Basic question of working with a realtor in Oregon: I've been working with a great realtor to find an investment property. On my own, I found a good off-market lead I'm interested in pursuing. Do I have any obligation to involve the realtor in this deal or am I legally able to pursue this opportunity without their involvement (and commissions)? I want to ensure I am treating this situation with integrity but certainly would be a better opportunity if commissions were avoided.
Thanks to any who can shed some light.
In this situation it would be difficult to have your cake and eat it too. Being fair to the Realtor and avoiding commissions, seems unlikely. Do you have a firm understanding of all the paperwork and disclosures required to complete the sale? If not you may still need the Realtor's help and may have to either request the seller pay a commission or form a separate agreement where you pay commission. If you go forward without the Realtor it is unlikely that they would want to work with you in the future because they don't want to put in the work for zero reward again.
In my opinion you do not have to shared this deal with the realtor, if it is the case that this realtor is not the cause of you finding this potential deal and if you don’t have an exclusive agreement as well. Because there can be some problem if you have an agreement in place and then go around that realtor, in such agreements, even if a realtor is not the cause of the deal, they may be entitled to a commission.
With that being said, if the realtor was not the procuring cause and no agreement has been made in writing, I would get the realtor to represent me in this deal, remember, this is not only investing in properties but also investing in people, investing in relationships that can last a life time, and to me this would pay more dividends at the end of any day in the future. And as you said, this realtor has been great, so why not reward them? And if commission eats up at your profit potential simply negotiate with the realtor, they understand that dealing with investors is a potential for many deals in the future.
Thank you @Aaron Klatt . I would not say I have a firm understanding of all the paperwork but was planning on learning and involving appropriate resources to ensure it is being done correctly. I do agree it simply may not be a situation where I can have my cake and eat it too. I appreciate your thoughts.
@Marvin Hernandez . No exclusive agreement. Good things to consider and I particularly appreciate the reminder of not simply preserving but even investing in the relationship. Great thoughts and I certainly agree that, with a long term horizon, this not only is the right thing to do but usually pays off as well.
Hello @Christopher Benjamin !
I am an agent/investor in Portland as well and I like what the previous responders mentioned. Although you may not be obligated to pay a commission to your realtor you should still try working them into the deal in some way. I never suggest just giving them a cut to keep them loyal to you. Make him/her work for the money. Ask for their help with the negotiations, writing the contract, scheduling inspections, etc. Anything they can do to bring value to you and then pay them for it.
Also, congrats on finding a good off market deal! The market in Portland is tough and it is important to look both on and off the RMLS to find properties that will work.
Thanks @Jacob Wathen . That makes sense to me too: including them but paying them for the value they bring to the process. Any advice on how to have the conversation with the agent on coming to an agreement on how much that is worth?
I am a broker as well in Portland. Congrats on finding an off Market deal!
I would be upfront and honest with the realtor. He/she has been working for you and they work in a service industry. I would compare it to not leaving a valet a tip... certainly not required, but a good thing to do.
I would offer to pay him/her a flat fee (some where around .5 or .75% of the purchase price/ about the amount of a referral fee) to perform a few important tasks with and for you. If you are getting a loan, if the realtor is good he should be able to wrap his 0.5% commission into the deal so you’ll only have to pay 25% of the commission in cash.
Useful things that he could do are:
1. Ensure you got a good deal by pulling comps.
2. Handle the contract and negotiations and make sure you have a 10 day inspection period and financing and appraisal contingencies if needed.
3. Manage the inspection and the sellers disclosures and walk you through them so you understand the asset you are purchasing and generate a buyers repair addendum if repairs are needed.
4. If you’re getting loan assist with anything that might be required by the lender and appraiser.
@Christopher Benjamin Christopher, congrats on finding a property on your own, especially if it’s a deal. How you cut your agent in is completely up to you? I know many people say you should be loyal but the fact is you did the key job the agent was supposed to do, find the property. Most agency Like others have said the best is to be open with him and see how they would like to move forward with you. I read someone comparing this to a valet and I can see the comparison but let’s frame it a little differently. Let’s say you ask the valet to go find your car for you and they can’t, you go look and find it, are you going to tip them? I know this can be torn apart but hopefully you get the picture. Using them to do the paperwork and other grunt work items, meeting appraiser at the house, setting up inspections, drafting contract, negotiating, etc. could be valuable to you depending on your time. You know your agent the best and like others said will they be able to earn their keep. I do this professionally, so take this with a grain of salt, but I would do everything myself as I find involving agents puts one more line of communication into the equation which typically muddies things up more. That’s not always the case but that’s for you to decide as you know your agent and how that person can add value or not. Realize though that since you don’t do this for a living there is a chance that you may miss something key, but that’s on you and you can then only blame yourself. Hopefully that made your decision as clear as mud. If nothing else if you don’t cut your agent in at least let them know how you found the property to help them with their career.
Hi Christopher I like the metaphors mentioned previously and they seem to help. I believe in most good deals its good because it is good for both sides. They both get what they want, also the timing could be really important. If you are comfortable to proceed on your own then you should, like getting it in writing. The problem of explaining it to your agent need not bother you to the extent that you found it on your own. I imagine they have had clients who have lost interest in looking because the client no longer needs them. Good Luck
My wife sales real estate in southern Oregon. she has a few investors that she has built relationships with, they to find properties on there own and buy properties that she has found for them, both parties put a significant amount of time in the business relationship because it produces cash for both parties.
Even on the properties that she has not found for them they will cut her in in some fashion, if they are flipping they may give her a week to bring a buyer from her investor pool, if they are holding they may slip some cash for other efforts. The sky is the limit on creativity.
In any relationship it is beneficial to operate where both parties win, when we come from scarcity doors will close.
Howdy @Christopher Benjamin !
Congrats on finding an off-market deal that will work for you! I thought I'd chime in because I have a slightly different view-point that hopefully will provide another way to see the situation. For starters, I agree that if you don't have an exclusive agreement with the agent, then you're fine not cutting them in. Honestly, even if we did have an exclusive agreement and you sourced, negotiated, and managed a private transaction (and clued me in ahead of time), I wouldn't expect or ask for a commission because I haven't done anything for you. But, if you're asking me to run comps, negotiate, prepare contracts, manage the deal-flow, interface with inspectors and appraisers, re-negotiate, and run interference with lenders, then my time is definitely worth a commission.
Finding the deal is great, but that is-in my opinion-the least part of what a good broker does. It's 2018! Information is everywhere and you have access to most of the same listings that a broker does. If you're connecting with sellers through friends and family or direct mail then you have listings your broker doesn't! But this isn't HGTV where an accepted offer equals sold. There's a lot that can wrong, where having someone who's sole job is to shepherd a transaction from start to finish with your financial best interest at heart is a powerful thing.
To go back to your original situation. If I was your broker and you came to me with a deal you found and asked for comps, I'm totally going to help you out. Same thing if you were looking for a good inspector or lender-I would totally refer them, because these are one-off things I would do for anybody. It's the same with the valet. It's true, I might not tip if I had to go out and find my own car. But if I parked on the street and found my car had been towed and a valet ran interference with multiple agencies, negotiated a fair unlock fee with the towing company, ensured nobody had put a lien on the ticket, and then was there to help you jump start the car, I'd probably pay the valet more than a tip. You know?
Finally, there's a loyalty component. It is fair to say you don't owe the agent anything, yet I believe we are known by our actions. If you develop a relationship over time, that has intrinsic value that worth. To turn your back on that worth potentially says something about a person's character. I don't think that means you pay a person a commission just because you've worked together in the past, but I do believe it means you at least should consider cluing the agent in to what you've got going on. Communication is powerful and simply saying, "I found this deal" doesn't mean, "I'm never going to look at another deal you send me." Before I got my license I was considering selling one of my properties and talking with a fellow investor who was an agent. He tried to cut out my long-term agent by telling me he'd reduce his fees, which would've saved me over 10K. I declined in a polite way, because the deals, the mentorship, friendship, and expertise I'd gotten from my agent over the previous 5 years was worth far more than $10,000 in my pocket now.
I hope that helped and didn't just cloud things further!
Best of luck on your deal!
It’s a common misnomer that the value of a Realtor begins and ends at finding the next house.
There are intangibles a good Realtor inserts into any purchase that are worth a commission. The biggest of these, and the most overlooked, is that these intangibles culminate in a far greater likelihood that the purchase will close! Good Realtors close deals!
Real Estate is a low-volume business. Each house is unique and only THAT house is for sale. Maximizing the success rate and reducing the risk of each transaction matters. A high-volume commodity business, like a grocery store, cares greatly about the last 3% margin of a sale because the volume is high and there will always be another transaction.
Real Estate is the opposite. Each sale is precious. You want a Realtor in your corner who can facilitate getting you the best combination of price, terms, inspectors, lenders, contractors, repairs, property managers, market analysis, paperwork, information and negotiation. All of these reduce risk and increase the likelihood of success.
Involving a good Realtor will result in more successful deals. Exactly what you want in a high-margin, low-volume business.
Thank to each of you- @Chris Shepard , @Bobby Nilsen , @Robert A Garcia , @Steve StMartin , @Mathew Wray , @Jacob Ghena , @Al Pat - for you additional thoughts and perspectives. They have been clarifying in both the value the realtor can bring to the transaction but also the importance of the long-term, intangible benefits of investing in people and building relationships within the industry.
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