Commission on purchase if you are your own RE agent?

26 Replies

If I am my own real estate agent buying an investment property for myself, do I get the % commission which would typically go to the buyer's agent? Pretty simple question. I tried to Google it but couldn't find anything (maybe I'm using the wrong search terms). Hopefully I picked the right category to post this. I'm still newer here, so if I'm supposed to post this somewhere else, let me know.

Yes, of course. It's real work, get paid for it, don't let anyone talk you out of it.

Make sure you do your own showings, let listing broker know you’re an agent and write the contract accordingly.

Of course you can take a comission for your own deal!.....WITH a few exceptions......

IF you are using a conventional lender, they may require you to use it in a specific way like to pay closing costs or for your down payment, which shouldn't impact you because that money has to be paid anyway.

Also, if you are writing offers on any REO or short sales, those lenders will NOT let you take a commission AND be the Buyer. It's totally unfair because they will pay a co-broke, but for some reason they won't pay it to the Buyer who happens to also be the agent.

Also, if you are buying a HUD home, you cannot be the Realtor taking a commission and the Buyer. That has changed in recent years. You used to be able to take the full commission (6%) AND closing cost concession AND be the Buyer, but they have changed the rules for that now.

In instances where you want to buy one of the exceptions listed above, I would just have the purchase price reduced by the commission amount to account for that value, or ask a Realtor colleague to represent you, and pay you a referral fee that seems fair for both of you. 

@Michael Ehmann Yes. Here in MA, MLSPIN (our main MLS in eastern MA) requires that the commission be stated in the listing as either a dollar amount or as a percentage of the sale and that all parties are required by contract with MLSPIN to accept that amount.

I've not seen an instance where a short sale or REO refused to pay an agent/buyer, but the MLSPIN contract is the first place I'd go if they tried.

As @Derek Carroll said, be sure to disclose up front that you're a licensed agent and you're also the buyer.

Originally posted by @Michael Ehmann :
If I am my own real estate agent buying an investment property for myself, do I get the % commission which would typically go to the buyer's agent?

Pretty simple question. I tried to Google it but couldn't find anything (maybe I'm using the wrong search terms). Hopefully I picked the right category to post this. I'm still newer here, so if I'm supposed to post this somewhere else, let me know.

Almost all the time yes your brokerage will get paid just like normal. You will then get a check from your brokerage for you % of the split. The only time this changes is on short sales or REO's. Often times in the broker notes on the listing you may see a notation that they do not pay a co-broke if the buyer is also the agent.

MLS Deals- Individual seller yes

Short Sales- almost always no

Reo- FNMA, Va, and Freddie yes. Others Maybe 

HUD- No , however you can always reduce your bid by 3% . So in effect, an agent representing themselves can purchase for 3% cheaper as all Hud considers is the net to Hud

Always consider forfeiting your commissions as opposed to collecting them so you are not paying income taxes 

Originally posted by @Greg H.:

Always consider forfeiting your commissions as opposed to collecting them so you are not paying income taxes 

Note that if your using this strategy your Broker is likely still going to want their cut of the commission you "should have" received. I know I do when my agents utilize this strategy.

When my husband and I purchase investment property, we do so under the LLC name and often use a lender. I had no issues acting as the buyers agent and still get paid the 3% as buyer's agent.

@Michael Ehmann

You can do one of two things.  You can either waive the buyers agent commission.  When we have done this we offer for example $100,000 in then specifically put buyers agent to waive $3000 commission so seller realizes there is a savings of $3000.  This would work if your office has a high split, because you may bring 3,000 into office but keep only 50% of that.  Keep in mind your broker may not allow this but our did in past.  We prefer to offer with buyers agent commissions however, because I want the units sold on my record and also it helps getting bank financing at the end of the day because its income you are putting on your tax return.  Also this is a factor of the splits you have with your broker and how you negotiate them. Some brokers only have a per transaction flat fee, some have high splits but no ongoing. Some are flat monthly.  I'd figure out which broker fits your needs best.  You may want a lot of hands on support for a lower split or you may be established and want to do all of our own marketing to take home as much as you hunt for.

Originally posted by @Michael Ehmann :
If I am my own real estate agent buying an investment property for myself, do I get the % commission which would typically go to the buyer's agent?

Pretty simple question. I tried to Google it but couldn't find anything (maybe I'm using the wrong search terms). Hopefully I picked the right category to post this. I'm still newer here, so if I'm supposed to post this somewhere else, let me know.

 That's the best part the commision : ) 

Thank you everyone for the great responses! I really apprecite the input from everyone who commented. 

@Cara Lonsdale , really appreciate the depth you went into. 

@Casity Kao , thank you for your specific perspectives and the things I should consider when deciding whether to forfeit the commission to get a lower. 

This solidifies for me that I will pursue my license. One of my 2018 goals is to 1) decide whether to pursue my license (check), and 2) if so, select a course my the end of January. Looks like I've got a little research I need to do over the next 2 weeks.

Originally posted by @Michael Ehmann :

Thank you everyone for the great responses! I really apprecite the input from everyone who commented. 

@Cara Lonsdale , really appreciate the depth you went into. 

@Casity Kao , thank you for your specific perspectives and the things I should consider when deciding whether to forfeit the commission to get a lower. 

This solidifies for me that I will pursue my license. One of my 2018 goals is to 1) decide whether to pursue my license (check), and 2) if so, select a course my the end of January. Looks like I've got a little research I need to do over the next 2 weeks.

 One thing to keep in mind is that most e&o policies do not cover transactions in which you are a principal.  Ive found most agents dont even realize this.

Yep - Minus the brokerage fee. I did this with my first purchase.

This post has been removed.

Originally posted by @Russell Brazil :
Originally posted by @Michael Ehmann:

Thank you everyone for the great responses! I really apprecite the input from everyone who commented. 

@Cara Lonsdale, really appreciate the depth you went into. 

@Casity Kao , thank you for your specific perspectives and the things I should consider when deciding whether to forfeit the commission to get a lower. 

This solidifies for me that I will pursue my license. One of my 2018 goals is to 1) decide whether to pursue my license (check), and 2) if so, select a course my the end of January. Looks like I've got a little research I need to do over the next 2 weeks.

 One thing to keep in mind is that most e&o policies do not cover transactions in which you are a principal.  Ive found most agents dont even realize this.

 That's because errors and omissions on your own deals are considered FRAUD to the e&o provider. Yikes!  That's why many agents have colleagues that they have represent them as a courtesy. 

Originally posted by @Russell Brazil :
Originally posted by @Michael Ehmann:

Thank you everyone for the great responses! I really apprecite the input from everyone who commented. 

@Cara Lonsdale , really appreciate the depth you went into. 

@Casity Kao, thank you for your specific perspectives and the things I should consider when deciding whether to forfeit the commission to get a lower. 

This solidifies for me that I will pursue my license. One of my 2018 goals is to 1) decide whether to pursue my license (check), and 2) if so, select a course my the end of January. Looks like I've got a little research I need to do over the next 2 weeks.

 One thing to keep in mind is that most e&o policies do not cover transactions in which you are a principal.  Ive found most agents dont even realize this.

Have not heard this before but good question to ask.  I just verified this and ours are all covered.  All of our partners we work with our investor friendly.

Originally posted by @Casity Kao :
Originally posted by @Russell Brazil:
Originally posted by @Michael Ehmann:

Thank you everyone for the great responses! I really apprecite the input from everyone who commented. 

@Cara Lonsdale, really appreciate the depth you went into. 

@Casity Kao, thank you for your specific perspectives and the things I should consider when deciding whether to forfeit the commission to get a lower. 

This solidifies for me that I will pursue my license. One of my 2018 goals is to 1) decide whether to pursue my license (check), and 2) if so, select a course my the end of January. Looks like I've got a little research I need to do over the next 2 weeks.

 One thing to keep in mind is that most e&o policies do not cover transactions in which you are a principal.  Ive found most agents dont even realize this.

Have not heard this before but good question to ask.  I just verified this and ours are all covered.  All of our partners we work with our investor friendly.

@Casity Kao it's not necessarily bad that you would be the principal. However, if you are the principal AND the Realtor representing yourself, your E&O won't cover you. They don't consider it a mistake at that point, they consider it fraud.

If you asked your broker, my guess is that they understood the question to be ONLY the principal OR they don't realize that liability is there.

I have not found any E&O policies that will cover an agent who writes their own offers. If yours is miraculously one that does, please share their info. :)

@Cara Lonsdale   We get around it because the offers are in my husband's name or in an LLC which is single member. Your answer does not apply to us;-) We did this a number of a years ago because it was easier to work with for DTI calculations. That allows my husband to buy property with just debt on his credit and not both of ours so we can individually max out the amount of debt we can take out and have independent exposure. Working in banking we had ran into all sorts of issues where our clients lost their home where both were on the mortgage and it was not necessary which made it nearly impossible for them to purchase a home. For example, we had a client that's home was on a ton of clay and during a drought the home literally split in half because the soil shrank and no insurance would cover it so the bank of course foreclosed. Had it been just in one of their names only one person's credit would be spared so we have always taken the same approach, we recommend to our clients. I can go into more detail but being a realtor I assume you know the advantage to this.

Originally posted by @Casity Kao :

@Cara Lonsdale  We get around it because the offers are in my husband's name or in an LLC which is single member. Your answer does not apply to us;-) We did this a number of a years ago because it was easier to work with for DTI calculations. That allows my husband to buy property with just debt on his credit and not both of ours so we can individually max out the amount of debt we can take out and have independent exposure. Working in banking we had ran into all sorts of issues where our clients lost their home where both were on the mortgage and it was not necessary which made it nearly impossible for them to purchase a home. For example, we had a client that's home was on a ton of clay and during a drought the home literally split in half because the soil shrank and no insurance would cover it so the bank of course foreclosed. Had it been just in one of their names only one person's credit would be spared so we have always taken the same approach, we recommend to our clients. I can go into more detail but being a realtor I assume you know the advantage to this.

 Yes.  I know how this works, and practice it also in my RE investments.  

However, the OPs question was about being licensed himself and taking commissions for his own deals. So I was surprised by your answer, which now that it has been clarified, is clearly not the same set up that the OP was talking about. So, it is good to make clear that you were talking about representing your husband or an LLC of which you have ownership interest in (which you also have to disclose), and NOT about representing yourself as a Buyer in a deal AND taking a commission for the deal.

@Cara Lonsdale You need to find a new carrier, because there are carriers that cover.  My broker set it up that way because he does 80 flips a year, so wanted to make sure for his own purposes it is covered.

Originally posted by @Casity Kao :

@Cara Lonsdale You need to find a new carrier, because there are carriers that cover.  My broker set it up that way because he does 80 flips a year, so wanted to make sure for his own purposes it is covered.

 I would love to hear who he uses.  In 20+ years in Real Estate, I have never come across a carrier that covers self represented clients.  Not that I don't believe you, but I am highly skeptical. lol.

I am in a similar boat and I think he asked a question no one answered... Does he need to work for a Broker? Can he not collect the entire 3%?

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