RE Agts' Commissions in Paper (JPiper?) - Posted by raelynn mitchell


#1

Posted by John Behle on January 19, 1999 at 18:45:54:

There are agents I just won’t work with. Some I complain to their broker about. If it is a good offer, but the agent is too stupid, egotistical or closed minded, these are some of the times when I will meet with the broker. Usually they are much better trained and brighter - and more commited to good service to their clients. Sometimes, it’s hopeless and I just learn one more agent or broker that I will refuse to deal with.

Not to begin another Win/Win vs. leave them bruised and bloody battle, but my offers are usually an acceptable and reasonable deal that an intelligent agent or broker shouldn’t have too much of a problem presenting.


#2

RE Agts’ Commissions in Paper (JPiper?) - Posted by raelynn mitchell

Posted by raelynn mitchell on January 19, 1999 at 10:26:51:

I have toyed with the idea of obtaining a real estate license lately, what with the access to the MLS system, especially in the way that John Behle used and/or uses his access as a principal instead of on behalf of clients (most of the time, if I understand him correctly).

Here’s what I was thinking and wanted feedback on:

What if an agent in Southern California were to do everything the opposite of most of the Realtors out there do? What I mean is, what if I were to introduce myself in the future (provided I actually do get the license) as, “Hi, my name is Raelynn Mitchell, and I often take paper for my part of the commission.” The theory would be that I would get way more deals than most other agents, sometimes with less work due to word of mouth from investors. My understanding of how most agents operate is, they work with the average homebuyer. That homebuyer may buy a home once every 4-7 years, whereas an investor may be able to buy 6-12 or more homes every year, depending on the deals and how creative he is. The concept is, it is easier to keep a customer you already have than it is to seek out new ones.

Is this a possibility, or would my broker/office manager flood water on my fire?

I think it’s a great idea in theory, but what I am looking for here is the negative side of the coin, the down side, the “Whatever can go wrong, Mr. Murphy?”–side of the story.


#3

Re: RE Agts’ Commissions in Paper (JPiper?) - Posted by George

Posted by George on January 23, 1999 at 22:34:13:

Most commissions are split 4 ways. 1. Listing Broker 2. Listing Agent 3. Selling Broker 4. Selling Agent
You need to at least get your broker to take paper and then that accounts for 3%. Only if you sell your own office listing can you take paper for 6%. Then your broker has to pay the MLS fee and if a franchise, the franchise fee. It’s a good idea if your broker understands investors and notes. You may be surprised that your broker may not understand paper.


#4

Primary goal was… - Posted by raelynn mitchell

Posted by raelynn mitchell on January 20, 1999 at 10:58:52:

actually something other than just outright access to the MLS. I had in mind eventually access to exchange group meetings, which I know would not be available right away but only after investing lots of time in training. Becoming an agent is merely step one of the process, and I was looking for something to make me stand out from the crowd of other Realtors. I know the other agents and brokers would not necessarily want to carry back their commissions, that I would be a lone wolf in that respect.

Many thanx to all who replied.


#5

Another idea - Posted by Rob FL

Posted by Rob FL on January 19, 1999 at 18:09:40:

I did the salesman thing and continued on and got my brokers license after 1 year. I can do my own MLS/realtor business without some broker telling me his rules.

Here is an idea I am working on right now. (now nobody in Orlando try and compete with me when I give this away).

Offer expired listings or FSBOs that I will put your home into the MLS for a set fee say $300-500. Then I will walk away from the deal, you Mr. Seller deal with all the potential buyers and their agents. Your home is advertised in the MLS and you only pay 1/2 a commission (the commission to the buyer’s broker). I get my fee up front and no commission. But in return all I do is put it in the MLS for X amount of months, no advertising, no yard signs, no open houses, those are all up to the seller.

A normal listed home sells for 100,000 with a 7% commission due. That is 7,000 dollars in commissions. My way whether it sells or not I get my fee of say 400. If it sells through a realtor for 100,000 they pay only 3.5% commission or $3,500. If they sell it on their own without another realtor they don’t pay any commission. I am starting up my marketing plan on this idea this week. Hope it flies.


#6

Commissions in Paper - Posted by John Behle

Posted by John Behle on January 19, 1999 at 15:08:47:

Ever since my first brokerage where I had a 65/35 split - I was the 35%! - I’ve always had a 100% split. First I went with RE/Max, but the fees were $750 per month. Then I found a broker that offered me 100% for a fee of just $100 per month. I made that up 3 years into the business when I became a broker and had agents and a timeshare office bringing me $2000 per month just to “hang” their license.

It’s tough to get a broker to take paper unless he is someone not using his license (like an appraiser or mortgage banker). You just have to find the right broker.

I’ve never really advertised that I will take paper, but you may want to try it out. It might encourage others in an investmet group to use you instead of going through the listing agent. That, combined with your knowledge and skills might sway some of them.

I look at the MLS as the best source of real estate deals ever. At first it frustrated me and I couldn’t see how to use it, then it became clear that I just needed to find techniques that work and agents that are worth bothering with. Once I did that, we had more deals than we could handle and our challenge was keeping up with the agents.


#7

Re: RE Agts’ Commissions in Paper - Posted by JPiper

Posted by JPiper on January 19, 1999 at 11:06:14:

Understand what you’re talking about here. Let’s say you’re dealing with a $200,000 house. In California the usual and customary commission is 6%. If you’re representing one party you get half of that, or 3%. That’s $6000. Now you split with your broker…meaning you get $3,000.

Your broker won’t care whether you carry your $3,000, nor will the other agent and broker. You just won’t be able to get anyone else to carry in all probability…unless the market climate changes, and even then perhaps not.

There’s no real negative side, other than perhaps you don’t get paid. I do know of some cases like this, not getting paid that is. Obviously you are probably going to be a high LTV note as well, making the marketability of such note difficult.

I wouldn’t get a license solely to be able to carry notes and use that to market myself. However if the other advantages seem important, and the disadvantages don’t, go for it.

JPiper


#8

Re: RE Agts’ Commissions in Paper (JPiper?) - Posted by Redline

Posted by Redline on January 19, 1999 at 10:42:04:

Now, I don’t know how licensing and agency works in California, but I do know NJ.

I’m assuming this would be a problem for you as a salesperson (which is the first license you would get). I would imagine your broker would want to get paid right away (as most brokers do) and would not be too happy with your “paper mentality” as most realtors/brokers don’t understand and don’t WANT to understand RE investment. Not to say you couldn’t find a progressive broker, but you’d have to look. It could be tough.

All in all, I’d say to get your license just to access the MLS is not a good enough reason. Remember, having the license also has it’s liabilities.

RL


#9

Re: Another idea - Posted by JPiper

Posted by JPiper on January 19, 1999 at 20:20:22:

I would like to add emphasis to John Behle?s remarks.

Flat fee brokerage is not a new concept. As John points out, this basic technique has been used for years by Help-U-Sell. There are others that have offered it as well. Interestingly, most of the others that I?m aware of are no longer in business.

Liabilities as a listing broker are high?.even when you?re getting the full commission. As a listing broker you have a fiduciary duty to the seller, regardless of the size of your fee. You also may have other liabilities/responsibilities to the buyer regarding disclosure of material facts. In my opinion, there is no way that a few hundred dollars covers the potential risks that these responsibilities/liabilities expose you to.

To me this is one of those ideas that sounds better in theory than it is in practice.

JPiper


#10

OUCH! that hurts just thinking about it - Posted by John Behle

Posted by John Behle on January 19, 1999 at 18:56:33:

The liablities are phenomenal. The problem is there is no way I will put my license up (including the actions of agents) into a liability situation without control.

No liability without control. If there is liability of any kind - I want control. Unless you just cancel the listing and get some kind of “hold harmless” agreement, the other agent, seller and buyer could cause liabilities and costs.

As a broker, I must be involved in the offer, contracts, closing and all documentation. I wouldn’t do that for just a few hundred dollars. You could arrange it to just back off and minimize liabilities. “Help U Sell” has done that for years in our area. It doesn’t seem to have made them millions. I considered a flat fee brokerage 23 years ago when I first started into real estate. Sometimes what looks like the best of both worlds ends up looking like the worst of both worlds.

Buyers and sellers that do not use an agent primarily do so because they do not know the value of the MLS and having someone represent them that knows what they are doing (Yes, many agents don’t). If they had a clue, they would use an agent.


#11

I’m Missing something… - Posted by Mark R in KCMO

Posted by Mark R in KCMO on January 19, 1999 at 18:41:35:

Rob,

How will the Selling agent get paid?? I Think that it is OK for you to wave your income, I don’t see how you can wave the income of others.

Will this method even be allowed in the MLS?

If you create a system where the other agents in the MLS will no get paid, who is going to be attempting to sell the property?

Unless I am missing something it appears that you are charging a small fee to the seller, to be listed in a place that will not be effective for them.

Mark R in KCMO


#12

Re: Commissions in Paper - Posted by Redline

Posted by Redline on January 19, 1999 at 15:33:57:

“I look at the MLS as the best source of real estate deals ever. At first it frustrated me and I couldn’t see how to use it, then it became clear that I just needed to find techniques that work and agents that are worth bothering with”

(sorry if this is a tad off subject…)

John - I agree the MLS seems to be a great place to find deals … but my problem is 1) I’m a realtor so I can’t go around the listing agent to present offers 2) even for you, you still had the listing agent to contend with, no? And since this person is usually ignorant on anything besides 20% down, 80% LTV it’s tough.

How do you successfully deal with realtors when presenting low offers?

RL


#13

Re: Another idea - Posted by Rob FL

Posted by Rob FL on January 19, 1999 at 22:21:54:

I tried to respond to John Behle but my post went into the bermuda triangle.

My idea is to use what in FL is known as non-agency. The FL legislature changed the agency law in 1997 to allow for “NO BROKERAGE RELATIONSHIP” as a type of agency. This basically means that I don’t have any fiduciary duty to the seller. I have to be fair and honest but I do not represent him or the property in any way. The realtors here call them “Non-agents” or “Non-reps”.

My only duty to the seller besides complying with the statute is to put the property in the MLS computer and make any necessary changes at the request of the seller. I would have no fiduciary duties to the seller beyond the MLS computer. The seller signs a typical listing agreement requiring certain property disclosures and requiring a commission to be paid to cooperating realtors upon sale and an up-front non-refundable fee to me.

The seller pay me $400 or so. I put the property in MLS for and agreed time period. If the proeprty sells through another realtor, seller pays agreed commission to him. If seller finds a buyer on his own, the agreement terminates at sale and no commission is due.
I did run this buy the FL realtors legal hotline and they said they gave it a stamp of approval and told me to follow the non-agency statute.

This is simply a service allowing seller’s access to MLS but only paying the 1/2 the commission. The buyer’s agent gets a full 3-4% commission which is unlike a discount brokerage where the whole commission is only 3-4%. This is not a flat rate brokerage in that I do not in any way represent the seller other than with the information in the MLS computer, and I make my money regardless of whether it sells.

This whole idea is simply a part-time business idea. Another tool in my investor’s tool box. It may or may not work well, but I do know of another realtor in another county who is doing this also and he has been around for many many years.


#14

Re: I’m Missing something… - Posted by Rob FL

Posted by Rob FL on January 19, 1999 at 19:14:15:

They will sign a listing agreement with me just like they would any other realtor firm, requiring them to pay a certain commission to the selling agent and a bunch of other CYA disclosures and clauses. I already checked it out with the realtor’s board lawyers and they gave it a stamp of approval.


#15

Working with agents - Posted by John Behle

Posted by John Behle on January 19, 1999 at 15:58:18:

Unless the offer is extremely simple like a low ball cash offer, I meet with the agent - and possibly the broker.

I found listing agents to be such a problem, that I don’t feel it’s worth my time to mess around with an offer without addressing the issue.

So, if the offer is anything other than ultra simple, I or my agent (and myself) meet with the agent first. I explain the deal and lay it out for them. My goal is to create at least a positive or neutral attitude with the agent.

If they don’t at least step aside (in attitude) to give the seller a chance to look at and weigh the deal, then I will rarely present the offer. This is one of the reasons I keep my broker’s license. In some cases it provides clout with a newer agent and “peer-ness” with the other broker.

In many cases, the agent’s reaction is just a “HUH?” and we meet with their broker also. He may also be a “HUH?”, but usually won’t admit to it. I don’t expect them to necessarily have a positive reaction, it just isn’t worth my time to have a totally confused or negative listing agent. Remember “a confused mind always says no” and agents spend much of their lives in confusion. I don’t want that to rub off on the seller. I have run into many cases where the seller picks up the offer quicker than the agent.

I don’t believe just forcing them to present an offer that they have a negative attitude about is worth it.


#16

Re: Another idea - Posted by Redline

Posted by Redline on January 20, 1999 at 11:01:39:

OK - So it sounds like you’ve figured out the liability part but this sounds like it could become a huge mess.

I can see houses listed in the MLS with owners that don’t want anything to do with realtors because they’d now have to pay a commission to that realtor if they produced a buyer. It defeats the whole purpose of the MLS which is to share information and properties. These owners wouldn’t be interested in sharing anything. Now while some of you would say that’s a good thing, I disagree. There are some good agents out there and by and large I think people benefit from them.

This sounds like complicating what’s already a complicated process. If sellers don’t want to deal with realtors, let them sell on their own. Period. No MLS … or they can use help-u-sell.

Just my opinion.
RL


#17

Re: Working with agents - Posted by Redline

Posted by Redline on January 19, 1999 at 18:13:42:

“I don’t believe just forcing them to present an offer that they have a negative attitude about is worth it.”

You are 100% correct in that. My problem seems to be ignorant salespeople/brokers that won’t even back a semi-decent offer even when the property has been sitting for many months and EVEN WHEN THEIR LISTING AGREEMENT IS ABOUT TO EXPIRE!

I just don’t get it. Anyway, I guess the key is just persistence and meeting people face to face to get your message across.

RL