Agent Exclusivity Agreement Yes/No?

16 Replies

Friends,

I'm looking to purchase my first investment in Oakland CA with cash. I met an agent that made a good impression but requires an exclusivity agreement (four months minimum).

Would you sign such an agreement in the Bay Area hot market? I'm wondering what if I decided to buy from a wholesaler - I will have to pay my agent 2.5% out of pocket for a listing that they didn't bring. It will probably be helpful to have someone experienced around but again - would you commit to one person? 

I wholeheartedly believe that people should be paid well for their work and I'm here to create long-lasting relationships so I would never cut someone short of what they deserve.

What would you do? Very much appreciate your input or sharing of personal experience...

I have done it in the past, ran into issues, and now I know better.

Now, I will never sign them.

It would be unfair to pay an agent for a deal they did not find you, and did not work on.

Many agents specialize in a particular market or niech. I use several agents because I look in several areas. And I am very up front about this.

I have no problem paying agents, as long as they found the deal and helped me close.

Hey @Ofer Dallal I personally don't ask my clients to sign one before we get into contract. But that may be a document that is mandated by his brokerage. Or it could simply be a local area practice. Ask her/him.

This is a relationship business. And you have to believe the people you're representing are going to want to work with you. And sometimes as an agent you get burned. I don't see the need for the contract, personally. If someone doesn't want to work w me anymore, for whatever reason, I let them go. If they decide to work with another agent just to get a deal, ultimately - to me at least - that means I didn't do enough to show them my true value.

As for the agreement, I'd say you're in control here. If you don't want to sign it, don't sign it. Your agent can get to work and find you a place to buy, and then they'll get paid.

Hope that helps.

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NO. If you were a homeowner buying I would say a definite YES, but as an investor you don't want to tie yourself down to any one agent. Plus, if you find out during that contract period you would rather work with a different agent because the one your "signed with" is not what you thought they were (as in NOT REI friendly), you're stuck.

In my experience any agent that has asked me to sign an agreement, I ended up having to cancel because they were not competent or just plain lazy. I could see the hustle leave them after I signed.

I believe that when you are working with an agent and you do end up buying you should give them their cut, it would be wrong not to. But that contract doesn't promote service because once you sign then the agent can take a break, if you wil,l and possibly not work as hard because they know you'll be there.

Like @Robert Musallam said though maybe they have to do this. Tell them your concerns about it, a good agent will become your wingman/women in this field.

Your mileage may very though with agents and the agreement. 

When we bought our first house a couple years ago, I told my agent I didn't want to sign one and he was fine with it. Now we're selling that house and hopefully buying another property with the same guy. We just have an understanding. It's actually worked out well for him because we've sent other clients his way too.

If you can't find an agent willing to work without an exclusivity agreement, message me and I'll give you my guy's name.

Hey Ofer, 

It's super competitive in Oakland. I started shopping back in December, and just got into contract this month. In-fact, I had to go off the MLS to find a deal that I was willing to buy. I really liked my buyer's agent, and we made aggressive offers... 15% some times 20% over list price, and we were still getting beat out by other offers.

I would suggest NOT working with a buyers agent. A "hack" that I figured out to get "inside information" on deals was to contact the seller's agent and ask them to represent me. What that does is incentivize the seller's agent to sell to me, because they get a double commission.  Once the seller's agent is in position to get a double commission, they'll give you all the inside baseball on the deal and the other offers you're competing against. You've got to be comfortable more or less handling the transaction "on your own" because it's hard for the listing agent to truly arrive at the best outcome for the seller and buyer doing a double agency. Towards the end of my 6 months shopping, I had learned enough to be comfortable navigating the whole deal by myself. 

I ultimately found an FSBO, the owners of that property were doing things "the old school way" where you list high and try to get offers to come up... while in Oakland right now most listing agents are listing low to cause a bidding war. I was able to get a great deal on the duplex I bought because the sellers listed their property too high and didn't get any competing offers. I probably got the duplex at a 10% discount.

I'm not sure how long you've been looking, but I made a ton of offers, and nothing seemed to work out until I went off market. You're buying with cash though, and my deal was financed. 

Originally posted by @Daniel Gonzalez:

Hey Ofer, 

It's super competitive in Oakland. I started shopping back in December, and just got into contract this month. In-fact, I had to go off the MLS to find a deal that I was willing to buy. I really liked my buyer's agent, and we made aggressive offers... 15% some times 20% over list price, and we were still getting beat out by other offers.

I would suggest NOT working with a buyers agent. A "hack" that I figured out to get "inside information" on deals was to contact the seller's agent and ask them to represent me. What that does is incentivize the seller's agent to sell to me, because they get a double commission.  Once the seller's agent is in position to get a double commission, they'll give you all the inside baseball on the deal and the other offers you're competing against. You've got to be comfortable more or less handling the transaction "on your own" because it's hard for the listing agent to truly arrive at the best outcome for the seller and buyer doing a double agency. Towards the end of my 6 months shopping, I had learned enough to be comfortable navigating the whole deal by myself. 

I ultimately found an FSBO, the owners of that property were doing things "the old school way" where you list high and try to get offers to come up... while in Oakland right now most listing agents are listing low to cause a bidding war. I was able to get a great deal on the duplex I bought because the sellers listed their property too high and didn't get any competing offers. I probably got the duplex at a 10% discount.

I'm not sure how long you've been looking, but I made a ton of offers, and nothing seemed to work out until I went off market. You're buying with cash though, and my deal was financed. 

My coworker owns many houses that he rents out, and he swears by the approach you mentioned of going with the seller's agent. He's usually able to get a significant credit from the agent upon selling too.

As an investor I would never sign one. I don't make anyone sign them as an agent. If they feel I am doing a good job the client will stick with me now and in the future. I think its a bad way to start off a relationship and if the brokerage requires it look for a different agent with a different brokerage. 

I wouldn't sign one.  I decided to get my license specifically because the realtors I worked with were less then desirable to work with long term...decent people, but not the kind of "partner" I work with long term.  After my second deal with a subpar agent I decided to do it myself...gl!

Hell no don't sign one @Ofer Dallal .

@Daniel Gonzalez's approach also isn't crazy.

You can mix them:

If you find a deal on redfin/mls/whatever, you're using that agent for doing normal agent things and they earned their check.

If you find it on your own, or if another agent brings you that deal and sells it to you, that means they closed the sale and earned that check.

Your primary go-to person needs to be exactly one agent at a time to be fair. And hey, if that person is the one out finding the best deals on the mls and taking the time to run numbers with you, or finding off-mls deals, they earned their check and it would be a dick move to cut them out (incidentally Daniel, whatever agent spent all that time running numbers and teaching you so well that you don't need an agent any more... I hope you have a stack of her or his business cards and hand them to FTHB owner occupant friends that are thinking of buying homes to live in).

Typically once an REI has several deals under their belt, they arrive at Daniel's position and go that route. Not at all unusual. There are a handful of REI that call me once every 6 months or so, without fail, for another mortgage, and time and time again the contract indicates dual agency.

Incidentally when you pop by my office (which I think we have scheduled? No calendar at home), remind me to add you to a mailing list that I shouldn't be on but you should.

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I typically do not ask a client to sign one until we are writing and offer on the property...and only then because it is required that I have one. However I do not work with individuals who use multiple agents. (Unless they are flippers). You can work with me, or you can work with someone else. My time is too valuable to spend with someone who is going to close a deal with someone else.  That is unless they want to pay me out of pocket for my time.

Originally posted by @Ofer Dallal :

Friends,

I'm looking to purchase my first investment in Oakland CA with cash. I met an agent that made a good impression but requires an exclusivity agreement (four months minimum).

Would you sign such an agreement in the Bay Area hot market? I'm wondering what if I decided to buy from a wholesaler - I will have to pay my agent 2.5% out of pocket for a listing that they didn't bring. It will probably be helpful to have someone experienced around but again - would you commit to one person? 

I wholeheartedly believe that people should be paid well for their work and I'm here to create long-lasting relationships so I would never cut someone short of what they deserve.

What would you do? Very much appreciate your input or sharing of personal experience...

Hi Ofer, and glad you can make it out to the Summit! I marked you down on the list!

Why is this agent better than the rest, for you? Has the agent gone above and beyond to help you out? How many other agents are asking for exclusivity agreements?

Personally, I absolutely WOULD NOT sign an exclusivity with a buyers' agent in the Bay Area unless you have a phenomenal reason to do it. (They are bringing you all kinds of crazy good deals?). I usually go directly through the listing agent. Unless you really need the agent to hand-hold the whole time, show you a million places, and they are so far into it, they want some kind of commitment you are going to stick with them.. I don't think it is standard practice. None of the investors I know buying properties have one with their agent. First come, first serve. Bring the deal!!!

I agree with you about building long-lasting relationships and not cutting someone out of what they deserve. On the other hand, I think that long-lasting relationships are built on deals getting done, and mutual benefits to both parties - not just on contractual commitments to work with someone if something gets found.. Of course, I'm not an agent hungry for commissions! So some of them can come rip me a new @hole about how agents' time is sacred and you now have a lifelong commitment to the agent once you ran into them on a street corner one day.. (OK, sarcasm.) But to each their own!! Good luck Ofer! :)

*Edit: I was trying to be diplomatic and poke at why you want to sign one with this agent.. but I'll just refer back to @Chris M.: "Hell No!" lol That's what I meant..

Hey Ofer,

I guess that depends on how strong of an agent you perceive him to be.

If you don't think he's anything special, maybe it's best not to sign. However, if you think he'll provide extraordinary service and will outwork other agents in the area, why wouldn't you sign it?

You want your agent to commit to you and your best interest, so showing them that you are willing to do the same in return can go a long way. 

I agree with the others who say Do Not Sign! I've bought two houses in Oakland in the last couple years. Neither agent had me sign any kind of agreement with them. Your agent should be forced to provide their time and knowledge, not just get a cut from any property you buy.