Wholesale Properties: Do You Owe Your Buyers Agent On FSBO?
Do Real Estate Investors Still Owe Agents Commission If They Buy For Sale By Owner Properties?
This is one of the dilemmas these wholesale properties routinely face. It can still be a tough call and a choice to grapple with, even for veteran investors. However, it can be an even more perplexing and significant option for newer investors. So whose side is the law on? does it matter?
This situation arises when property wholesalers have real estate agents working as “buyers’ agents” on their behalf and then find a property for sale by owner (FSBO) that they wish to purchase. So in this scenario, the real estate agent’s commission still needs to be paid?
Unless investors have signed some pretty wild and unfair paperwork, there should be no obligation to involve or compensate any real estate agents if a property stands alone and a deal is negotiated directly between the buyer and the seller.
Of course there may be some quirks here. If a real estate agent is showing a property to an investor and runs into an FSBO, the owner can sign an agreement to pay the real estate agent for his or her services if the deal gets stuck on the spot.
However, there are also some occasions when those wholesale properties may voluntarily choose to include their agent in the deal. The first and most obvious reason for this may be to use the real estate agent’s help in navigating and negotiating the deal. This may not always be ‘cheap’, but when you add it up, it can prove valuable enough to make it work. This is especially true for those who are looking to do a large volume of business and who want to maximize their time.
There are other concerns, too. Throw his agent out to the curb, and it’s highly unlikely that she’ll get out of bed to help you scout future deals. It can also earn you a nasty reputation in the local community and industry that could come back to bite you in the future. This is an equally dangerous risk for both the newbie who can’t afford any negativity and the seasoned veteran who has invested years and millions building his brand and name.
Fortunately, in many cases there may be some middle ground to be found. Maybe a discounted commission rate can be negotiated to keep everyone happy and earn some points for extra help with the sell side of the deal and future transactions.
