If you’ LO with a house that is represented by a realtor some gurus advocate paying the realtor’s commission. According to Wendy Patton in this buyers market, she’ll give the realtor 1% of purchase price to the realtor, then the rest when the option is sold. OK…My question is what is paid to the owner of the home to be LO’d as a “consideration”, or option fee? $500-$1000? And does this come out of the agent’s 1%? Hopefully this makes sense…
Wendy’s been working with Realtors a long time and has many connections. I doubt you’ll be able to find a Realtor that will work with you under those terms, I haven’t. Most of the Realtors in my area ask for 10% opt. cons. and take their 5-6% out of that. The Realtors here don’t push the Lease Option just because they want to be paid now. Actually when I find a Realtor that does LO’s I’ll solicit their expired listing at 3-5% opt. cons. Herbster
herbster,
thanks for the reply. I’m still confused. If we have a buyers market (definitely the case in my neck of the woods) why would a realtor ask for a 10% option fee? I mean this makes no sense if the only contractual obligation between the agent and the seller is for the standard buyer-seller agent splint is 6-7%. And only IF the house even sells. 10% of 0 is still 0. The house I’m interested in has had 3 realtors in the last 2yrs and still hasn’t sold. My plan was to offer the agent 1% of the purchase price then pay the agent 12-18 months later the rest (5-6%). I then make the T-B pay the 10% option premium on a pre-determined price above the price I negotiated with the seller/agent.
So back to the original Q: Assuming the realtor signs on with this agreement who pays the seller the option fee?? Is it given by me above and beyond the 1% up front commission given to the realtor or does the realtor give the seller the “cut” as they are contractually obligated to each other?
Packer, You can try as Wendy suggests, good luck to you. I simply stated what things were like in my area, I’m in Wendy’s State BTW but on the other side. Even if I sold on a LO through a Realtor I’d like to get more than 500-1000 wouldn’t you? Herbster
PS If this home hasn’t sold in 2 years and has had 3 Realtors wait until this listing is expired and do it yourself, and you may want to have a serious look at the homes value.
Herbster,
I will talk to the owner if the listing expires…As far as the realtor being compensated, the agent will be compensated the full commission (more than the $500-$1000 as your last post says) it only will be delayed until 12-18 months later when the T-B purchases the house. The $1000 just represents “earnest money” to grease the wheels.
I guess maybe I’m looking at it from a legal angle. A seller-agent relationship is a private contract. Private contracts are the cornerstone of capitalism and the Constitution. All fiduciary transactions must go through the agent. So if this deal is to work, any monies exchanged must go through the agent and then to the seller. So unless anyone else has any other experience, I guess I answered my own question.
Thanks
Packer, in theory everything you say is true. But in practice out in the real world it’s pure fantasy. I don’t know anyone who’s been able to duplicate what Wendy talks about in her course. I’ve been doing L/Os for 8 years now and I’ve never been able to do one with an agent involved. I tried really hard for awhile I made over 500 offers through agents. It’s simply impossible to work with agents on creative deals.
It has nothing to do with getting paid, agents don’t care if you hand them their 6% in cash at signing. They still won’t get involved in a lease/option or any other creative investment technique no matter how bad the market is. If you meet an agent who really truly understands creative investing, you won’t be able to work with them either, because they will be doing what you want to do themselves.
Listen to herbster and hit up those expired listings. But I take it a step further. As long as you don’t have a real estate license you can solicit active listings as well. Listing contracts can be cancelled, or you can simply have your contract start immediately upon the expiration of the agent’s contract.
Thanks Doug, I was trying to say that. Herbster
There is definitely a difference between what we read and how it is implemented in real life. Thanks for the real life insight!
Since you mentioned it, what is your best way of getting the expired listings?
A good way would be to befriend a Realtor to do it for you, but them and me don’t get along. There are some web based data companys that will provide this info. but at a charge that I currently can’t afford. Someone else may chime in and tell you who they are. So for right now I do it the hard way. I study my area hard and if I stumble onto a Realtor that does LO’s then I solicit their sellers with Letters and Post Cards. Keep in mind this is a business and I only have to work 1/2 days( 12 hours on and 12 off )Herbster
Easiest way is to get your spouse to get their license :biglaugh
I don’t target expireds per se. I go after actives and I’m usually contacted by the sellers who are fed up and about to expire themselves 
Is it ethical to contact the seller and say “when/if you listing expires give me a call”?
It’s ethical, but you’ll find sellers don’t like that approach, most sellers are very loyal to their agent until they lose faith in them so there’s no point in stirring the hornet’s nest before the time is right. Also sellers are typically confident that their agent will successfully sell the house. And last, they’ll probably forget to call you when their listing expires anyway.
You’re better off making your pitch to a set number of sellers per day and allowing the numbers to work in your favor. If you reach enough people regularly, the timing will always be right for some of them.
i think what wendy means and i could be wrong is, the real estate agent gets 1% of the sales price then you additionally pay the seller the option money/deposit
I don’t think it would be too difficult to find real estate agents to work with you, the problem is many investor are in the mind set of how to get out of paying the realtor
Johnny, I have to disagree. I’ve tryed working with dozens of Realtors with no success. That’s the real world. In my experience they have been nothing but deal killers. Herbster
saying i’m a realtor? i beg to differ. Especially in this slow market I am seeing a lot of agents become more and more creative.
I have assisted other agents on atleast 7 or 8 lease options this year. I even own several websites that target lease option buyers
Packer, Just thought I’d let you know. Wendy Patten is a licenced Real Estate Broker.Herbster
Herbster,
Yeah I knew she was so I tried to factor that in to her angle to promote such things. All things considered I think the saying goes “the confused mind always says no.” It is a great defense mechanism but tends to be a deal killer from what you have said.
Another thing to consider is whether it’s even worth all the trouble. You shouldn’t have to bend over backwards to appease an agent. If they don’t recognize the value of working with you then you’re just wasting your time. I mean really think about it…
First, you have to find an agent who’s open to doing a creative deal.
Next, you have to figure out how they’re going to get paid.
Then, you have to educate them on how the deal will work.
Plus, you have to get their broker to sign off on it as well.
And to top it all off YOU have to PAY them for the privilege!
Only then can you finally get to the seller to find out if they’re interested in doing a deal.
It’s pretty easy to see why you might want to just skip straight to dealing with the seller directly. Saving yourself a lot of grief and saving several thousand dollars to boot.
What is the typical commission split between agent and the brokerage of that same agent?