Posted by JohnBoy on January 22, 1999 at 09:02:16:
It depends on what the listing agreement says. Some listing agreements state the commission is due in full if the seller lease-options the property. Some listing agreements may not say anything about a lease-option taking place.
If the listing agreement doesn’t specify how the commission is to be paid in the event the property is lease-optioned then it’s all negotiable between the seller and agent.
In my opinion a fair way to handle the commission if the listing agreement doesn’t pertain to a lease-option is to pay a percentage of any option-consideration up front, 6%-10% of the monthly rent as the rent comes due each month, and any balance of the commission owed would be paid when and only IF the option is exercised.
Some may argue that the no commission is due until the option is exercised. What happens if the option doesn’t get exercised? No sale? If a commission is paid prior to the option being exercised and if the tenant/buyer never exercises the option, then the seller would have paid a commission on their home that never sold. When the seller list the property again they would have to pay another commission. Should the seller have to pay two commissions to sell the same property once??
If you can get the realtor to agree to a fair percentage of the option-consideration and the monthly rent, with the balance due when the option is exercised, then the deal could be worked out so everyone gets what they need to make it work.
Before you plan on what way to go, you should read the listing agreement first. Then you can decide which way is best that will work for you and the seller.
How do I handle the real estate commission if I buy a property on lease option? Does the seller pay it at the time of close or at the time the option is exercised? Any response will be appreciated.
I have a realtor that will wait for their commission until close. The major reason I am selling on options is Income tax. I want to hold the property to avoid being labelled a dealer. Also, I bought a few with a 1031, and must hold them before final re sale.
So we are writing 2 year contracts and he is waiting. I have obviously developed a good relationship with this guy. And it is win/win. I would however much rather sell the house myself and not pay him at all… but he keeps bringing me good deals, and I want to keep priming the pump.
The concept of lease option on the purchase end is to get in with as little money down as possible. With a realtor contractually getting 6% it will be a rare deal that the numbers will work. Your prospective tenant buyers are likely to give you only 3-5% down(always suggest more but most don’t have it) so going through realtors would put you in the red.
Re: Realtor commission on a l/o purchase - Posted by Keith Williams
Posted by Keith Williams on January 22, 1999 at 19:44:27:
I’ve had 2 different RE Agents refuse to submit a lease/purchase offer because “they would not get their commission until/unless the house eventually sold”. Someone recently told me the Agent is required to submit all offers. Does this apply to L/O offers?
