I am trying to rent out my first buy and hold. I have someone that is interested and they had a realtor to contact me. The Realtors commission is half of the deposit amount and she stated she has detailed information, credit and background on tenant. The tenant also has a section 8 voucher. My question is do the Realtor facilitate the lease and do I still have her fill out my app if I'm provided the information? I have not formed my own lease yet,,Can I use her Realtor to my benefit? I'm a little throwed off as I planned to do rental process myself. ANY ADVICE?
I have written up leases for my tenant clients when the listing agent has gotten lazy and not done them. However, I usually try to make them beneficial to my tenant client (ex. lesser penalties for paying late).
I would have an attorney create your lease or if you do it yourself, don't use some generic one from Staples.
I would forward your application to the agent and have her client fill out it and submit it with the credit report.
Who pays the broker's fee in your area, you or the tenant or Section 8?
That is a pretty hefty fee and since I have no trouble getting multiple qualified applicants for my properties in a few days I wouldn't be interested.
Are you having problems finding qualified applicants? If so, it might be worth it, but I wouldn't trust anything the agent tells you. You still need them to fill out your application, you need to contact the references and verify everything. Then you will use your own lease since you want to make sure it has what you want in it. Don't change any procedures just because the prospect has an agent.
Are you set up to handle Section 8 tenants? Your property will need to apply to and be inspected by the local housing authority if you are not already in the program which can add time off the market that you wouldn't have with a regular tenant. I haven't looked at it too much, but it may be a good look into since the government so far has always paid their bills.
First, you should get your own lease in place ASAP. Sorry, but you should have done that before advertising, since you'll have to have it as soon as you get a qualified tenant.
I wouldn't trust anyone else' screening. So the information the agent is providing would be only marginally useful as far as I was concerned. We have a really hot market here. So, if an agent came and said "I have a tenant, you owe me <whatever>" I'd say "thanks, but no." I have, at one point, hired a leasing agent to find me a tenant, but that was my choice.
Section 8 can be good. In some areas they pay more than you would otherwise get. And the checks are regular. But you still need to do your own screening. And their inspection process can be rigorous and time consuming. So, if you take this tenant you'll not only be paying the agent, you'll probably lose 2-4 weeks rent for the inspection process. If your market is slow, that may be OK. But if you have a line of applicants, you might be ahead to take a regular (non section 8) applicant off the street.
@Paul Ewing I did attend the section 8 orientation. I have had alot of calls and a few showing while the house was being prepared. I will keep my options open. Thanks
@Jon Holdman I know I should have a lease by now. I just posted on BP that I spent so much time researching buying a REO, closing, repairing, and screening processes. It all happened so fast, I just closed on 1/8. I already know my criteria and addendums to add I just have to find a good template to print out. I called my Realtor I used for buying he suggested I use her to do lease with my addendums and he could review it(if I accept tenant). I will keep searching and screening other tenants.
My agent said that normally if there are two Realtors their commision is the first month's rent split between the two. Is this typical is your area?
Monica you have to understand there Is no money for these agents in the deal.
Say rent is 800. The agent is getting 800 but then must split with their broker. They also have expenses taking the tenant all around town just like a home buyer except the commission check is way, way less.
Frankly I do not see how they make anything doing things like that. If there is someone on the other end now you are talking 400 bucks each they might as well be working at Mcdonald's.
In my area it is typical for that to be offered to leasing agents for houses to rent. Obviously if you have to pay that out each time you rent the place it will affect your cash flow model just like paying a management company.
If you churn tenants once a year on average.
First months rent for example 800 for leasing fee, property management company 80 bucks a month, make ready for new tenant again 1,000 with lost rent. Minimum you are looking annually to be out 1,000 + 800 + 960 = 2,760 if you have 1 year turns.
Low income tenants tend to be very unstable.
I would think the prospective tenant would pay for the broker service since they were the ones that initiated the use of a realtor in their search for rental housing. I wouldn't pay for the realtor services and I wouldn't rely on their screening method, but I would review the packet of information they present to me to see what I could glean from it.
There are a few important things to have in place before you begin to look for a tenant....
1. Market Niche - define your market... A, B, C, D class properties? Business professionals, students, low-income, senior housing, inner city, suburbia, rural, industrial area, vacation area, close to schools/universities, close to hospitals, pets/no pets, smoking/no smoking, Section 8 or not, etc.
2. Rental Criteria - what is your minimum criteria? Helps you find good prospective tenants who will pay rent on time, take care of the property and not be a nuisance to neighbors.
3. Tenant Screening Questions - must be in compliance with the Fair Housing Act - not discriminatory against protected classes. Ask the same questions of each prospective tenant. Get the answers you need to see if they meet your rental criteria. Will they be a good fit for the property and for your management style?
4. Advertising Content - for online advertising or print. Get good photos and details of the property. Include some of your rental criteria to discourage undesirables from applying.
5. Tenant Screening Agency or Verification Method - define what you need. Set up an account with an agency or do some or all yourself. Do thorough background checks and verification of rental history, income, credit history and legal history.
6. Rental Agreement/Lease Agreement - take the time to do it right. Make it comprehensive and good enough to stand up in court. Can include an addendum of your property rules. Remember common sense is not common, so you had best establish some property rules.
7. Move-In Packet - include information to help the tenant get settled, change utilities into their name, get to know the community/neighborhood, use the property features correctly. Explain who you are and how to contact you or your property manager when necessary.
Updated over 3 years ago
I forgot to add that you also need to have ready a good, clearly written, Rental Application that will capture what you need, and doesn't ask for extraneous stuff.
Unless this agent will be your PM I would not trust the information they give you. You should run your own background check and screening once they complete your application. You should have had a lease before you listed the property. If it makes you uncomfortable which it sounds like it does just tell the agent that you only deal with tenants so if they want to apply they must contact you. This gives you full control if you are self managing.
Thanks @Eddie Werner I was uncomfortable because my potentials have been coming in off my ads and I wasn't familiar with dealing with a Realtor, When she called I was caught of guard.
@Joel Owens I know it's not much but I researced her Realtor who is also a broker, The commission would be 500$. She gave her client a list of properties to drive around and check herself from gosection8.com
@Marcia Maynard I've done everything but finalize a lease. Which I'm doing now.
I was going to use the infor to save client on credit and background fee, but I double check myself! Thanks everyone..
If the realtor is representing the tenant, that means an agency relationship has been established between the tenant and the realtor. And that means the realtor has a fiduciary responsibility to look out for the tenant's best interest, not yours.
That doesn't mean the realtor is lying to you. Real estate agents are required to treat all parties to a transaction ethically.
Residential leases are available from the Texas Association of Realtors, but you have to be a member to access them. There are sources online where you can purchase residential leases. One of those is in the resources section of this website. But I would still have an attorney look over it to make sure it complies with Texas law.
I would be happy to answer any questions you have, as best as I can, and without obligation on your part. You can contact me using the info below.
Originally posted by @MONICA WATSON :
@Marcia Maynard I've done everything but finalize a lease. Which I'm doing now.
If you would like to see our Rental Agreement and Property Rules to get some ideas, private message me. Our Rental Criteria and Tenant Screening questions are already available under the BP Resources tab - File Place - Other Documents, if you would like to look at those as well. Good Luck!
If you end up using this realtor and placing the tenant then you can use the Texas Association of Realtors lease.
G. Copyright: If an active REALTOR® member of the Texas Association of REALTORS® or an active member of the State Bar of Texas does not negotiate this lease as a party or for one of the parties, either as a party’s broker or attorney, this lease is voidable at will by Tenant.
@MONICA WATSON we have some lease forms here. I also had one from material I bought from Bill Bronchick and one from a local property manage. I combined elements from all three, added some items I'd seen discussed here and then had an attorney review it. Not a real estate agent. You need real legal advice and you get that from an attorney. I'd look at the standard TREC lease, but that copyright clause means the lease is void if you use it, don't use it.
Great info folks! I have several SFR rentals and have yet to be contacted by anyone other than the prospective tenants themselves. Now I'll be prepared!
Originally posted by @MONICA WATSON :
Thanks @Fred Heller for the offer!
Just to clarify, the lease he was referring to was the Texas Association of Realtors lease which was created for their members. This is different from the Texas Real Estate Commission (TREC) which does not have a residential real estate lease. The TREC does provide many contracts for property purchases that can be used by anyone since it is a state commission. The Texas Association of Realtors lease that I saw wasn't something I would be interested in using as a landlord anyway.
There is also the Texas Apartment Association lease. However, it costs about $200 a year to join the TAA. Their lease is pretty solid. I just signed up with them last week and will be using their lease for my rentals. You can view their lease at https://www.bluemoon.com/products/forms_online/pri...
The residential lease starts on page 78
@MONICA WATSON if you view the lease on a computer the residential lease starts on page 78. It won't load correctly on mobile
@MONICA WATSON I created my own after reading a bunch of other leases. I felt that the Realtors lease was a bit too tenant friendly, and besides you have to have a property manager that is a Realtor or have a Realtor handle the negotiation. In a few months I will be getting my license and that won't be as much of an issue, but I like my current lease. Send me a message with your email and I will send you a copy.
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