should i use a broker buying a property?
I found an investment property I am very interested in buying in Nashville. It was a FSBO but I was a day too late and the owner just hired a broker (at 6%) and now the price is $8k higher, but still what I think is a good deal. Since I'm not paying the 6%, the seller is, should I work with a local broker to represent me? Or, is there a way for me to get a better deal without using a broker? This is my first purchase as an investment so don't have tons of info about the process, etc. Thanks!
Most Popular Reply
@Julie Greenhouse Hi Julie, great question. Typically, the listing broker will split, or give a part of the agreed upon commission (6% in this case) to the buyer broker that brings a buyer. Having a broker on your side will be good for you, since they have a large interest in you succeeding. That being said, it is important to keep in mind the incentives of the listing broker. If the listing broker procures a buyer, he doesn't have to split the fee, and essentially doubles his income. This is also known as double-ending a deal. So, if you want the deal, and there is a lot of competition for it, it may be advantageous to allow the listing broker to represent you. Every broker always wants to double-end the deal, and many brokers will describe certain offers as most favorable for the owner if they are going to be representing the buyer. Although it is sad that this happens, it is the reality of the industry and you knowing this will help you. As a side note, it is most important for you to judge the honesty of the broker, given the circumstances. In this situation, again, it is important to keep the incentives in mind. If the listing broker has worked with the owner in the past, and has a relationship with the owner, it is very important for him or her to strengthen the relationship. In your situation, since you have never transacted before, it is less important for the broker to do well on your behalf. Therefore, by keeping the incentives in mind, you will be able to keep your eye out for anything that leans towards the advantage of the owner.
I really hope this helps. Best of luck on your offer, and reach out if you have any questions !
Kenny Reimer