I was listening to “How To Estimate A Rehab in 15 Minutes and Profit
$25K to $50K Per Deal” under “free investing books, audio” in reiclub here and Jerry Norton was explaining something about contacting the listing agent of a prospective property to put in an offer after calculating a quick thorough rehab estimate , presumably to offer extra incentive to the listing agent with not having to split the commission with another buyer’s agent. I don’t remember exactly because the quality was bad such that it hurt my ears so I won’t be listening to it again. It was interesting though.
I’m curious though, unless I’m wrong about his point in contacting the seller agent, if youll be working directly with listing agents how would you inspect homes without your own (buyers)agent to let you through the doors? And lastly why would a REA want to work extra for someone just looking for a good deal which not only takes longer to make a sale but is working extra hard to minimize the agent’s cut, albeit unintentionally? Thanks
If you as a buyer use the listing agent while buying their own listing, the agent has to disclose to you that they are acting on behalf of the seller as well as on your behalf as the buyer. This is known as dual agency. You will likely be required to sign a form acknowledging this fact.
In theory, it may seem like this would be a good way to get the agent motivated to give you a great deal on the property…but remember the agent on the seller’s side is supposed to get them the highest price possible for the property while the agent on the buyer’s side should get the buyer the best deal possible for the property. If you have someone acting in both capacities, whose side do they really serve? It means full commission for the agent, but they also know both sides of the story. They (presumably) know what price the buyer will pay and at what price the seller will sell.
I’ve done this a couple times buying homes before. I don’t think I would handcuff myself by saying I would only do dual agency deals. To answer your question though…the seller’s agent would become your agent as well in dual agency and would allow you to inspect the house while the agent is with you. For your last question, I think a smart agent would realize that cutting a few thousand off a deal would mean slightly less commission but at least they would get a sale and get some commission. Also realize that if you deal in lower priced homes, the commission can be a flat fee (especially with bank foreclosures). 6% doesn’t amount to much for a 15-20k sale so sometimes a flat fee is offered to entice agents.
Thanks Justin. I’ve been reading up since I started this thread. A bit of a confusing subject. But providing you’ve done your research on the home and the market to confidently determined what your range is, you shouldn’t have to worry about who gets what commission correct? Funny, it sorta reminds me of this deli worker who used to give me extra meat on my sandwich until I asked her to wrap it separately as I admitted I was giving it to my cat. I guess she didn’t think my cat had enough to do with me.
Okay, so if I were to end up in a dual agency situation, which most likely would be because none of the buyers agents that have come my way have ‘made the cut’(ive never actually shopped for a buyer’s agent, I’d just call the listing agency of whatever property I was looking at and asked to look at it, and now that I think of it I understand why I never got hooked up with the name on the sign) I should know the numbers well on the property and my max bid, have a good idea of rehab costs if any, have an inspector on hand if and when need be and an attorney? How else should one prepare for a dual agency situation? thanks!
The main thing in a dual agency situation is that you are on your own: you have to make sure you have done your due diligence since you cannot count on the listing agent looking out for you, although by code of ethics standards he/she should be acting in all fairness and honesty. Run your comps, analyze the deal and submit the best offer possible, but stick to your numbers.
Personally going after properties that have been on the MLS for 90 days or more has proven to be a good strategy for me - you approach the listing agent, and since you don’t have an agent he/she would keep both sides of the commission. It is a win-win situation.
The agent has nothing to do with the price. That is between the seller and the buyer during negotiations. Now if you are negotiating and there is a spy in your camp letting the seller know that there is more money in your purse that they can get then that would not be good. Hey when you are buying your agent is free so why would you put yourself at a disadvantage?
I guess I don’t like the idea of ‘dragging’ someone along with me who’s anxious for a return on their investment. I guess it’s how I felt with my last agent. I’m happy with my purchase but felt rushed. So maybe it was him, maybe me… most likely him. But I’ll keep an eye out for a good one.
If you go into Wal-Mart or Target to buy a TV, the person you’re talking to there is getting paid whether you buy or not so it’s not a big deal if you take up some of their time asking questions before you buy. Even if you don’t buy, they still get paid.
Your Realtor not only has to spend their time with you, but they’re also chauffeuring you around in their vehicle using their gas. Their time is a limited commodity where they don’t get paid unless they help facilitate a sale. I’m sure they get window shoppers all the time who either fail to commit to buying a house or just can’t because of financing or other issues. I’m sure that’s where part of that rushed feeling comes from.
We have been really happy with our Realtors. We’ve given them lots of business and they take care of us. They will change their schedules to match up with ours because they know there’s a high likelihood we’ll buy something when we go look at houses.