Signing a non exclusive representation agreement with a broker?

Question

I'm fairly new to RE investing. I've started looking around and talked to a few brokers about deals I found online. One of the brokers said he could send me dealflow but required that I sign a non exclusive representation agreement. Is this common?

Also, the agreement specifies that if I buy a property through his service I'll be paying 3% commission in case the sellers broker doesn't split fees. Is that also normal?

Russell Brazil · Answer

Buyers better get ready for the fact that they're all going to need to sign buyer agency agreements in the near future if they want to work with an agent because of the DOJ.

It's interesting that the DOJ says they want to protect the consumer, but the action they are taking will lead to mandatory buyer agency agreements and will likely lead to a rise in cost to the consumer.

Andrew Freed · Answer

@Dan Bowe - I agree, I am a broker and never make any of my clients sign such agreement. The thing about working with investor focused agents is each have their own niche, area of expertise etc. If I'm searching in one market, I might use one broker who specializes in that market and if I search in another market, I might use a different broker. To sign such an agreement requiring you to utilize this person in all scenarios goes against your ability to find the best deal for you. If he is a solid agent, he would not require you to sign such an agreement. He would be confident in his ability to bring you deals you are interested in and if you like them then you can move forward with working with him.

Luka Milicevic · Answer

You can talk to 10 agents and you will get 11 different answers.

Everyone does it differently.

In your example I see nothing wrong and no red flags with this request. This is very reasonable on the part of the broker.

I personally don't do it this way. I send off market deals to my investors with no markup or representation fees attached. I just ask them to let me list deals on the back end when they do end up selling. I also require no agreement to be signed promising me back end listings.

Everyone is different...

Robert Rixer · Answer

Pretty normal. A non-exclusive means if you find a property on your own or another broker sends it to you, you don't owe commissions to him. If it were an exclusive buyers agreement and insisted on 3% with no contingencies, that is a lot more rare and broker-sided but from the terms you've provided, it appears he's just trying to protect himself from timewasters.

Nathan Harden · Answer

Atleast in the state of WA, a buyers agency agreement is the law now.

That being said, 3% is too much. Only go with brokers who are offering 2.5%. This is the norm, so there should be no extra money that is needed from you at closing just so the agent can make an extra .5%.

Russell Brazil · Answer

When I sell commercial multifamily, about 50% of the time my buyer pays me directly and about 50% of the time we include in our offer that the seller pays my fee.

Melanie P. · Answer

There is no "norm." If he is sending off-market deals it makes sense. He should not be due a commission for pointing out a property to you which is on the MLS.

Dan Bowe · Answer

Appreciate the comments. I'm trying to figure out what are the best practices in terms of buyer broker fee in commercial multifamily. Is it fee split with seller broker or the buyer pays out of pocket?

Lucia Rushton · Answer

@Dan Bowe. It’s also a test to see how committed you are. There are lots and lots of desktop investors who surf the internet but are not fully committed to buying or learning the process. And there are plenty who want us to do all the work for them and then not get paid ? We are not a charity, we are in business.

Someone said it well the other day - we are volunteers until closing day. So it confirms the work we do do prior to closing, and not just the one deal that actually makes it to the closing table, but all the work prior to - that is why we want a partnership with our clients and have them sign the rep agreement for 90 days at a time. If you are committed to making a purchase, we will make that happen (in 1-4, commercial MF is different).

As always just my opinion and not written with Ai.

Mark Updegraff · Answer

Well said @Russell Brazil - Our preferred attorney will be meeting with my agents here in Upstate NY to review new protocol in light of the recent lawsuits.  I've never required someone to sign an agency agreement in over a decade of doing this.  I've been burned a couple times early on, but the type of personality that operates with no consideration of anyone else but themselves is easy to spot with a little experience.  Now they're the ones I politely decline to work with.  If you're someone that brings value to to the table, it should be a no brainer for loyalty given you're working with a decent human.  It will be interesting to see how the consumer reacts when these documents start getting shoved down their throats.  Indeed it will be bad news for the consumer as a lot will get locked in with inexperienced / part time agents who never make the cut.  In my market, this can easily lead to increased home prices, closed transactions that had no inspection where there are a lot of issues that could have been identified by an experienced agent, and a bad taste in the consumer's mouth.  Co-op broker fees have been diminishing over the last few years, and I think it will accelerate.  Discount brokers a keeping the meat on the listing side and shorting the selling side.  Most buyer's can't afford to pay the differnce and selling agents desperate for a deal don't seem to mind.  We're going to see a huge shake out of agents over the next few years IMO.

Signing a non exclusive representation agreement with a broker?

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