Agent asking for $5000 upfront compensation. That normal??
Hi I really need some feedback on this. I was looking to buy some out-of-state rental properties and got introduced to this agent in August when I did a field trip. Since then he has been sending me some off market properties and market analysis, which was very helpful. I was on vacation for the entire month of Sep so we lost contact for a while, but in early October I came back to the state and was ready to do some business again with him.
Long story short, we've made so far 5 offers together (2 are for properties he sent me and the other 3 are ones I found on MLS myself). They were all multifamily homes and my initial offers were at about 80%-90% of the asking price but i told him i am open for negotiation. He wasn't quite happy about that and told me there is no chance if I keep low balling (i later noticed 3 out of the 5 properties I offered are still sitting on the market unsold as of today, meaning my offers weren't that low actually as the units were either overpriced or the sellers were just being greedy). The agent told me this is not how they normally do business here and suggested me go under contract first and get the inspection started. I can negotiate again in the inspection phase or just back out if I don't like the results. I started to agree with him as most multifamily here don't even let people view inside unless it's under contract and that seems a good strategy to at least have the ball rolling. So one day he sent me an off-market deal (it's in another city 1 hr from his town) and told me it's in a high demand area and this is a great opportunity; however he said the seller is quite firm on the price (he is a dual agent in this deal btw). I trusted his words, offered full asking price and scheduled inspection the following week. This place is about 5 hr drive from my home but I still decided to take a trip as this is going to be my first large investment out-of-state and don't want to take it lightly. When I got there I was quite shocked by its below-average condition and being in the worst part of town - totally unlike what the seller had disclosed before. My wife wanted to cancel the deal right away but I said let's just wait til the inspection done before making the final decision. A few days later the inspection report came out as expected. All roofs need to be redone; hvac needs complete overhaul; one unit has serious termite issue; another unit might have problem in sewer line- just to name a few major ones. I think this is enough reasons to back out of this deal so I told the agent we'd like to cancel. Now all of a sudden he was like changed to another person and started saying negative things about me- he texted me something like new investors like me will never be able to buy anything and he felt disrespected as my realtor bec I didn't discuss the report with him. I apologized and offered him a thorough explanation of why I think it won't work but he still wants me to order a separate termite and sewer inspection to better evaluate even though there are already plenty of issues to worry about... Anyways, I cancelled the deal but told him we have other things in the pipeline because I am constantly searching for new deals and let's just move on.
Today he asked me to sign an exclusive buyer-broker agreement with $5000 non-refundable compensation exp. Jan 2018. (future commission can be credited against it). I dont mind signing the exclusive buyer-broker but the $5k thing bothers me. The market we are looking at has an average home price of $50- $100k per unit so it means I will need to buy at least 3-5 units within the next 2 months in order to get the credit back otherwise it's for him to keep. I never heard of such thing but I'd like to ask for feedback here in the forum. Does this sound normal? I know he's frustrated by the fact that the deal didn't go through, but I am also frustrated being mis-informed at the first place and wasted time/money on the inspection etc. I treated that as a learning process and didn't want to blame anybody, but he's apparently not happy about it. Today we had a phone conversation and he said he has kids to feed and is not working for free. We are currently in negotiation for another deal but sounds like he's not working on it unless I sign the agreement... What should I do? I don't feel this kind of relationship will benefit anybody down the road. Should I switch agent at this point?