Got an option agreement on a luxury home in VA a few weeks ago. I have been preparing for a round robin auction to take place on 11/9. Sellers told me they were considering listing it, which is within their right since my option doesn’t take the house off the market. But I asked them to please wait until AFTER the auction, or to at least exclude me from the listing but nooooo, they let the Realtor talk them into signing an exclusive listing agreement 10 DAYS before my round robin! Grrrrr. CRAPPP!
Now we gotta pay this guy even if I am the one who produces the buyer. I called the guy and it seems he’s willing to work with me rather than against me.
Here are the numbers:
Value $720-750K (They paid $818K for it last Jan & installed $40K in upgrades)
My option price $640K (They’re selling it for what is owed)
Terms: If house sells for more than $660K I’ll split those additional proceeds with the sellers 50/50
Question is this - how would you suggest I restructure the agreement now that this Realtor in the picture? His commission is 3%. I want to make sure I make at LEAST $10K no matter what.
Also I’m asking if he would at least put the auction listing on the MLS…what else could I have him do to market the open house? If I gotta pay him he might as well earn some of it.
I just wrote a detailed blog post about dealing with the commission on a non-exclusive option deal. The gist of it is that YOU are not responsible for paying the commission even if your option is priced at a point that makes it impossible for the seller to pay the commission without coming out of pocket. You can of course be generous and share your profit with the agent if you like, couldn’t hurt if you intend to build a long-term relationship with them.
Perhaps the more important issue is your overall strategy of working deals of a non-exclusive nature. I prefer to limit the amount of time and money invested into each deal.
One thing you didn’t mention is how long you’ve had the option?
Thanks Doug. I had the option for about a month, and it’s a 6-month option. Just read your blog from top to bottom. Needless to say I like what I’m reading.
Turns out it may be a non-issue after all. Market is really soft here, and I got very little response to my marketing efforts (I, like you, don’t like to invest too much time & money in non-exclusive deals). So I doubt the house will sell this weekend. However I’ll continue to market it to retail buyers using your “free/inexpensive” marketing methods for the term of the option. Who knows, I just may get lucky.