Paying my agent per hour and no commission

59 Replies

Wow there must be some REALLY DESPERATE brokers and agents to agree to crap like this.

I am 14 years in the business and I do commercial real estate. If someone mentions consulting fee, rebate back, and all that crap I hang up instantly. If they e-mail I send back NOT INTERESTED.

Some are just testing the waters and others are just really like that.

I do not get those very often maybe 10% of the time. I am a specialist and investor/developer myself so bring a lot of value to the table and my clients know that.

I can see a new agent desperate for anything to agree to junk like this. Sometimes I get people mid deal that decide they want help but the total commission is already going to the buyers brokerage. The buyer wants to pay a small consulting fee of 10k to 20k for a typical 100k check.

I tell them go get a commercial attorney and pay by the hour and you might land somewhere around there if you want them to step in mid deal. Often I find buyers are inexperienced or they can be control freaks. Buyers follow my system if they want to be my clients. If not they can move along to somewhere else.

I could take decades off but I do the work because I love helping people that respect my time and enjoy commercial real estate. If people are complaining about 500 an hour they certainly would not like what I make on average.

There is always another broker or agent that is trying to be cheaper and compete on price. Instead the highest income earners I know compete on skill level and experience with constantly learning and getting better daily.

I have also heard and I am sure Jay Hinrichs has heard discount brokers are taking over the industry for decades blah,blah,blah. It hasn't happened folks.

There are certain things you can automate and then there are relationship components  to business. There will always be cheapo's that represent a small part of the market. There are tons of other buyers that are not cheap and want experience and skill to help them make the right decisions with the millions in my case they are putting down to buy properties.

If people want to work for low fees more power to them. I would rather sit on the beach,watch TV, etc. with my time on this planet. 

They have stuff like this but unless they are a broker or agent they should not be getting interior access to a property.

I just find it crazy how brokers or agents work for small fees these days.

Originally posted by @Account Closed :

@Darius Niz   It really just comes down to how much an hour you want to pay and what percentage of properties to close on.

I know companies that purchase large amounts of real estate often do this with lawyers.

The disclosure rules are not the same with lawyers vs agents so most people would never be told how the lawyer is actually being paid.

I also want to mention....  "The seller pays the buyer's agent commission" is FALSE in every case where the seller does not bring money to the closing.  That is simply propaganda made up by Realtors and other agents.  The money is fungible.  I do not care how many pass-throughs you do.  The person bringing the money to the table is the one paying.

This last part is flat-out wrong. The seller has a listing agreement, IE a contract with the listing brokerage, that when the house sells they owe the list brokerage a defined amount or percentage. Unless otherwise specified, its up to the list agent to decide how much to offer, of their commission, to selling (buyer's) agent - usually its about 50%. So if you go direct, the list agent is under no obligation to lower the commission amount the seller owes's them, irregardless of you having an agent or not. And if you want to argue that a buyer is paying it because he brings the money to the table, lets keep on going and say that they buyer got it from his job, who got it from their customer, who got it from the bank, who got it from the FED. So then the gov't is paying the commission, right? Why stop where its convenient to your logic?

If a buyer brings an offer for $X w/o an agent, the list agent is under no obligation to lower their commission because the buyer's agent is missing. The seller owes X% to the list agent when it sells irregardless of if the buyer's agent co-op commission is offered @ half or 99% of that amount.

It's definitely legal to cut a check out to the buyer with commission proceeds (at least in CA).  My agent has this model and has been audited by the IRS due to the large number of deductions taken from the proceeds.  He provided the rebate explanation and paper trail and came out of the audit just fine.

I'm a big proponent of the pay per hour model and so is my agent.  I offer $250-$300 per hour depending on the task and I'm not sure how anyone can complain that this amount is too low.  I did speak to one agent before I found my current one and he went on and on about his value and years of experience, blah blah.  I purchased a $350k property and paid my agent $1250 for the transaction.  Took 5 hours of his time, probably much less since offers/counter offers don't take 1 hour each.  $1250 is still $1250 and the first agent lost out. 

As a CA broker...

I want to make money too! Big Money! 

I guess if business is slow some agents may do it. The best deals are the ones where they are going to make big $$$  

For me, I personally do not want to look at any business opportunity that will make me less than $10,000. I value my time above all else.    

@Matthew Olszak   While it is clear your arguments are emotional ones, I will explain.  Sellers consider the commission to be a cost of the transaction.  They take that into consideration when setting the price.  A pass-through is the act, action, or process of offsetting increased costs by raising prices.  I have been a Realtor and all the studies I have seen say sellers raise the price to cover the commission.  That is an EXTREMELY important point because all of the arguments about getting more money by hiring an agent do not work unless there is an offset for the commission via a price increase specifically to cover it. 

So 80% of the time agents are basically working for you without pay?

Your attorneys and accountants get paid no matter what you buy or don't buy. 

Any good agent with any real RE skills would not even answer your call.

Originally posted by @Matthew Olszak :

Something else to consider - if you just need someone to take videos, why bother with an agent? Get a guy off craigslist to do it for $25 a visit.

My hourly rate, whatever it is, is based on my experience. I never like to compare what I do to a lawyer or doctor, but in this case its very similar. If someone else pays the hourly rate for an attorney to draft a lease, should the atty then only charge you the time it takes him to email a copy over to you, since he's already been paid to produce it and it literally doesn't cost them anything more to send it to you?

No - you are paying for the experience, research, education, and liability and the cost of developing each. Additionally, while I might make $500/hr from you, I might loose $300/hr on another person who never pulls the trigger. Its the risk I take on every person I engage with. So that risk is built into what I make, like interest rate on a loan.

But again, you don't seem to utilize, value, or require any of the services an agent would offer, so I again ask - why not just hire a $25/house go-fer and submit your deal to the list agent direct?

Because the $25/hr guy can't get into the property without the Realtor

So now we are considering the upfront costs it took someone to attain their license and maintain a current and valid license into the rate

@Darius Niz - Agent thought process - Assuming you make offers on 20% of the properties I go visit for you as an out of state investor, what % do you win? How far are these from my home? What's the average purchase price? Do you also hire me to rent the properties or do you get a full service PM? Would your pm do it for you?

Newer agents would be thrilled to be paid $100/hr to video houses and write contracts. The people who have less business are usually under higher % commission structures (i.e. The broker keeps 46-56% of the 2-3%) so it's harder for them to take you up on it.

Are you trying to work with just one / a few local buyer agents? You could also ask each listing agent for videos of their properties and write offers through them and negotiate for a lower purchase price. They're legally impartial but if they make the whole 5-6%, you might be able negotiate down the seller 2% or the agent might be willing to cut their commission to the seller. It would take more time to get each individual listing agent to give you a video vs getting one buyer's agent with a rebate program. There are fixed plans out there. One is Goldenkey. Alternatively, try a REMAX or fixed fee agent (Redfin, Homesmart, realty mark etc) who can reallocate commission however she wants.

A great agent is worth every penny... (for helping you find contractors, etc.)

I like the idea, but I actually have the ability to think outside the rigid box most agents have been trained inside.  "We've been doing it this other way since Jesus was a boy.  What do you mean you'll pay $45/hr per task????  Are you crazy???"  lol

Your target agent obviously is not Russell or Joel.  You want the one doing 'desk duty'.  Call the brokerages and ask for the newest, hungriest agent in the office.  That's your target agent, but the probability of getting to one that will perform for something besides commission will still be slim.

I know how hard this can be because I just tried to get agents to 'stretch the size of their little box'. I'm selling a $240k house by owner. A new agent just had to do a CMA for me. I said to not waste her time, but she insisted. Anyway- when she was done with her marketing presentation and all that I said there isn't a chance in hell I am committing to a listing agreement for 6 months or whatever, sitting vacant during the winter, but I will do this- I will give you 2 weeks to tell all your realtor friends about this house. I will pay you 3% and them 3.5% for bringing the buyer. Get to work!

She looked at me like I had 3 heads and left.  I am under contract at full asking on my own, but do have to pay a buyer's agent 2.5%.  The listing girl couldn't see I had given her an opportunity.  She considered it a failed appointment because she didn't leave with a listing.  Good luck stretching simple minds and simple long-standing sales practices!  I am with you!

@Steve Vaughan the problem with "I will give you 2 weeks to tell all your realtor friends about this house. I will pay you 3% and them 3.5% for bringing the buyer." is that that's not how you get a buyer for a home. You have to get it out there, properly presented, on some database like the MLS or Zillow or somewhere else with a large audience. Agents can't do that without a listing agreement. It's license law. Now, they could sign a non-exclusive listing agreement with you but I can't imagine some agent doing all that work for a 50% chance (my estimate) of getting the deal when an exclusive listing agreement would give them a 100% chance of getting the deal. That is assuming, however, that the home was priced to sell, which apparently it was.

Originally posted by @Gary Lucido :

@Steve Vaughan the problem with "I will give you 2 weeks to tell all your realtor friends about this house. I will pay you 3% and them 3.5% for bringing the buyer." is that that's not how you get a buyer for a home. 

 Well there ya go.  Thanks for confirming my thoughts on this.  

With the low inventory on the market here, agents should have buyers lined out the door. More buyers than houses, I know that.  She didn't even offer to mention to others in her office.  I had a zillow ad and a CL ad and she could have said she knows a guy...  

Alas, she is still farming for listings instead of being in escrow pending a $6k gross commission.  No skin off me. I sold it easily with a $15 sign in the yard.  Think outside the box or don't, Gary.  

@Darius Niz I understand where you're coming from on this. For a long time, I placed little to no value in real estate agents. They just didn't add value to my business. 

However, I've found one a few years ago that has tremendously helped my business. He regularly brings me off market deals, lending insight, and provides negotiating advice on my deals he's not even involved in. And because of this I've never asked him to reduce his commission on the listings that I've give him.

I'd recommend finding a better agent than asking someone to take the hourly rate. A top agent will recognize how valuable it is working with you if you're as efficient as you claim. The best ones will bring a lot more to the table than just shuffling paperwork.

@Steve Vaughan , "Think outside the box or don't" Seeing how we've been doing discounted commissions, buyer rebates, and hourly rates for almost 10 years I'd say that's pretty out of the box thinking. But agents don't really network like they say they do and like you describe because it's horribly inefficient. And the odds of a listing agent "having a buyer" for your house is damn near zero. What I would do for a seller that thinks their sale is going to be easy is offer them our hourly option. But the other thing is that you have to make sure you're not underpricing the property. If buyers are lined up out the door the property is priced too low.

For FSBO - Buyers think you are saving on the commission so reduce the offer price. Yes there are some markets that are ultra hot for a brief period of time where that is not the case but over an extended period of time and in most markets it is not the case.

As a broker/agent you do not need all of the business just some of it. If I have 100 people tell me I am too expensive and to go take a walk ( doesn't happen) then all I need is 10 people a year for 100k each and I am at 1 million in commission for myself.

As a broker/agent demand more for yourself. You teach people how to treat you. If you think you are only worth making 50k or 100k a year then you are.

It's not a buyer or sellers fault for where you are at in business. It is the broker or agents fault for agreeing to accept the business and the results on their time and income. If a broker/agent wants to reach the next level they need to analyze their business just like an investment. Just like investors would not buy a certain property because it appears to be a dog the broker/agent should put systems in place to create many leads so they can funnel it down to their exact target business criteria and throw away the rest.

Some brokers have junior agents in commercial and throw the flaky and over demanding buyers to them. If by some miracle they close them they get 50%. If not the senior broker did not spend time on it.

I do not believe in fluff in business. Time is important. Only work with people that believe in your abilities and have a common relationship respecting each others time. The rest tend to be users or control freaks that want their way. They tend to view a broker/agent as just a mediocre tool they need to do something. You want long term relationships that grow over time and not one off abusive type transactions.

Start investing now just like the investors so you can tell the flaky buyers and sellers to (pound sand) when they get abusive. It is very liberating when you know you do not have to work another day in your life but choose to on your own terms because you love what you do. 

Ok @Gary Lucido .  I don't mean to argue with you, especially if you are doing things a little differently in your office.  I commend that.

I didn't expect this newer listing agent to have a buyer in her pocket.  She is a member of the largest agency in our town.  Most agents that have been doing it a while here have plenty of buyers because inventory has been so low so long.  I was amazed she didn't even consider telling her office about it.  I, as a lowly non-licensee, would have had the inkling to at least try that.   

My goal with the FSBO wasn't to save on commission. I offered her way more than standard. My goal was avoidance of an exclusive agreement that stretched for months into the winter. I wanted to just rent it out or lease option it beginning Oct 1 and revisit a sale next spring maybe.

\For the typical one-off Jack and Jill selling their home, I agree their main goal is to save on commission and they are overpriced and naive to the process.  I was priced right and sold on my own as I have been doing for years. Most don't know how to price their own homes or what is involved and are well rewarded retaining a good agent.

There are sites that pretty much offer that. They have flat fee type services for buyers. If all you are looking for is someone to walk around with a video camera and send it to you they will do that. If you go to their site and buy one they will actually call around and try and find an agent to go on their site and take some 4 hour test to be eligibile. I know this because they called me and asked, I declined because it's not the business I run, but I am sure they found someone to do it.

@Darius Niz

Seems reasonable to me. There are a lot of agents out there who aren't doing much business. Many of them are going to or are already failing in this business. They would be happy to work for the guaranteed income. So long as you are not expecting to work with an expert I think it would work out pretty well. I am sure you'll churn through a few of them as your generally going to be working with the bottom of the talent pool but if that's something your good with doing I say go for it.

I think there is a simple solution to your question. Why would you not look into just hiring someone in the local market that already has access to the property because they shoot videos for Obeo or whoever. I am sure they would be happy to video the property for you on a flat rate basis. You can then have the listing agent write up both sides of the deal for maybe an additional 1%. You win, because you get the videos that you want, the video person wins because they get paid for doing their normal job and the listing agent wins because they get 1% more then they would of. Win , Win, Win

@Account Closed

Not sure I'm following you here. The listing agent has a contract with the seller that includes a commission for the sale of their home. So, unless the parties agree to other arrangements in advance, the commission is paid from the proceeds of the sale, not from the buyer. There are situations, especially for off-market properties, where the buyer will agree to pay the commission to the broker/agent.

@Account Closed The money from the buyer goes into an escrow account to ensure it reaches the proper sources in order to insure title. But you can consider "escrow" as the seller for accounting purposes. All the money goes to the seller (IE escrow account), then gets paid out to the lienholders, title co, list agent, etc. Just because its held in escrow doesn't mean the buyer is paying. The CONTRACT to sell and market the home is between the seller and his/her agent's brokerage, and has nothing to do with the buyer.

In practice of course, a list agent might agree to reduce their commission either through what they charge the seller and/or as a credit to the buyer. But the concept is the same, the seller is paying the listing brokerage, who then is either charging the seller less AND/OR crediting (sending) THEIR (the brokerage's) money to the buyer. Those movements occur through an escrow account at the title company to streamline and ensure compliance with the process.

And I promise you - that's a factual response. Whether you chose to believe it or write it off as my "emotions" is on you. If you've ever bought or sold a property, just look at your closing statement.