When you are working on lease option deals for your rent-to-own program, it may be difficult to find motivated buyers and sellers who have the funding for the down payment. For that reason, it is crucial to learn how to work with other individuals in the real estate market and compensate them appropriately in order to keep them referring buyers and sellers progressively to your program.
Essentially, two different kinds of people to whom you can turn for referrals include investors and real estate agents. These are two separate groups of people and must be compensated as such.
Never Shortchange for Referrals
The relationship between real estate agents and investors is typically a tense one, primarily due to the fact that real estate investors think that the real estate agents are not creative enough in closing deals and agents believe investors are just cheap. Consequently, as a real estate investor it is up to you to be able to explain the creative way to buy a property and not be too frugal when it comes to compensating a real estate agent.
When you pay a real estate agent, never take out any of the commission. It is important not to shortchange him or her on the commission. If the real estate agent refers a motivated seller to you, then there is absolutely no reason why you should shortchange their commission because the seller always pays commissions for the realtor.
If you handle the deal properly, not only will the commission be paid without you being out of pocket, but also you will have an experienced real estate agent who will be happy to represent you in the transaction, gaining dual compensation once the tenant decides to buy the property.
You need to be prepared to respond when the real estate agent asks what will happen if the home does not sell. Some real estate agents are only paid if the property sells, and there is no guarantee that will happen. At this point, it is time for you as an investor to refrain from frugality.
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Tags: lease option deals, property investing, real estate agents, real estate investment, real estate investors
{ 2 comments… read them below or add one }
Hi Sean,
I think the role of real estate agents is an invaluable one in property investing. I think if you’ve found a great agent then it makes sense to take care of them financially. I don’t see the need to penny pinch.
There’s enough money for everyone so it’s important to compensate them for their efforts. If you treat them well, the referrals will keep coming and there will be more than enough to keep you busy.
It makes sense to reward the real estate agent for great work, you want these poeple in your team and as you build a relationship with them you can both profit.