Broker wants me to sign a 10% commission agreement for off market deals??

16 Replies

Hi Folks,  I'm looking for mobile home parks and home-land deals here in GA.  BTW "land-home" deals are just a mobile home or double wide titled on land, not in a park.  Some investors buy/build whole subdivisions of mobile homes each on their own lot as a rental community called land-home deals.   At present I'm buying doublewides on land one at a time and doing rent to own then owner finance.  Numbers are great,.

I met a broker here in GA who is instant, even obnoxious that I should sign his fee agreement for 10% that if the seller doesn't pick up the whole 10% that I will pick up the balance.  His comment is that I should just subtract the fee I get hit with off my offer price.  Am I un-reasonable at my revulsion at his apparent greediness or is 10% a fair price for him to bring true off market deals to me?

I'm having a problem with his apparent greediness!   The size of these deals are in the $1M range.

A factor in this strained relationship is that this broker is truly talented and aggressively builds his own owner databases and pays for VAs to call every owner in the state...  He may have a unique value story.  I just find it hard to sign his agreement.

if you dont like him, his ways or have trouble with his guidelines, do not do business with him. it will just get worse as time goes on. it never does the opposite. never.

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Ask him to prove himself.  See if he won't do a deal with you at 5% commission.  If that deal makes you money and he does all the legwork to earn that 5%, then decide for yourself if he's worth 10%. 

If the guy is doing all the work and bringing you the deals then he gets to name his price.

It takes a ton of work to build databases and stay in touch with these property owners. If it was easy all of these buyers would be out there doing it.

If the value of the property is in the land then 10% is common here in GA ( There is no set commission in any state but I see this percentage often with a co-op of 5% to selling broker ) . Doesn't matter if an old trailer is sitting on 10 acres the value likely " highest and best use " is parceling out the land ( developing it ) etc. 

I can tell you if ANY buyer contacts me and starts mentioning chopping fees etc. then they do not believe in the value I offer and I won't give them the time of day. If the property meets your goals and you make money on it and could not find it on your own then why not buy it??

The buyer just sees the immediate property to buy being shown them. They do not see the sometimes ( years ) that went into getting the owner to sell and time invested by the broker. Yes sometimes sellers you contact want to sell right away but that is not often the case.

"I met a broker here in GA who is instant, even obnoxious that I should sign his fee agreement for 10% that if the seller doesn't pick up the whole 10% that I will pick up the balance."

This is a common occurrence that I see.  If a broker gets another 150k knocked off in price but you have to pay 20k the seller will not cover to the broker then it would appear the broker has then shown their value.

I don't like brokers who dictate fees, especially high ones. It means they're more concerned with their needs than yours. I think people should get paid fairly for their work, but 10% on a deal that size is excessive. It sounds more like what a partner would get, not a broker. What does that 10% do to your ROI? Unless this guy is the only one who can get you what you want, find another broker.

I don't get it. What makes 10% greedy? As a buyer, when you negotiate to buy at a 10% or greater discount off of FMV, you're not greedy, right? That's just good negotiating. If you can sell to a buyer at 10% above appraisal, that's not greedy. But a 10% commission makes this agent greedy? 10% is typical of land and speciality property listings where I am.

You say this agent has the goods and the know-how.  Those people are rare, as I'm sure you're learning.  So make your offers so the numbers work for your purposes and to accomodate your share of his fee.  Don't worry about what he makes.  

@Curt Smith  

  who cares what the broker makes... If its a deal its a deal.. bottom line.. And he is most likely worth it... Its not like your paying him a retainer up front.. If he brings you a deal that pencils and if its off market it could be a much better deal than you could get yourself....

I think back to my days of selling dirt in N CA. during the early 80's and 15 to 20% interest rates... It was darn tough to sell anything and especially ranch land with little or no financing.  But I specialized in it and that's all I did.. I charged between 15 and 25% for each sale.. Most people would not list with me at first ( actually no one did) but when they had a year with C 21 and their 6% with nary an offer.. they would give me a try... I also facilitated these deals because I worked out terms to get it sold.. the other brokers would just take orders from the clients I would sit down with them and explain the benefits of owner finance.. and that I could get them more money for the property than listing with another broker who only offers the property for cash.. So then I would give 80% of the downpayment to the seller and we would split the monthly payment until my fee was paid. Many of these commissions I made took 5 years to pay off but it was great residual income and I earned my 25% fee's.. I was selling 40 to 250k properties back them.. Sonoma Napa Mendecino and Lake Co/s... when the pot growers started in the late 80's we then could sell for cash.. And I was one of the few that knew how to deal with those guys

What's fair is in the eye of the beholder.

An investor can think making 200k on  a deal for themselves over time owning the property is fair and that the broker/agent should only get 10,000 commission. My old neighbor across the street is an engineer and he would constantly tell me brokers/agents were "blood sucking vampires" who shouldn't get paid anything. This from a person who sits at a desk all year and gets over 100k salary. I never took him to task on explaining his value as an engineer.

Being an investor myself and a broker I can see both sides of it. I don't work with buyers who hyper focus on my money. If they think I have little to no value then I won't work with them.

This comes back to the old saying about investors complaining about property management fees but do not want to manage the properties................ : )

I have buyers right now that will glady pay the money. In fact there are buyers that will pay EXTRA to bring the properties to them. The smart buyers don't try to smash the hand feeding them the steak.

There is nothing greedy about any negotiating position.  It is just how it works.

It amuses me when investors complain here about contractors negotiating for work, or tenants negotiating lease terms and payments, or brokers charging a certain commission...

...when they brag about buying properties below market.  What's the difference?

You might also be getting hit with a risk premium from a broker who knows you are violating Dodd-Frank.  Unless you are running all of those owner-finance deal through an MLO.

@Joel  LOL "smash the hand feeding them steak".  Ok ok that's why I asked.  Thanks.

@Jay Nice story about working out the financing too, that's value add!!  

Why do investors feel making 20% is ok and brokers making 10% not ok, well I'm signing the purchase contract and arranging financing or putting my cash on the deal, thats why!!!

Ok Joel has a point re finding sellers may have taken years.  But in this case not, just paying VAs to call every owner in the state.  What's that worth?  Maybe his 10% ok ok.  

From all of the above my summary is that it takes a team to be a well rounded investor especially in commercial or bigger deals.  Joel's / Jay's points are carrying the day for me.  I'll reply to this fellow and see what his deal looks like, signing his fee agreement.

Thanks everyone!!

Greed is good, it captures the evolutionary spirit, to quote Michael Douglas in Wall Street. I'm with Joel and K. Marie, I don't think you are looking at this from the right perspective. Clearly you are willing to pay 6% as the standard RE commission to agents who simply look on the MLS for you! but now you have the opportunity to work with an agent! that by your own admission! is very savvy and has a system that most other agents do not! thus bringing you deals nobody else has and you balk at an extra 4%? Check your numbers, if the deal is good With the increased commission costs, then what's the difference? I would be happy to engage a RE agent willing to depend money and time to do things differently and out of the box from all other agents.

If you still have second thoughts, send me your agents contact info, I will gladly pay him the extra for these off market deals!

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Originally posted by @Curt Smith:

Ok Joel has a point re finding sellers may have taken years.  But in this case not, just paying VAs to call every owner in the state.  What's that worth?  Maybe his 10% ok ok.  

Again, what do you gain by deciding the agent's business model didn't involve enough effort or time to warrant a 10% commission? You know nothing about the R&D or cost or time involved.  Regardless of how much the agent spends or time he devotes to his business, off-market lead sources are worth money.

If the agent has real sellers with properties that you want, don't waste time or mental energy on his commission.  Spend your time making offers that work for you.

The broker brings you off market deals, and you want to screw the broker so you can make more on your end. 10% are cheap for off market proprieties, and the broker is smart asking you to sign his fee agreement.


Joe Gore

@Curt Smith  As a MHP broker in AZ 6% commission is the standard we use for MHPs that are in the lower 1 million dollar range and it usually decreases as the property value increases. For example we have a current deal in escrow for 15M and are doing that at a 2% commission. If this broker is charging a 10% commission it could be warranted if they are one of the top brokers for MHPs in the area and have buyers coming to them with exchanges (which are usually the best buyers since they have a time limit to buy and pay retail prices). We usually avoid smaller deals like yours however because new investors are the most nervous and hardest to deal requiring the most work and the smallest pay out. I'd shop around and see what his competitors are offering and go with the best option. He may be willing to lower the commission if he realizes he is in competition. 

Regards,

Andrew Warner

@Curt Smith  &

@Joe Gore  Off market listings are standard for MHPs. This is because most sellers do not want to spook their property managers, who often lose their job when a property is sold. Because of this many sales are off-market and not publicly listed & marketed.