Met With a Realtor Today

Hi Justin,
Congratulations! It sounds like you've made your first contact with a Real Estate Agent today so you are obviously not just sitting around hoping something good will happen but you are getting out there to make it happen. The first question I have is not related to commission.
Is this realtor/real estate agent an INVESTOR? Have they already done what you want to do? I assume you want to buy properties at deep discounts... and then have an exit strategy for that property.
It took me 10 months to find a good real estate investor/agent. (It doesn't have to take that long but I'm a little slow and it took me that long because I didn't really know what to look for). My first Real Estate Agent was not an investor and so I wasted a lot of time learning what NOT TO DO! through that agent.
Now that I have that out of the way I think I want to brag a little on my Real Estate Agent. You see, my Real Estate Agent is also an investor and is VERY successful at it. He is not hard up for money and did not feel compelled to make these kinds of requests up front. As a matter of fact he is so confident that he can get me discounted properties that he agreed to a reduced commission on the sell side for my first two deals. Instead of 6% I am paying 4.75% for the first two, then I'm sure they will be 6% after that. I will definitely use my same agent on the sell side but I didn't have to sign any guarantee clause.
I think its cool that you hit it off well with this agent. I just heard today a recording of Chad Merrihew (EDGE 2010 & 2011 speaker) being interviewed by Dean and I think he said he finally got the agent who really worked on his behalf on the 4th try. He did do some deals with other agents before that, but he finally hit on his power team member after the 4th try. So, long story short, I would
use this agent contact that you've met, he might even find a property for you if he's got some good leads and is aggressive as you say.... If it's a good enough deal then the commission is acceptable.
But I would still keep pounding the pavement, meet more agents, and keep building your network.

Roger Schafer
Jaguar Investment Group, LLC

Thanks Roger for your advice. Yes, the realtor who I was referring to is also a small investor. I am planning on meeting with other realtors, which I already have three realtors in my network that are friends. Therefore, I am just trying to explore my options. Like you said he shouldn't have had to make such requests, but I believe he was just trying to be up front with me by establishing a trust. He want's to go look at some properties Saturday morning, which is great, he's showing me his aggressiveness. He is emailing me a buyers agreement contract to view and sign, should I be signing this so early or is it just to protect me? How stern do you want to be with realtors at the beginning? Should I have the mentality that the realtor is working for me and it's my way or the highway or should I just remain laid back through the first deal?

Thanks,
Justin

sounds to me like the realtor wants you to be exclusive to him and i wouldn't do that. if you are signing something, he wants you to be exclusive. there is no reason for you to be exclusive to any realtor. if he does well by you, you will continue to use him, but don't tie yourself down to one realtor like that. $2500 minimum is way too high and you can do better than that. this doesn't sound like he's trying to establish trust to me; he's greedy and probably doesn't trust you. just my opinion and i am a realtor in IN. unfortunately, there are some out there that will take advantage of you being a newbie. tread carefully and remember that you are trying to make a living too. you do not have to guarantee him anything; it's the nature of the business, but many of them will take a free ride if you give it to them. remember, he will be working for you and you set the parameters, not him. you will be helping him make money too. personally, i would move on real fast. again, just my opinion, but being around them and working with them, i know what i'm talking about. another realtor on here might think differently.

Agree. At this point, I don't think committing to anything is a good idea. Talking to more REAs will give you an idea of what you want and don't want in an agent. Weigh your options and go with someone that has the same vision as you, but doesn't tie you down. When you find the right REA, you're probably going to want to deal exclusively with him/her anyway, but you don't need a contract right now to make you do that before anything happens. Good luck!

Thanks Linda,
You really seem like you know what you're talking about and I value your advice. I guess when the realtor emails me the buyers agreement I'll look it over thoroughly. Maybe I am confusing myself when he asked to looked it over and sign it. What is actually a buyers agreement? I haven't received the contract yet. Is this realtor asking that I sign this agreement to assure I defiantly use him or does it just protect him from wasting his time with me? The realtor did show me one property on the MLS in reference to show me an example of one property a realtor would make a commission of $750.00, which he said most realtors would be happy with that but he has a family to feed and all the running around he'll be doing is going to cost him money. That being said he also stated that he will actually be losing money on the first deal because of all his efforts and he looking toward long term with me is where he'll benefit from me.

Thanks,
Justin

It's not a bad deal, if he is indeed good. Contracts have time limits, you can shorten this one as a trial run, like 3 months or something.

6% is the "normal" commission for a seller's agent, but can easily be negotiated down to 5% or less in this market. Just chose your battles and don't get greedy. 5% is fair and is normally split with another agent and two brokers (so four ways.) And ALL he is saying is that if he gets you, the investor, the deal, you agree to use him as the listing agent, so he can collect on both ends of the deals he feeds you. That's not mischievous. I would do the same, and even offer the same to an agent. It makes their time worth it, and gets them invested in your success (because they are part of the flip now, on all ends.)

The 2,500 is just a minimum he's asking for as a buyer's agent. It makes sense because to be aggressive in offers requires time, follow up, and creativity, AND if he's actually good, he'll get you one way below market value, so if you get 50% equity on a deal, and only had to pay him 2,500, depending on your zip code and property values there, that's a good deal! Also, a lot of times that minimum is only in effect if the seller's agent doesn't split the commission, or if the split doesn't equal 2,500...so it doesn't always mean you'll be shelling out 2,500 to him to close on a deal. Most of these contracts are standard from the local Realtor's board, so he's probably not getting too creative.

If the home values in your area are high, then this contract is a win for you and a win for him. A good agent is valuable. Be wary of nickle and diming agents, especially if you don't have a history setup yet in your region.

They have something to prove to you, yet you also have something to prove to them. So if you like him, he has a track record, I recommend working with him but putting a very short time limit on the contract as a trial run (or a transaction limit, like this deal is only good for 3 transactions, then we look at the terms again.)

Hope this helps. I'm a licensed agent so I'm biased Full disclosure there.

Take care,
Chad.

Thanks Mouse2106, I appreciate that!

Hey Chad,
Great advice, and I appreciate your honesty and experience. I did initially respond to this realtor "If you find and we close on a deal that works for me and falls into my criteria, I would not have a problem paying you that $2500 and I would defiantly consider on using you to sell the property for me". I know it costs money to be aggressive and to be a good realtor, which I can appreciate. I will defiantly use a contract clause like you suggested if I decide to agree to his terms.

Thanks,
Justin

Hey Justin,
Glad to hear. The expiration is going to be in there by default, so just pay attention to it, and have the contract expire after three months, as opposed to a year which will probably be what is there. And don't be scared to line things out...I signed an exclusive buyer's agent agreement in New Orleans with an experienced firm, with a provision that states any deal we close on together, they will be the management company. It was a standard contract from the LA Realtor Board, but I lined out a few things. I wanted their compensation to be based on closing, and not going into contract. I added a zip code and surrounding 20 miles provision to the exclusivity. I specified that the management contract is only good for 12 months, with option to renew, and I agreed to their request for 3% commission if for some reason it didn't come from seller's end.

Just remember that ALL contracts are negotiable (except taxes!) and the value of this deal ultimately depends on the price range you're looking in.

Comparatively speaking paying a wholesaler 2,500 over what he bought a pre-foreclosure from is the same thing at giving your agent 2,500 if he is finding you like valued deals. If we're only talking about 15,000 home purchases here, it's probably too high, but if you're in the 30's, 50's, or 60's and they ARV in the 60's 80's or 100's, you're doing alright.

My last point is to let the numbers speak. Don't get caught up in the tiffs between investor views vs. agent views about who works for who and what's greedy or unheard of. If the numbers work, and you cash on the deal, and he will bring you many deals, you've all got a win/win, and win/wins produce renewing prosperity!

Take care,
Chad.

Hey, and on review of this last comment, the agent is starting to sound shady. Never work with people that are desperate or on their last dollar! If this guy is pulling the family card this early in the business relationship, and actual commission are only 750 to 1500, red flags are flying all over.

None of us have all the details on this board, but if those are the words he really used with you, I recommend walking briskly away from the contract and talking with other agents.

Chad, you really provide a lot of insight and prosperity. I value your advice and would appreciate bouncing future questions and concerns your way. Do you have a linkedin account? I would appreciate adding you and as many people to my network connections list who will provide valuable advice. I will also consider sending referrals your way as I get things going.

Thanks Chad,

Justin Marasca

Sure do, Man. PM me.

Take care,
Chad.

Thanks Chad, looking to make a difference!

-Justin