off market deal.
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Tim W.
Keller, TX · Member since 2015 · 49 posts · 25 votes
10y
What is she actually doing for you? I don't think you need an agent at all. A contract and a title company is all you need.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
Ask her what is fair to handle the paperwork. She may need some minimum amount based on her agencies rules. I brought my agent into a deal and gave him just short of three percent. It started at 3% then he reduced to help make the deal work. Percent really depends on price too because 3% of $50k is $1500 versus 3% of $200k is $6000. It is probably the same work for her in either case.
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Neal Collins
Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
10y
That's got to be quite the relationship if you're willing to hand them free money to shepard a deal through escrow when there isn't much room for an agent. 1. If you want a good contract drawn up with the terms you've agreed to then have an attorney do it. Simple and not very expensive and a cost you could split with your buyers. 2. With the signed contract you or the buyer can go to a title company and open escrow. They will be integral to get to the closing table. 3. Your buyer may want to do inspections (or not if they live there). They order those separate from you. 4. Your buyer will also order the appraisal with their banker assuming they are getting a loan. 5. All you have to do now is wait for escrow to call and then sign some papers and give them instructions on where to wire you money. It's your money that you'd be giving away so it's your call. Just follow the steps and you'll be fine.
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Arthur E.
OP
Investor · Milwaukee, WI · Member since 2015 · 76 posts · 23 votes
10y
How many hours of work do you think that would be, @Neal Collins?
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Karen O.
NYC, NY · Member since 2016 · 619 posts · 456 votes
10y
I bought a piece of land from a neighbor. Then I subdivided the piece of land with another neighbor. Atty did all the work. No agent involved on either side.
Since you made this deal without an agent, you could have closed it without an agent too.
I'd ask here what she thinks is fair.
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Dell Schlabach
Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
10y
Good point from @Karen O. let the realtor tell you what they think is fair, if she brings you good deals and takes care of you. I would pay it.
Mine would tell me 2,500. but he has a staff to pay to handle and coordinate inspections apprasials etc.
I personally think 3% is very high, unless its a 70,000 duplex. If its a 300,000 then that is steep, but most realtors think in terms of 3% per side, and arent used to flat fees.
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Neal Collins
Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
10y
@Arthur E. It shouldn't take you long. Factor in about 30-60 minutes for the lawyer meeting to give them the points of the transaction. A 5-10 minute email to the title company to open escrow once you have the agreement from the lawyer and its signed. You'll have to sign closing docs no matter what so there's a half hour that's hard to get around.
Since they are you're tenants they already have keys to let the inspectors and appraiser in.
Again, if you want to bring your agent in on the transaction that's your call. This is just a way that can keep that 3% commission in your pocket since you've already done the heavy lifting of securing a bonafide buyer and come to terms.
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Mark Holencik
Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes
10y
You can write the terms on a napkin. Both of you sign the napkin. Hand it to the title company. You can get a deposit or not. That is up to you. The title company will do the rest.
There is nothing to learn. If the title company needs more information they will ask.
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Michael Hayworth
Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
10y
Originally posted by @Mark Holencik:
You can write the terms on a napkin. Both of you sign the napkin. Hand it to the title company. You can get a deposit or not. That is up to you. The title company will do the rest.
There is nothing to learn. If the title company needs more information they will ask.
You're getting good advice here from Mark and others.
I do understand your concern. I had bought 20 or so properties, always through MLS, when I found my first private sale opportunity. Just like you, I thought about paying my RE agent to shepherd the paperwork through. But I looked at the contract forms from all my previous sales, found the Texas Real Estate Commission form, and looked at how previous ones had been filled out. Took me 10 minutes. Looks like this is the equivalent form for Michigan.
I called the title company and said, "Hey, I've closed a few with you guys through Agent XYZ, and been real happy with your work. I'm doing a private sale now and want to use you. Any advice for me?" They said, "Thanks for the business. We'll assign Meagan to handhold you through this first one." And they did. And it was a piece of cake.
The most important part of that process wasn't that I saved the $500 I was thinking of offering my agent to do paperwork - it's that I learned how simple the process is and felt more confident in it. Because the real deals in this business come through private sales, not through MLS. So the more confident you feel in the process, the better off you are.
I bought three houses last week, all on private sales, no agent, and it was simple as can be. But I had to do the first one to gain that confidence.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
You know it's funny all the times investors try and get free information without compensating a broker or agent.
If brokers or agents charged for that it would end up being a ton of money.
People who work for nothing value themselves at nothing.
Look you can go it alone but be sure to NOT call your broker or agent when you have a problem closing it. That will 100% be for the title company and attorney you are working with.
You are asking the agent to do 2 JOBS. One to represent you and one to deal with the buyer as a customer for "ministerial acts". That is typically a 2 side commission for double the work for around 6%. If there was another broker or agent handling the buyer then the listing broker is doing one side unless the buyers broker is inept.
It's fine not to involve a broker or agent you just need to be all in or all out with the decision. Don't not use the broker or agent and then mid transaction say you need help with these last little items because you do not know how to do it. That would be hypocritical to do such a thing and bad form as an investor.
Investors like to say they can do everything themselves but then hold out their hand for free help from brokers and agents. You have to own 100% what you choose to do.
Just remember if problems are found during the transaction that attorney is going to start to rack up per hour fees and the bill will start getting up there. Make sure and ask from the attorney what the fees are and how much per hour is charged and what they break the increments down into.
No legal advice given.
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
If you are OK with losing the agent then go around her and don't use the agent or pay her a BS commission.
If you value the business relationship with the agent than give them the 2.5-3% commission.
Good agents in my experience are a huge asset to an investor. The fact that you are even asking this means you think the agent isn't that great or you don't know enough to realize how valuable a good agent is.
1 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
Again on not using a broker or agent if an investor feels they can go it alone and run their business without the need then they have to own 100% of everything they do. It's great while everything is humming along with no issues.
Just do not call a broker or agent to bail you out of anything where you messed up. Can't have it both ways folks. You are either all in for a relationship or all out. You either prosper together or go it alone with no commitment for each other.
I personally do no work with "wishy-washy" buyers or sellers on the commercial side always trying to work an angle. Those leads go in the trash can.
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Al Wilson
Investor · Daphne, AL · Member since 2014 · 1k+ posts · 242 votes
10y
I agree with 3%. Good luck.
0 Reply
Arthur E.
OP
Investor · Milwaukee, WI · Member since 2015 · 76 posts · 23 votes
10y
@Joel Owens, I appreciate your enthusiasm! Please know that I posted this topic because I wanted to figure out what the community feels is appropriate for my situation. This includes getting input from brokers and agents. Going into this I didn't understand what was involved with processing a sale after it was all negotiated. All the back and forth on finding a buyer and negotiating price has been taken care of, so I'm sure you could imagine that from my perspective I need to make sure I'm paying my agent appropriately for what she's going to do for me. 3% of this deal is $5250. Do you believe that is the correct amount of money to be paid to an agent that's going to process the purchase agreement and work with the title company? I just got a response from my lawyer about how much she would charge and she said "I charge $550 flat fee to deal with a closing which includes drafting the purchase agreement, dealing with the title company and reviewing closing documents."
In the end, I want to do right by my agent. I like her very much. But I also need to protect my bottom line because I'm absolutely struggling financially right now.
Honestly, how much do you really think this transaction is worth?
0 Reply
Mark Holencik
Investor · Coplay, PA · Member since 2015 · 404 posts · 315 votes
10y
Originally posted by @Joel Owens:

You know it's funny all the times investors try and get free information without compensating a broker or agent.
If brokers or agents charged for that it would end up being a ton of money.
People who work for nothing value themselves at nothing.
Look you can go it alone but be sure to NOT call your broker or agent when you have a problem closing it. That will 100% be for the title company and attorney you are working with.
You are asking the agent to do 2 JOBS. One to represent you and one to deal with the buyer as a customer for "ministerial acts". That is typically a 2 side commission for double the work for around 6%. If there was another broker or agent handling the buyer then the listing broker is doing one side unless the buyers broker is inept.
It's fine not to involve a broker or agent you just need to be all in or all out with the decision. Don't not use the broker or agent and then mid transaction say you need help with these last little items because you do not know how to do it. That would be hypocritical to do such a thing and bad form as an investor.
Investors like to say they can do everything themselves but then hold out their hand for free help from brokers and agents. You have to own 100% what you choose to do.
Just remember if problems are found during the transaction that attorney is going to start to rack up per her fees and the bill will start getting up there. Make sure and ask from the attorney what the fees are and how much per hour is charged and what they break the increments down into.
No legal advice given.
This is all true. I do not try to weasel fees away from my realtor. When a property is listed for sale, I call my agent and tell him I want to look at this property and make an offer. If it is a For Sale by Owner, an agent can get in the way of making a deal. The agent a lot of times can not explain the terms you have in your offer.
My agent gets to manage the property no matter how I buy. My agent gets to sell the property no matter how I buy. If the agent thinks I am not a valuable client then I will move my business elsewhere.
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
The percentage here depends a lot on the value of the property. Without needing to go on market, I would probably ask for 2%. But if the property price is particularly low, then I may ask for a flat fee. I recently did a transaction of a $15k property at 3%, and while I did not have to show the property at all...just doing the paper work on it and taking calls...Im sure I made less than minimum wage on the deal. I would not typically service something that low without a flat fee, except it was an existing client that I have done normal priced transactions with in the past. (I also thought I would be putting just a couple hours work into it, and boy was I wrong on that front)
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