Posted by Doug (ON) on October 12, 2001 at 17:36:49:
If the deal is good enough, why don’t you just pay the realtor out of your own pocket?
Otherwise, avoid realtors.
Doug
Lease options - How to get Realtor Paid? - Posted by Michael Morrongiello
Posted by Michael Morrongiello on October 12, 2001 at 15:34:13:
I live in the “Bay Area” which is considered to be a very high end Real Estate Value market. A lot of Realtors have become “Fat cats” over the last few years, since most transactions involved only cash sales.
The marketplace is gradually shifting as it is in many parts of the country these days to more of a Buyers marketplace. I have been presenting lease options to several motivated property sellers as a way to solve some of their problems and need to “sell”. However, invariably I have found the listing agent not willing to push this purchase program as a real solution to their clients dilemma, primarily because they are concerned about WHEN & HOW they will get paid their commission…
I understand that typically if a Realtor is involved in a Lease option transaction that typically the commission is not earned nor paid UNTIL the option is excercised and the sale closes.
What are some other ways to “incentivised” some of these Realtors to go along with this type of an offer to their clients?
Thanks in advance for all your input…
Michael Morrongiello
Re: Lease options - How to get Realtor Paid? - Posted by BR
Posted by BR on October 14, 2001 at 08:30:59:
What you need to do is approach realtors concerning listings that are about to expire. Look at it from the realtors prospective…
1)If the listing is about to expire would I rather have ZERO now, or 6-7% later?
2) If the listing is not about to expire…I think I’ll hold out a little longer… don’t YOU believe in fairys?
Re: Lease options - How to get Realtor Paid? - Posted by Dee-Texas
Posted by Dee-Texas on October 13, 2001 at 09:11:32:
Hello Michael,
First let me say that I enjoy and learn much from your posts.
I would talk to the seller, explaining that I would like to take their headache away and that I know that they are responsible for the commission fee. So to help them out and allow me to buy like I want. I would ask them to pay 1/2 of the commission and I would pay the other (out of my non-refundable option money)Otherwise these sellers still have their headache…a house that won’t sell and the market going stagnant…
I believe if you have a truly motivated seller, they will come up with the money…the realtor will get paid (making them want to work with you, knowing that you will take care of them) OR the realtor see at least half of something instead of a whole lot of nothing and works with the seller on your behalf.
I feel like everyone needs to bend sometimes to get a deal done when things are slow. It’s just better for all.
Best Success,
Dee-Texas
Thank y’all for the input… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on October 12, 2001 at 23:30:52:
Thank y’all for the input…
More options… - Posted by TRandle
Posted by TRandle on October 12, 2001 at 22:37:43:
MM,
Here’s what we’ve offered to agents a few times. So far, several said they would consider it (seller balked for various reasons on those) and one agent agreed.
The agent has a listing that is dead. Therefore, they need to be given a small reality check. There is NO COMMISSION FAIRY! They aren’t owed anything and without you, they just spent money advertising that they won’t see again.
Once they’re in the right frame of mind, then you can offer them some choices:
1% leasing fee paid upfront
3% deferred commission upon actual sale
monthly payments if the numbers work
combination of all these
We also have agents who will offer up their “disqualified” buyers now for similar numbers. The primary difference is that the 3% deferred commission has a 1% floor on the backend if their buyer bails.
Hope that helps…
Re: Lease options - How to get Realtor Paid? - Posted by Ronald * Starr
Posted by Ronald * Starr on October 12, 2001 at 18:50:31:
Michael Morrongiello-------------
Dick Gardiner and Linda Macy had a “Lease Option” equity-sharing book and tape program in the mid to late 1980s. He was a real estate broker so set up the program to pay himself. Their program involved buying a house from an ordinary seller – so there was money there for the listing agent and Dick. Then their buyer would lease option the property to the renter/occupant/optionee. Dick would property manage the deal. When the option was exercised, Dick cut himself in for another fee.
Can you use some of that? Some money to the agent when you purchase. Maybe have the agent manage the property for a fee while it is a rental? Then, when the sale takes place the agent gets more money? If not a management fee, then how about some monthly portion of the rental, as JohnBoy suggests?
Also, try to work with them to refer to them other people who you meet so they feel they are getting a good deal.
Could you have the seller contribute something toward their commission?
Good InvestingRon Starr
Re: Lease options - How to get Realtor Paid? - Posted by JohnBoy
Posted by JohnBoy on October 12, 2001 at 17:16:59:
First you need to read the listing agreement. Some listing agreements state the commission is due if the property is L/O’d.
Otherwise, 6% of the option money, 6% of the rent each month, 6% of the balance due when the option is exercised. This actually earns the agent more commission over time since they collect the percentage on the rent.
OR
Anything you can get them to agree on!
If you find one willing to work with you on this the benefit of doing so would be to build a nice monthly income stream off many deals. Lots of smaller up front paid days on the 6% of the option money you get. Cashflow build up off the 6% of rents collected that establish a nice monthly income over time, which can be nice during slow times when nothing is selling. Nice commissions on the back end when the options are exercised!
Now all you need is to find one willing to listen and take advantage of this, especially on low equity homes that need higher selling prices!
Re: Lease options - How to get Realtor Paid? - Posted by Vic
Posted by Vic on October 12, 2001 at 17:10:18:
Michael,
I’m often in this situation, albeit with properties that aren’t high dollar.
Working L/O’s through realtors is a very difficult thing to do unless you have the right agent. However, if you can find the right agent, why not just offer them a note with some interest, if need be, maybe even offer to give the agent both sides of the commission.
The only other solution is to work the fsbo mkt.
I’ve had some success with the right agent & very little with “in the box” thinking agents.
Vic
Re: Lease options - How to get Realtor Paid? - Posted by matt
Posted by matt on October 12, 2001 at 15:55:53:
- Put the property under contract.
- Find yourself a buyer with substantial down payment money.
- Close the deal
- Pay the realtor out of the non-refundable down payment you collected from your buyer.
In a typical lease option deal you (the investor) would get paid
- a non-refundable down payment up front.
- a monthly spread. The difference between your payment and theirs.
- Difference between your selling price and your buying price.
In this case you may have to forgo your up front profit.
Home is NOT being immediatly resold - Posted by Michael Morrongiello
Posted by Michael Morrongiello on October 12, 2001 at 16:42:47:
Matt:
Thanks for your input, however this home is NOT being immediatly resold. So there is NO money coming from a quick resale option of the home. Now how do we satisfy the Realtor who is trying to disuade his clients.
We are trying to lock in the “option purchase price” for 5 years… and would simply sub-lease the home & slowly renovate it, upgrade it, until such time that the RE market heats up again where it would make sense to sell it at an appreciated value.
Michael Morrongiello