Lawyer or RE Agent for turnkey investments?

Question

Hi BP Gurus,

It appears that when investing with a respected turnkey company, they attempt to sell directly to you.  Their sales people are effectively serving as the real-estate agent, which creates some mis-aligned incentives.    Should I bring my own real-estate agent to help navigate the contracts?  Would the turnkey company pay their 3% commission if I did?

Should I instead bring a laywer to the table?

Does anyone have advice on how best to proceed, and what professional advice is necessary before signing?

Thanks

Jeremy Schreiber · Answer

Hey @Chris Clothier,

Thanks for chiming in.   BTW, I wanted to let you know that I've been working with Allen on your team and he has been a fantastic guy to work with.  I wanted to make sure you heard it directly.

Cheers,

Jeremy

James Wise · Answer

You'd need to ask if they'd pay the 3% commission. It's probably a case by case basis. If they list properties on the MLS they may be willing to do so but you don't know if 3% is what they've even offered on the MLS. A lot of people think it's a rule that sellers or listing agents offer 3% to buyer's agents. Not the case. It's all about supply and demand and how much the seller values what the buyer's agent brings to the table.

In the event where the company found you, engaged with you, then at the last minute you wanted to being in your own agent it's doubtful they would value what the agent is bringing to the table very much as they have for the most part already procured the sale.

Colby Fryar · Answer

@Jeremy Schreiber be sure to do your own due diligence and don' take anyone's word for it.  You need to know the property and neighborhood front and backward.  Don't rely on "this is the best rehab company in the nation".  And make sure to visit the property-could be well worth the airfare.

Chris Clothier · Answer

@Jeremy Schreiber -

You can always ask for anything.  As you noted, you know how to negotiate, so there is never an issue with asking and getting clarification.  As far as attorney, there should be no issue with you having your own attorney.   Again, that is one you want to get straight on the front end as they may add a day to your scheduled closing.

Ali Boone · Answer

Do you mean a turnkey company you are working with? Or a middle person/company.... like I'm not a turnkey seller directly but I'm a middleman for the buyer and the turnkey company. I'm individual but there are companies who do the same thing. Some people call them the turnkey marketing companies, etc. They are the ones I'm wondering if you are working with because they are usually the ones who serve as the agent for the buyer, informally.

Jeremy Schreiber · Answer

Hi @Ali Boone,

I do have a company I'm working with.  They seem incredibly professional, and all the research I've seen on them has been positive.  The contract is pretty standard - however it's incredibly biased towards the seller.  Additionally, when you get to the property management side, there are clauses that completely misalign the incentives between owner and manager.  I'm fully capable of negotiation terms.  That said - I'm used to using an agent to purchase a home - it's a strange feeling going it alone.

If you're willing to help pro-bono - at least to help me talk through some thoughts - that would be amazing!  Please PM me and we can talk tomorrow!

Thanks

Ali Boone · Answer

I wouldn't think they'd pay the 3% because there's no incentive for them to do so when they don't have to for any of their other buyers, so they could just sell the property to someone else.

You can always do the lawyer thing but in my experience, lawyers are fairly ineffective at helping with anything other than to confuse the process with turnkeys. I've never even heard of a turnkey company using a sketchy contract, and with a lawyer not being familiar with turnkeys and they are essentially glorified salespeople (sorry, lawyers), they tend to just make mountains of barely-existent molehills and irritate everyone. Turnkeys move fast, lawyers don't.

If you felt better having someone on your side, it'd be cheaper to pay an RE agent than a lawyer.

Do you have a turnkey company picked out you want to buy from? Is anyone helping you with it? For example, I help people get turnkeys all the time and I'm a licensed real estate agent, but I don't put myself formally on the paperwork as the buyer's agent. But that's what I serve as more or less. There are lots of me-types out there that help with turnkey purchases, and they rarely charge to do it.

Lawyer or RE Agent for turnkey investments?

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