Rental Property Investor · Golden, CO · Member since 2015 · 65 posts · 11 votes
Wanted to ask how realtor commission works on seller financing deal? For example, the sale price is $850k but by the time we pay 5% interest rate to seller over 30 years the final amount to seller is over $1.5 million. I assume realtor only gets commission on original $850k but can someone confirm? Thanks.
Rental Property Investor · Katy, TX · Member since 2013 · 417 posts · 171 votes
10y
This is a great question. I too am considering using seller financing to acquire my next deal and wonder about standard practice around realtor commissions on seller finance transactions.
Investor · Las Vegas, NV · Member since 2013 · 131 posts · 63 votes
10y
@Charlie Gruber yes commission would be on $850k only not 1.5 usually you don't get paid on the future of what it would cost to finance the property. But it is real estate and almost everything is negotiable...
Vendor · Bonney Lake, WA · Member since 2016 · 48 posts · 12 votes
10y
Hello to all-
This is a great question with some very simple answers that unfortunately keeps many realtors shying away from handling Seller Finance/Carryback deals.
Like most things in real estate it comes down to the contract between the buyer and seller. Plus it requires communicating the handling of those commissions with the seller prior to presenting the final contract to the buyer.
There are several options, the most common as follows.
Seller pays the agreed commission directly to the realtor out of personal funds or part of the down payment on the property. This can be done separately or as part of the close in escrow.
Many times the contract allows for the commission or part of the commission to be paid out monthly to the realtor when the payment is made to the servicer. The servicer then makes a disbursement to the seller and one to the realtor. This is addressed in the original contract between buyer, seller and realtor and can be set up in many creative ways with partial commission paid up front at close, then a portion paid out as the buyer makes payments.
The contract also needs to address the possibilities of prepayment, refinance and non performance.
Before a realtor snubs this idea I would say look at the power of residual income stream that can be built up using this strategy on some of your deals. And another benefit...utilizing this strategy allows for a higher percentage commission as it is paid out over time.