Splitting Commision with Realtors - Posted by Robert

Real Estate Investing
1

Posted by DaveD (WI) on March 24, 2006 at 16:36:46:

Then have him list it for somewhat less than the going rate, if he is happy with your volume. Just as long as his co-broke outs are for what other brokers would expect to get. Keeping things clean between yourselves is better for your relationship. You know what I mean… if he gives you money, and then performs poorly down the road you are obligated.

Honestly, I’ve had mortgage brokers offer me some of their take as well… as long as they continue to bust their butt for me, I’m happy with them keeping whatever they make. Value received.

2

Splitting Commision with Realtors - Posted by Robert

Posted by Robert on March 24, 2006 at 11:58:09:

Hi,

I was wondering for those of you who have a realtor that you work with on a consistent basis. What is your agreement with them on splitting their commission with you since your bringing them tons of business. Especially if you are a home developer and do lots of rehabs?

Best Regards,

Robert

3

Re: Splitting Commision with Realtors - Posted by Ron (MD)

Posted by Ron (MD) on March 24, 2006 at 19:07:39:

Robert,

It’s not chinzy or petty to pay a listing agent a reduced commission. Many agents willingly negotiate listing commissions. After all, the hardest part of the job for the listing agent is signing up the listing. After that, there just ain’t that much to it…especially when you seller/client is a professional who doesn’t need his hand held with understanding contracts, etc.

I pay a broker a $300 flat fee for listing my rehabs. She’s happy to get it because her work is limited to the ten minutes it takes her to type the info into the MLS system. Buyers’ agents call me for showing instructions. They fax contracts to me. I negotiate the deal, etc.

Don’t let bigtime Dave’s aspersions make you feel like some kind of cheapskate for doing something that makes sense. If you’re gonna give your agent volume (which means more than one listing in a year), he’s probably very agreeable to taking a reduction.

A couple caveats, though.

Your agent should be fairly paid for the work that he does for you. For example, if you’re buying junkers for $20k and he’s the guy running you around looking at 8 of them, making offers on 6 so that you can land one deal…all so that he can collect a net commission of $500, well, he should somehow be getting more from you.

When I was working that way, I used to give my agent $2,000 over and above his paltry selling commission. He also provided me all the comps I needed to evaluate deals and set my selling price. I was happy to give him a full commission on the sell side.

Now, I have my own access to the MLS database, so all I need from my listing agent is the simple, mechanical part of entering the data into their system. I’d be stupid to pay full commission for every deal I sell.

Another caveat…be sure to pay the buyer’s agent a full commission. (Whatever full is in your area.) A buyer’s agent will steer clients away from your house if you are offering a reduced commission.

I think rehabbers have gotta watch their expenses if they want to be successful. Flip guys like Dave will say that your deals are too thin if you have to cut a realtor’s commission. My deals aren’t thin…I just like to pay for what I get and keep more, not less.

Hope another opinion helps.

Ron Guy

4

Kinda chinzy, don’t you think? - Posted by DaveD (WI)

Posted by DaveD (WI) on March 24, 2006 at 14:47:33:

Really Robert, don’t you think you are tripping over dollars to save nickels here? Let your realtor earn his due… as long as he is dilligently working for you. Don’t you realize how petty it sounds to haggle on picking up an extra percent or two, if when you are rehabbing you should be making 20-30% of the sales price or more?

If gouging a broker for a percent or two makes that much of a meaningful difference in your deals, then you are paying too much for your properties.

Golly, leave something on the table for those whose help you seek. BTW, they can’t split it with you anyway unless you are licensed. And don’t get me wrong… I’m not a big fan of realtors. We tend to handle that sort of thing ourselves, unless there is a compelling reason to use one. Then, we don’t go out of our way to beat them up for a slice of their commish.

5

Re: Splitting Commision with Realtors - Posted by Jen

Posted by Jen on March 24, 2006 at 12:07:07:

Hi Robert
I work regularly with a realtor and we have decided on a 5/2/3 split meaning its a 5 percent split, He gets 2% the buyers agent gets their 3% and I get the rest after paying him.

If I find a house then he lists it with his company, then I get a referral fee of 5% of the purchasing amount.

Hope that helps

6

Re: Splitting Commision with Realtors - Posted by Natalie-VA

Posted by Natalie-VA on March 25, 2006 at 10:28:47:

Ron,

This was a good post. I want to emphasize that you are experienced, and all you need is those reduced services you agent offers. Many beginners will not have the expertise to do it alone like you do.

–Natalie

7

You missed the point, Ron - Posted by DaveD (WI)

Posted by DaveD (WI) on March 25, 2006 at 09:10:52:

Robert was saying the broker was suggesting to “split the commission” with him. That implies a give-back of cash to Robert. Quite different than working for a reduced commision which makes perfect sense for any kind of recurring or volume work.

All I was saying was to not get sucked into anything more than a professional relationship where Robert can continue to call the shots and take decisive corrective action if the broker doesn’t perform - without hard feelings. Passing money back and forth does muddy those waters.

We watch expenses as well. But winnowing a point off the brokers take strikes me the same as driving all over town to buy sheetrock for six bucks a sheet when it is right down the street for eight. Shouldn’t make too much difference if you bought the house right to begin with. Even though the broker may be willing to give something up, they are very much appreciative to be able to keep their full pop, along with volume as well. I, too, have paid bonuses to agents.

I don’t know that I’m big time or much of a flipper either. We plod along and do deals that make sense… and make the money on the buy.

Best wishes, Ron.

Dave

8

Re: Kinda chinzy, don’t you think? - Posted by Robert

Posted by Robert on March 24, 2006 at 15:23:04:

Hey Dave,

I get your point it was just that I have a realtor who really wants to work with me and offered. I was just wondering if anyone were doing something similar with their realtors. Thanks for you input.

9

Re: Splitting Commision with Realtors - Posted by Ron (MD)

Posted by Ron (MD) on March 25, 2006 at 17:47:54:

Natalie,

You’re right, again.

When I read the original post the first time, I assumed something that wasn’t there when I re-read it. He mentioned rehabbers and developers doing steady business. I jumped to the conclusion that he was an active rehabber. On re-reading, he doesn’t say that.

As with most things, I encourage rookies to get guidance from experienced folks, e.g., realtors.

Thanks for pointing that out.

Ron Guy

10

Re: You missed the point, Ron - Posted by Ron (MD)

Posted by Ron (MD) on March 25, 2006 at 16:45:01:

Dave,

I didn’t miss your point. It’s pretty clear…re-read the subject line and the same tone is echoed in the text.

Driving miles to save $2 on one sheet of sheetrock probably doesn’t make sense. Saving thousands of dollars on a recurring basis through a little bit of very normal, business-like commission negotiation is not chinzy, gouging, petty, or a waste of time. It’s good business.

Also, I agree that you have to buy right to make money. Once that’s done, you can make even more money if you spend right.

Ron Guy