Long distance rental property

19 Replies

I'm looking to buy property outside my market and the realtor I'm dealing with asked that I sign an exclusive Rights to represent a contract is that a good idea to sign or not Since he is doing a lot of the legwork

@David Goldberg as an investor friendly realtor myself, I can tell you that many out of state investors are just tire kickers. Your realtor probably feels that the exclusive right to represent gives him more protection before investing time into your deals. I personally don't do this, but I can understand wanting to vet some one and get something signed saying you can represent them before looking at a bunch of properties. 

By the way, have you begun looking at property management? I purchased a 20 unit apartment complex in South Bend, Indiana last year, and I now tell every investor looking out of state to start by identifying potential third party management companies. This is by far the most important thing you can do! Buying a property can be relatively easy from a far. Managing from a far can be a nightmare!

@John Warren I have not gotten a property manager yet it. I'm not planning on managing it from were I am that would be impossible. With regards to the contract I believe in my case it would be a good idea " tell me if I'm wrong" this guy isbrhe only realtor that I have reached out to and I have tried a bunch that DAILY sends me mostly solid deals, and he is my only solid contact in the area. I feel that if I don't sign it for 6 month I will loss the contact and start all over again. And to be honest I'm looking for my first deal and I'm only looking for that first property it's not like  jm ganna buy 2 in 6 months .

I'm sorry for the spelling my phone has auto correct.

@lane kawaoka

I know that this benafits him more how ever I'm only looking to do 1 deal in the time that I'm signing off on,and he is a connection I really don't wanna loss. Since he is the only realtor-manager that has given me time and listings. 

In most cases I would never commit to this however I think this is a case that benafits me as well.

I agree with @John Warren .  The request for a buyer agency can be way to determine if you are serious or not.

Also, how and when an agent requests a signed buyer agency agreement can be dictated by state law.  In Virginia, for instance, agents are required to have a written agreement when a brokerage relationship is created.  When is that?  the short answer is when the agent starts giving you advice and showing properties.

However, there is no requirement here, and I am guessing in other states, regarding  length and terms.  

For a "normal" retail client, one looking to buy or sell a residence, I often make it exclusive.  But for investors who are getting deals from many sources, I may make it effective for only homes I show them.  (yes conflicts could happen but I work primarily with people of integrity.  They are fair with me and I with them.)  Or I may write it for a specific property somebody has brought to my attention and wants me to assist.

Length of the agreement is the other negotiating point.  NEVER NEVER sign one for longer than you think you need to find a property.  If it takes longer, it can always be extended.  

Okay, the broker may be required to get one signed but what is the benefit to you?  The agent will work harder for those he has signed as clients rather than those he could maybe get as clients.  If he finds a great deal, it would be presented first to someone already signed up with him where he has one less hurdle (getting a signed agreement.)

So in your situation, I would suggest signing the agreement.  You appear to value this broker. However, I would make it very short, like 30 days and then extend it as needed.  I can't speak for the terms of the agreement presented by your agent but the length of the agreement refers to the time it would take to find a home and write a contract.  Of course the time between contract and settlement may exceed the 30 days but that is automatically covered in most agreements.

No, don't tell them to go pound sand - just protect yourself with terms you can live by. 

Hope that helps.

@Joe Facenda thanks a lot very helpful. I am a newby  looking for my first property and, I don't think 30 days  is enough to do a deal just yet. I agreed to the exclusive right however I got it at 3 months instead of 6.

HI @David Goldberg .

I understand the desire of the agent to sign you to a contract. He is working hard on your behalf and wants to make certain that he gets something out of it. As @John Warren mentions, tire kickers are a hazard of the business for real estate agents.

One of the problems that I can see with signing an agreement like this is that you are limiting yourself by relying on one person. As an out of town (state/country) investor you want to reach out to as many people as you can and have them all thinking about you regularly. This won't happen if you are locked into one guy. 

Try this strategy:

1. Define your buying criteria - Beds, baths, sq. ft., location etc.

2. Go to Zillow and set up a search using that criteria. You will get referrals that match that criteria emailed to you daily.

3. Call/email the listing agent. If you want to see an agent work hard for you, give them an opportunity to earn both sides of the sale.

4. As @Joshua Dorkin advises, do 5 calls a day.

5. Going forward call/email/text each agent 1/month to ask them if they have any deals that match your buying criteria. Over time they will begin to remember you and if something comes up they will likely give you a call. Especially if you have closed a deal with them previously. That way you build credibility. 

I'm not saying that you should not continue to work with this agent, especially if you have a good relationship with him, but don't limit yourself. 

Good luck with your search.

Thanks @Stephen Fryer I  understand were you are coming from. However I'm trying to take the approach that @david greene talked about on the latest podcast. Find that one guy and us him to find the other 3 "realtor-manager-contractor". And the agreement I'm signing is only 3 months which is time for me to "as a first time home buyer" have enough time to really find something, and feel comfortable making my 1st purchase.

If after 3 months I don't like this guy certainly I would use your advice .

I agree with some of what @Stephen Fryer said but not all.  As previously stated, I think you are wise to sign a buyer agency but one that does not tie your hands.

But where I strongly disagree with his comments is to suggest you call the listing agent.  This the WORST strategy for an out of town buyer.  The listing agent represents the seller.  If the neighborhood is between B or C, I am sure the listing agent will say B.  Condition of the property?  Ease of renting?  You will get an opinion that makes the property more attractive and promotes the seller's interest.  

Of course, on factual matters, the agent can not misrepresent but on subjective matters, they are looking at things through the seller's eye's.  And they will not - can not - negotiate on your behalf.

I will be doing a 3 month as I said before. How does it work when it come to my realtor and someone else's listing. How do they have the right to sell that house? Do they just present the offer to the seller?

HI @David Goldberg

When your agent presents your offer to a seller and they accept, the two agents will split the commission which is normally paid by the seller. That's why @Joe Facenda suggests that it's a good idea to have a separate buyer agent to ensure that you are protected by someone who is supposedly looking out for your interests. 

In my experience using the listing agent has been a very successful strategy for me for several reasons. 

  1. Is altruistic. When dealing with C type properties in the Midwest, I am often looking at deals that are being sold at less than $100K. Nobody is going to get rich on a $3K commission, but the amount of work that the agent has to put into the deal is exactly the same as if they are listing a $500K house. By giving them both sides of the commission I feel that I am rewarding the agent for their hard work.
  2. Is selfish. The agent is motivated to get the deal done, because they have a greater financial interest with both sides of the commission. Whether we like to admit it or not, the agents are motivated by their financial self interest. 

  @Joe Facenda. I respect the your opinion about the agent's inclination to talk up the deal to the buyer, but I am going into any negotiation taking anything that they say with a grain of salt. No disrespect to my agent friends, but I will defer to Ronald Reagan's comments during the SALT talks with the Russians. Trust but verify. When I have the property under contract I include a 15 day due diligence period and will walk the property with my property manager and will get a second opinion on the quality of the neighborhood, rental rates, vacancies etc. No good investor should ever be relying solely in the advice of an agent and should always do their due diligence before closing. 

@Stephen Fryer thanks again i would agree with you not to rely solely on the realtor. I would take it a step further and follow @David Greenes strategy. Checks and balances, have my core 4 check each other.

for out of state, Yes I would sign an agreement with the agent.  You want them to actually work for you and they want to make sure you aren't going to buy with someone else just because...   If you dont, they will think you are calling every agent in town. 

Make sure there is a clause that you can cancel the agreement for any homes he ha not shown you if you are not happy  with the service. 

@Christine Kankowski i would agree with you to make that clause. However the terms will only be for 3 months . I am looking to buy my first property. I would like to make this guy feel that im not looking elsewere. I think that asking for the clause on such a short term can rock the boat.

@Stephen Fryer When I wrote my response about not using the listing agent, after I hit "post" I thought, "Stephen must be an experienced investor."  And I was right.  You have boots on the gerund and people who can check in on your buys..... people you trust ....and you have done multiple deals in the market.  I think David is new to the business and the market he is looking at so it would not be wise for him to use the listing agent at this time. 

I also agree, as an agent, I would not feel great really working an agent to the bone for a sub 100K deal unless I was in a position to give them many in a short period of time. 

Thanks for the clarification. See, often there is never one right answer.  It depends.  Experience and goals play a big part.

@Stephen Fryer and @Joe Facenda. I really appreciate the help. I hope to close my first deal in the next 3 months. I will be able to do so with help like this.

honestly. I am on the side of calling listing agent.  agent will work harder and make the deal work for double commission.. To my experience, listing agent represents the seller, of course he will try everything he could to sell the property in the favor of seller since he is representing the seller. However when there is a chance for double commission they will be the buyer 'side to cutting down the price to make it work because of double commission. Let's face it.  Real estate is the money game. Getting more money out of it will prevent u to do the " right thing as an agent ".  I have some experience of bidding on the property for best and final.  Got outbid by $300 bucks , yup right $300. And the agent who representing the winner is the listing agent.  Right,   what a coincident. From that on, I never use my own agent for such deal. Because if you don't work with listing agent, you won't get the best and final call deal. 

@Stephen Fryer i agree with you that the realtor is in it to make a sale, but he know that if he sets me up with a deal that favors me. In the long run HE KNOW that i will keep coming  back. I made it clear to him i dont plan on stopping unless i dont have the funds.

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