Commission splits as a Realtor?

[vballdarin 1]

I need some advice from those who have structured some deals before..........

 

When I approached my broker (fairly large Brokerage) and mentioned to him that I may come across deals that I put under contract from the MLS and then assign them to another investor (who is also licensed)(~Wholesale or assigning the SLO~), he said that he doesn't want to get involved in doing this unless there is a referral fee from one party to another so that he gets his split somehow.

 

He then asked me "why would you put something under contract and give it to someone else to buy anyway?"

 

I'm primarily concentrating on Sandwich Lease Options. If I use the MLS to buy, i obviously have to split my commission with my broker at the time of the sale but he also expects to collect 1 months rent for every year of the lease for "administrative fees" (of which i split with him 50/50).

 

Is this normal? and what happens if I sign a 4 year lease option with my seller and then my tenant/buyer exercises his/her option from me after only 2 years........should anything be refunded by my broker?

 

And also...when I asked him if there any local REIA meetings he knew of (then i had to explain to him what a REIA was....) he said no.

 

Does anyone else have their own experience structuring deals like this so that everyone gets their appropriate split?

I appreciate suggestions or experiences and sorry about the long-winded question.

 

Darin

[Doug Pretorius (ON) 9]

I think it's totally ridiculous that you have to pay your broker anything for deals you do for yourself. Have you thought about moving to a transaction brokerage? (I think that's what it's called) That's what I would do if I were an agent and be done with all this "split" nonsense.

[<Steve> 82]

Hey Darin-

 

Sounds like you should not include your broker in your investment deals. That kind of response is what keeps many investors away from agents. To many rules and monopolies. Look at "your" investment deals as personal business and put the realtor stuff as secondary or as a resource to acquire your personal business goals.

 

If I use the MLS to buy, i obviously have to split my commission with my broker at the time of the sale but he also expects to collect 1 months rent for every year of the lease for "administrative fees" (of which i split with him 50/50).

YUK!

So, are you saying that you can not have access to the MLS with out giving a cut to your broker on any deals you do? I don't know the realtor rules, but can you get MLS access without going through your broker? Are you trying to use your office to do your SLO deals? And to do SLO deals with other realtors?

[MichaelC 160]

When I approached my broker (fairly large Brokerage) and mentioned to him that I may come across deals that I put under contract from the MLS and then assign them to another investor (who is also licensed)(~Wholesale or assigning the SLO~), he said that he doesn't want to get involved in doing this unless there is a referral fee from one party to another so that he gets his split somehow.

Your first mistake was approaching your Broker. Obviously, he's a salesman and not an investor, and so has no idea what you're talking about, as evidenced by his< "why would you put something under contract and give it to someone else to buy anyway?", reply.

You need to keep your Agent duties separate from your investor activities. Am I wrong in assuming that your investor activities do not need clearance from your Broker and that you are free to do as you please?

[vballdarin 1]

I'm asking my office manager to give me a written explaination of standards/procedures when dealing with non-traditional transactions (ie...SLO's, wholesales,etc) so that I can be completely clear when i bring up topics to my broker. Trying to not intermix office leads/activities with my personal activities is a little difficult.

 

I do know that I am allowed one "broker commission free" deal per year after I reach a certain level of commission revenue. Also, if I purchase anything through the MLS using my name, I must pay my broker a commission. If I purchase a property that is not listed on the MLS (FSBO, FRBO, etc), then there is no commission due.

 

We have an inhouse Mortgage Broker (SunTrust) who was hired to work in conjuction with our offices. She seems to be the only person who understands and openly welcomes my new ideas(SLO's) and is a long time reader of Bob Bruss's investor columns. She said that she will refer people to me if they come in to see her...... or any other Realtors in our office who bring in customers/clients, can't get them approved using traditional methods, and don't have the knowledge to create these kind of deals. I, of course, would offer my services in return for serious compensation.

 

I have applied to the State of South Carolina to register an LLC as well as changing my traditional IRA to a self-directed IRA to do most of my deals. I am going to try to do all of my deals through these two entities so that I may get around the "personal commission" issue. I believe that if my business is purchasing the properties, and I have not signed a buyers agreement or listing agreement with my own company....it is free to do what it wants. My Real Estate attorney and I are working out the details.

[vballdarin 1]

Just an update in my battle to escape from the "Planet of the Apes"........RIP Charlton Heston

 

I asked my office manager for a written copy of my broker's commission policies. What he gave me was the division of commissions for traditional transactions (normal commission splits and inter-company referrals). I then asked him for my broker's written explanation of non-traditional deals (Lease Options, Lease Purchase, etc). He originally told me that my broker REQUIRED a one months "administrative fee" from the seller for every year of a lease purchase/lease option.

 

He then began to explain to me the differences between traditional transactions and Lease option transactions and that agents should ATTEMPT to get the lease monies from the seller for our efforts of putting the transaction together. When I said that I'm not interested in getting that money if i'm personally buying the property....he had a disgruntled/annoyed look on his face.

 

I finally ended the conversation with...."Is it required by the broker; Yes or No?"......"He said not really but you should try getting it if you can."

 

And I wonder why i'm so tired at the end of the day. LOL

[boazbama 0]

If your business model is to mingle lease Purchase/CA with Real Estate Sales I think I would find a more of investor friendly real estate office. Just my opinion. It appears to me by your post that the broker is going to give you a hard time.

 

We have Real Estate office here in Alabama that only charges a flat fee or desk fee. I would be looking into those type of real estate companies if it were me.

[Dustin 0]

Hilton, just understand that what your doing with real estate now is where the real money is at. You have the "control" and your on the right track, however, when bringing your business to your job where there are brokers, agents, and the likes... you will get some conflict of interest and folks that say "no" and "not permissible" quite often. I would focus on operating under your LLC banner so you never lose your focus and keep a mission statement as well.

 

The one agent who is "open" to what you are trying to accomplish is probably the only one I would even consider even slightly educating on the subject matter. It would be a networking relationship that may pay off down the road. You are in a position where you can easily break some laws though so you need to be very careful at this point on. When you start mixing brokers and agents and all these "Real Estate players" chasing that dollar on a single deal... things can get weird real quick and because of all the middlemen and knowledge at the table... the rules start bending and someone, usually the seller, gets screwed and you end up in court and everyone gets a "go to jail free" card. I have seen this in Texas and heard of it a couple other times and lastly, I had a friend who I almost had to smack him to get him to realize what he was doing was illegal...its that easy when so many parties have their hands in the cookie jar.

 

DO NOT operate your deals under the banner of your brokerage, if I am understanding what you say correctly. Your probably just going to make less money but work harder. I admire how outgoing you are and the strong networking you do as well (I do it myself ALOT). Those are virtues that are better practiced while protected by your corporate structure (LLC). If any broker or agent is bringing nothing to the table... then they should receive nothing. If they are bringing "leads" then the payout for a lead can be figured without all the hurdles you appear to be jumping.

 

Im sorry if my post is real long or if I seem to be speaking on the wrong subject with no correlation to your post. It just seems like your going to them for "permissions" that you should really never have to overcome. It worries me even more when you mention commission splits and referral fees. If your L/O transaction turns into you getting a commission split then I hope you have your licensing up to date and your clients are aware that you are a broker among all the other things. Now, its up to you to give full disclosure from the get go and can you see how things can get really hairy really fast?

 

If your telling us you are "allowed" one broker commission free deal per year then, to me, it just seems like you got your eggs in too many baskets.

 

Please dont be upset because Im really trying to understand and help from some of my past experiences and perspective. This topic may go a bit longer.

[vballdarin 1]

Dustin,

 

Thanks for your opinions and feedback. I'm always open to positive or negative ideas/comments. It will make me a better investor/person.

 

My LLC should be up and running very soon and I'll be doing most of my deals through it so there is no "Co-mingling" and conflicts of interest. I also disclose, disclose, disclose when speaking to people from my investing advertising. I want to be totally upfront and honest with them and I expect the same in return. If they feel uncomfortable in any way and don't want to deal with me....I simply say "No problem. I understand you're concern. If you decide in the future that I may be of some assistance, feel free to contact me."

 

It's been kinda weird to slowly back away from being a "Realtor" and entering the role of an Investor. Explaining to my office manager that i'm pretty much done sitting in Open Houses and manning the phones during Opportunity (Desk) Time has been liberating. But I KNOW that I don't want to be a slave to a JOB!

 

 

P.S. I work 3-4days a week as a golf caddy and 5 nights as a waiter. <-----slowly backing out of these as well!

[MichaelC 160]

By the looks of the angle you're on in that pic, I would say you've been tapping into those barrels. . .

[Dustin 0]

Hey np, Hilton and thanks.

 

I'm just passionate about ethics because when we start working in grey areas, man, it can get scary!

 

You will love income from being in "control" versus doing everything for others' companies for sure.

 

You also seem very busy doing many things....so try to keep your focus as well =). God knows I am too!

 

Lastly....Ill take one of those wines in that pic!!!!!!!!!!!!!

[vballdarin 1]

MC.....

 

The angle of my tray/bottle/wine glasses in that pic was because of the shear speed and nimbleness of my weaving in and out of the barrels (<----has never used HGH nor do I know Roger Clemens). I finished 2nd in the Waiters Race that year.($200)

 

Dustin......

 

Trust me....you wouldn't have wanted that wine. It was from El Cheapo Winery and it was sitting out in 90degree heat all afternoon. I'll find you a nice 2005 Jordan Cab after I get my first deal done.

 

Speaking of Realtors........

I had a Realtor(#1) call me today and ask me if I(#2) could help him and his buyer/clients work a Lease Option deal with home listed by another Realtor(#3)!

Talk about too many Chickens in the Hen House!!!

 

I told him he has 2 possible scenerios:

1) I could give him some quick tips on structuring the deal and playing on each party's motivation.........(Me being a helpful, upstanding pillar of the community, and overall nice guy)

or

2) I could find him and his buyer/clients a comparable house (that I would lease option from a FSBO myself) and let them lease option it from me.(His buyer/clients would then have to pay his 3% commission at the time they exercise the option because I cannot legally pay him a fee for bringing me a buyer)

 

Any other suggestions other than wishing him good luck and going about my merry way?

[MichaelC 160]

The angle of my tray/bottle/wine glasses in that pic was because of the shear speed and nimbleness of my weaving in and out of the barrels (<----has never used HGH nor do I know Roger Clemens).

It's just a matter of time before you're testifying before Congress.

 

Talk about too many Chickens in the Hen House!!!

Indeed! In addition to your two suggestions, can you contact the Realtor with the listing directly and see what might be worked out between you and the seller? Assuming the seller is open to a lease option, maybe you can negotiate a deal and and then assign it to the first Realtor's client? Just a thought. But I wouldn't sweat this one. Again, too many cooks making the soup. There are less cumbersome deals awaiting.