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What's reasonable to pay to a realtor in this situation?

3,587 Views | 25 Replies | Last: 3 yr ago by Bonfire97
Kool
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8:46a, 12/31/22
AG
I've owned a condo for just under 4 years. Lease is about to expire, and I have had the same tenant the entire time. The real estate agent who sold me the condo also found my tenant and has written up our contracts.
I recently contacted the real estate agent to try to determine, should my tenant wish to leave at the end of the term, what she thought of the current market for rental or sale of the unit. In return, she opined on the current market and sent me some comps.
I reached out the the tenant, who also has been working with a real estate agent to look for properties for purchase. In our back and forth, she let me know that she would be interested in a purchase of my unit.

My question is, what would be a reasonable way in which to structure realtor fees if we move forward with this transaction? Neither realtor would be really doing a lot of research or leg work in order to make the deal happen, so it seems crazy to pay full commission for such a sale. I am sort of tired of being a landlord, but a full commission would make the sale (at what I would anticipate would be the sale price) not a very good investment overall. That being said, I don't know how much leeway they even have for reducing their commissions typically if they work for an agency (mine does).
Thanks in advance
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AgResearch
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9:40a, 12/31/22
AG
Hire lawyers to do the legal paperwork to sell and cut out the unnecessary real estate agents.
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aggieswmr04
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10:03a, 12/31/22
Your agent did provide some leg work with the comps and such. It wouldn't be inappropriate to pay them (at least my POV)

There isn't much more work to be done if you come to an agreement with your tenant. Tell your tenant to pay their realtor. You can fill in a contract and send to Title company and they will handle it from there assuming you have free and clear title. Or ask your realtor to draw up the contract.

If it were me I would ask my realtor if they would be ok with a lowered commission on their end to handle any blips they may find in the process, draw up the contract and handle the rest.

Don't forget about recaptured depreciation and gains when you're calculating your proceeds.
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Kool
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In reply to aggieswmr04 • 10:14a, 12/31/22
AG
aggieswmr04 said:
Your agent did provide some leg work with the comps and such. It wouldn't be inappropriate to pay them (at least my POV)

There isn't much more work to be done if you come to an agreement with your tenant. Tell your tenant to pay their realtor. You can fill in a contract and send to Title company and they will handle it from there assuming you have free and clear title. Or ask your realtor to draw up the contract.

If it were me I would ask my realtor if they would be ok with a lowered commission on their end to handle any blips they may find in the process, draw up the contract and handle the rest.

Don't forget about recaptured depreciation and gains when you're calculating your proceeds.
Great, thanks. I wouldn't feel right giving the agent who has been helping me with the renewals NOTHING, but if my tenant wants to purchase the unit and there are no listings, no showings, etc., it certainly doesn't make sense to me to flush all that money down the proverbial toilet.
With regards to completing a transaction, would it be cheaper/easier if I were to own the property outright? I do have the cash on hand to pay off the mortgage, but have been in a bit of a holding pattern to see what I was going to do with the property.
As far as recaptured depreciation, etc., that's for my CPA to work out. The lease payments have been covering my mortgage (I financed at 15 years) and HOA fees and repairs, but not taxes.
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FILO505
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In reply to Kool • 5:17p, 12/31/22
AG
I think the biggest question to ask yourself is if your tenant is going to give you fair market value. Despite a shifting market, make sure you're not doing your tenant a favor in lieu of you getting a higher price.

I, obviously, know nothing about your property, condition, location, etc. Just important to make sure it lines up with the market.

If you think it's good and are happy with a FSBO, then just retain legal and then talk to your realtor about what you think is fair

Just my two cents. Happy New Year!
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Red Pear Realty
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5:35p, 12/31/22
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AG
Y'all know TREC promulgates the forms we use and gives them out for free on their website, right?

https://www.trec.texas.gov/agency-information/contracts

As others have said, you should make sure you aren't giving away the farm to pick up some pennies.

In situations like these, we typically charge our standard 1.5%, but the buyer and seller usually split it at closing.
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Kool
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6:01p, 12/31/22
AG
Thanks for both responses. It's a condo unit, so comps are relatively easy. A unit with the exact same floor plan, also a corner unit as is mine, sold for $485K in June. Days on market was 4 days, and the property sold for $2,000 over ask. I've replaced BOTH A/C units in the last 3 years, so major repairs certainly won't be an issue for a buyer.
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jja79
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8:15p, 12/31/22
AG
I've been in banking and mortgage a long time. Most of the instances where I see a property appraise over sales price are FSBO. A savings on one line item on your closing statement might not net the greatest bottom line.

From June to now, the market is considerably different in areas with which I'm familiar. Are there more recent comps more reflective of the market today?
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Kool
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In reply to jja79 • 8:27p, 12/31/22
AG
jja79 said:
I've been in banking and mortgage a long time. Most of the instances where I see a property appraise over sales price are FSBO. A savings on one line item on your closing statement might not net the greatest bottom line.

From June to now, the market is considerably different in areas with which I'm familiar. Are there more recent comps more reflective of the market today?

That's by far the best comp. Otherwise are not really that similar, unfortunately
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JaneDoe02
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8:31p, 12/31/22
AG
I did a deal where I was the seller and found an all cash buyer on Texags. I asked a realtor that I had a relationship with to handle both sides for 1% and she agreed. It was very little work for her and I knew I had all of the paperwork handled correctly. It was a win for us.
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Shooter McGavin
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In reply to jja79 • 8:27a, 1/1/23
AG
jja79 said:
I've been in banking and mortgage a long time. Most of the instances where I see a property appraise over sales price are FSBO. A savings on one line item on your closing statement might not net the greatest bottom line.

From June to now, the market is considerably different in areas with which I'm familiar. Are there more recent comps more reflective of the market today?
Or way below sales price, because the buyer accepts the seller's price without any research.

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jja79
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In reply to Shooter McGavin • 3:16p, 1/1/23
AG
In that case they may have an out but if they aren't using a good agent they may be uninformed.
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Agilaw
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11:09p, 1/1/23
AG
1.5% too high for work being done and the price of the property. This is when paying a % of the deal is overpaying. You have done most of the work, so no need to pay much in realtor fees or attorney fees. Get an attorney or realtor, or an attorney who is a realtor, to paper the deal and work with title company to complete the transaction for about half of the 1.5%.
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Red Pear Realty
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In reply to Agilaw • 6:24a, 1/2/23
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Agilaw said:
1.5% too high for work being done and the price of the property. This is when paying a % of the deal is overpaying. You have done most of the work, so no need to pay much in realtor fees or attorney fees. Get an attorney or realtor, or an attorney who is a realtor, to paper the deal and work with title company to complete the transaction for about half of the 1.5%.


Why do they need another attorney if the docs are available for free from TREC on their website and Title has in house attorneys and will help advise with the forms if you have any questions (buyer and seller know a good title company, right?). Assuming we all can read and have degrees from Texas A&M, filling in some blanks and checking some boxes shouldn't be too hard. Some of my best clients have been attorneys, including ones that are real estate attorneys. They work with me because they believe there is more value in what we do than just filling out contract blanks.

Btw, some of my hairiest deals have been where a buyer and seller have already found each other and "just need someone to complete the contract" for them because "they've already done most of the work". For whatever reason, they always turn into a mess and end up being more work and bigger liability than the average deal. Every time I do one I tell myself I'm going to start charging each party 1.5% going forward, but here I am offering to help for half of that again.

Good luck OP!
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
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Kool
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In reply to Red Pear Realty • 9:39a, 1/2/23
AG
Red Pear Realty said:
Agilaw said:
1.5% too high for work being done and the price of the property. This is when paying a % of the deal is overpaying. You have done most of the work, so no need to pay much in realtor fees or attorney fees. Get an attorney or realtor, or an attorney who is a realtor, to paper the deal and work with title company to complete the transaction for about half of the 1.5%.


Why do they need another attorney if the docs are available for free from TREC on their website and Title has in house attorneys and will help advise with the forms if you have any questions (buyer and seller know a good title company, right?). Assuming we all can read and have degrees from Texas A&M, filling in some blanks and checking some boxes shouldn't be too hard. Some of my best clients have been attorneys, including ones that are real estate attorneys. They work with me because they believe there is more value in what we do than just filling out contract blanks.

Btw, some of my hairiest deals have been where a buyer and seller have already found each other and "just need someone to complete the contract" for them because "they've already done most of the work". For whatever reason, they always turn into a mess and end up being more work and bigger liability than the average deal. Every time I do one I tell myself I'm going to start charging each party 1.5% going forward, but here I am offering to help for half of that again.

Good luck OP!
I hope you are not misinterpreting my question, but it was never my intention to cut out the real estate agent entirely. I DO understand that people have expertise and bring to the table things that I cannot do myself. The agent sold the condo to me in the first place, and obviously was paid that commission. She handled my lease agreement with the tenant she found, and took a fee for that. IF my tenant, who has expressed an interest in purchasing the property, makes an offer that I would accept, my real estate agent would not need to list the property, stage the property, field calls about the property, schedule showings of the property, potentially work on a deal that falls apart at the last minute, etc. My tenant already has loan approval and underwriting, and I would have clear title of the property. She knows the property well, as she has been renting it from me for years. To me, paying a standard real estate commission to be split between my agent and the purchaser's agent seems excessive.
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Red Pear Realty
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In reply to Kool • 11:02a, 1/2/23
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AG
You're good man! Much of what I posted was not directed at you, but rather some of the other posters or the 10x ratio of lurkers reading this, because I can see that you "get it" and ultimately whatever payment amount that works for you and someone that is representing you is what price you should pay. Most agents don't work for less than 3%. I own a whole other company where we charge 3% and I basically only offer the Red Pear model for TexAgs folks. The only reason I posted was to try and balance out the " you can do everything yourself" people. I because they are right…. you can do everything yourself. You just have to decide at what level of DIY are you comfortable with? Here are just some examples of things you can do yourself:

-Cleaning your house
-Mowing your yard
-Building a fence
-Doing your own plumbing
-Doing your own electrical
-Replacing your shingles
-Writing your own contracts
-Building your own house (physically doing the labor yourself)
-Representing yourself in court
-Performing surgery on yourself

A lot of those examples can be done by people with very little training, and/or education. But "should you?" is the real question. Is it worth your time? Will it look good? Is there a risk to it? Ultimately, you have to decide for yourself what each of these means to you.

As an example of some things that can go wrong preparing your own contracts, I recently helped a family friend sell some land to a buyer he had already procured. He forgot to include a few forms that probably would've got him sued based on the situation, and was also going to transfer his mineral rights that he did not want to transfer. He is an experienced investor and he had already had another "professional" look at it for him. An attorney at the title company almost certainly would not have corrected either of those items, because it's not their job. Finally, I also helped him set a contract price at about $100-$150,000 more than he had any business and getting out of that deal. I think he was pretty happy in the end, even with my fee baked in.

This is why the largest companies in the world engage third-party brokers to represent them even when they have teams of in-house and third-party attorneys as well as their own in-house real estate teams.

Back to the OP:
I really do wish you the best in your transaction, OP.
Sponsor Message: We Split Commissions. Full Service Agents in Austin, Bryan-College Station, Dallas-Fort Worth, Houston and San Antonio. Red Pear Realty
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Kool
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5:55p, 1/2/23
AG
Tenant contacted me today. She has been looking at homes with an agent for a while now. She reached out to her agent, who said she will not accept less than 3% on her side. Since she has already been showing her properties, I guess that makes sense. Apparently she is going to write something up to present to me directly as an offer, we will see.
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Diggity
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In reply to Kool • 9:44p, 1/2/23
AG
That's a load of ***** Buyers agent is in no position to dictate how much (if anything) you offer them as a commission.

If the buyer wants to pay their agents commission, that's their prerogative.
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FILO505
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In reply to Diggity • 10:52p, 1/2/23
AG
Which could become a very real thing, soon. Across the board
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Diggity
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In reply to FILO505 • 9:54a, 1/3/23
AG
and dumb crap like this buyer's agent is pulling doesn't help the cause much.

It would be one thing for the agent to ask the seller if he/she is willing to offer a commission, but to state that they won't "accept" less than 3% is a complete joke. They have zero leg to stand on here.
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aggiepaintrain
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10:51a, 1/3/23
AG
Realtors think they are entitled to your equity. Her offer better be 3% higher than your price in your mind.
Get an appraisal done so you know 'about' what it's worth, which is a whole other can of worms.
There is no way I'd pay anywhere close to 6% commission in this situation.
Couple grand each side max.
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Furlock Bones
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In reply to Kool • 11:39a, 1/3/23
AG
that is patently absurd. tell the client they are welcome to pay their agent whatever extra they feel is appropriate. but, you are not under any obligation to pay.
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JamesBREI06
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9:12a, 1/7/23
AG
Most agents are greedy *******s. It makes no sense to pay them 3% they didn't bring you a buyer on an MLS listed property.

Absolutely have the buyer up the price to cover as that agent is working on their behalf, so they should pay.
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Red Pear Realty
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10:20a, 1/7/23
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AG
Y'all realize that a lot of sellers in Texas right now are offering commissions above 3% to buyer's agents to get deals done, right?

OP - Stop listening to people with "fixed pie" mindsets. You started this thing with the ability to close at a June comp pricing and paying someone 1-1.5% to paper it for you, but now your best option is to pay the tenant's rep 3% and your own something like another 1-1.5%, because if you don't, you're gunna have to list it on the MLS at 6% (or more) and most likely you won't hit that summer pricing level. If you have the ability, I wouldn't sell at all. Just keep renting it and cash flowing.

Last thing, OP. I see your medical badge, and I'm sincerely trying to relate to you on this. This thread is the equivalent of people looking for medical advice on Facebook. Most people have no idea what they are talking about and it's dangerous (for your pocketbook).
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Kool
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In reply to Red Pear Realty • 2:06p, 1/7/23
AG
Red Pear Realty said:
Y'all realize that a lot of sellers in Texas right now are offering commissions above 3% to buyer's agents to get deals done, right?

OP - Stop listening to people with "fixed pie" mindsets. You started this thing with the ability to close at a June comp pricing and paying someone 1-1.5% to paper it for you, but now your best option is to pay the tenant's rep 3% and your own something like another 1-1.5%, because if you don't, you're gunna have to list it on the MLS at 6% (or more) and most likely you won't hit that summer pricing level. If you have the ability, I wouldn't sell at all. Just keep renting it and cash flowing.

Last thing, OP. I see your medical badge, and I'm sincerely trying to relate to you on this. This thread is the equivalent of people looking for medical advice on Facebook. Most people have no idea what they are talking about and it's dangerous (for your pocketbook).
Pear:

Thanks again for your response.

Just as a clarification, I was HOPING for the ability to close the deal with a reduced fee between my agent and the buyer's agent, based on the fact that my property was never listed and my tenant's agent never had to "find" my property for her. I made the post before I received a formal offer from the buyer's agent. I am completely cognizant of the fact that, if I don't consummate this deal, I will be looking at either renting it to my tenant until she finds somewhere else to live or selling the unit and having to cover 6% of the total agent fees. I am not sure as to how the market will be in the spring and summer, but inventory is tight where the unit is and people wishing to move into the community mail offers to buy quite frequently.

As far as not selling the property, I already have a "day job" and not having to worry about this unit would be kind of nice. I bought the unit in the first place for reasons other than rental, and those reasons are no longer applicable. I've had to replace both A/C units, repair two appliances, replace two toilets, etc. Over Christmas, I left town and was really worried that the unit might flood when my tenant was also out of town and the temperatures went into single digits. My current tenant has been easy to deal with, but I might not be so lucky with the next one.

As to the utility of the thread in this Forum in the first place, I totally understand that a public, anonymous forum will garner a very wide variety of opinions. Some will be better than others. That being said, sometimes "putting it out there" flushes out some great responses (yours included), and at a minimum it generates some thought if not a learning opportunity.

Cheers
No material on this site is intended to be a substitute for professional medical advice, diagnosis or treatment. See full Medical Disclaimer.
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BlueHeeler
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4:41p, 1/13/23
AG
Quote:
I've owned a condo for just under 4 years. Lease is about to expire, and I have had the same tenant the entire time. The real estate agent who sold me the condo also found my tenant and has written up our contracts.
I recently contacted the real estate agent to try to determine, should my tenant wish to leave at the end of the term, what she thought of the current market for rental or sale of the unit. In return, she opined on the current market and sent me some comps.
I reached out the the tenant, who also has been working with a real estate agent to look for properties for purchase. In our back and forth, she let me know that she would be interested in a purchase of my unit.

My question is, what would be a reasonable way in which to structure realtor fees if we move forward with this transaction? Neither realtor would be really doing a lot of research or leg work in order to make the deal happen, so it seems crazy to pay full commission for such a sale. I am sort of tired of being a landlord, but a full commission would make the sale (at what I would anticipate would be the sale price) not a very good investment overall. That being said, I don't know how much leeway they even have for reducing their commissions typically if they work for an agency (mine does).
Thanks in advance
You owe this realtor absolutely nothing. Talking about percentages of the sales price to write up the contract is absurd. It sounds like you have a good relationship with this person. If so, I would suggest you roughly figure out what your attorney would charge you to write up the contract. I had a very similar situation and assumed my $200/hr attorney would take about 6hrs altogether. I offered a realtor friend who provided some comps to me the $1200 to do the paperwork, as opposed to the attorney getting it, and she was completely happy with that. That's what I would suggest.
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