Contacted by 13 Sellers in One Day!

[<Steve> 82]

That is way cool!

 

And a totaly different aproach than what I have been doing regarding listed properties. I guess I have had my head up my wazoo when you have talked about this before. I can recall talking to many sellers that have their properties listed and putting the breaks on until they have canceled or their listing expired. Really by paying the agent and allowing them to collect their commission on the back end of the sale you are not stealing thier listing at all I would say.

 

This is really exciting stuff and thank you for sharing it John. I'm still amazed that you are able to do L/Os in your state, but that's another thread.

[speedingpenguin 19]

Neat. When my marketing budget allows, I think I'll give something similar a try (on a slightly smaller scale, I dunno if I'd be able to handle that many houses in such a short amount of time quite yet!)

[MichaelC 160]

That begs another question. Does the homeowner have a legal obligation to pay the Agent's commission when the deal goes down like this? If so, doesn't the homeowner bitch and moan about it? I mean, we're keeping the option consideration, there are rent credits coming off the top, and then there may be a commission, as well. Just trying to get into the head of the homeowner, but I could be way off here because I don't use this approach.

[pilot76180 51]

Despite what the agent may say, the owner is not obligated to pay commission if there was no contract brought by the agent.

(There is normally a clause in the right to sell contract regarding a 45 day period, but I won't go into that here)

In 8 years I have never had an owner pay an agent a commision if we did a lease option.

I typically give the owner a small piece of the option fee, say..$1k...and when they ask about their agent, I tell them that most owners will pay the agent some small fee of say $500 for their marketing and time etc.

That's it.

Again, keep in mind, I very very rarely get called first by the agent, or even ever talk to the listing agent.

My communication is with the owner, and I let them deal with the agent.

[<Steve> 82]

I think I would document a fee paid to the seller as option consideration to bind the agreements. Then as you say John leave it to the seller to pay the agent. Then I could also back up an early statement of paying the agent half a months rent, but via the seller.

 

Despite what the agent may say, the owner is not obligated to pay commission if there was no contract brought by the agent.

So, do you tell this to the seller to ease their mind?

[Jonathan RexfordFL 8]

To ad to somethings in the state of Florida the Exclusive Right to Sale listing Agreement does have a place where the listing agent can place what is to be paid in case of an option fee and also a percentage of sale when it is exercised. The option fee is credited towards that commission.

 

But as with all agreements it is all negotiatable. I always put a "0" when listing my own properties.

 

I would love to start marketing to listed properties. But I don't look good hanging from a tree.

[randian 0]

Despite what the agent may say, the owner is not obligated to pay commission if there was no contract brought by the agent.

Is that a TREC thing? I could have sworn every agency contract eliminates "procuring cause" as a restriction on earning commissions. Agency contracts are so nasty and one-sided I bet they'd be void as contracts of adhesion were state governments not in collusion with NAR.

I typically give the owner a small piece of the option fee, say..$1k...and when they ask about their agent, I tell them that most owners will pay the agent some small fee of say $500 for their marketing and time etc.

I have clearly misunderstood who you pay when, so please help me out.

 

You pay nothing directly to the seller's agent. If they receive anything, that comes out of the money you pay the seller?

The "half month's rent" you said you pay applies only when a buyer's agent approaches you, not to the seller's agent?

[randian 0]

So, do you tell this to the seller to ease their mind?

Personally, I wouldn't. Rendering a conclusion (even if correct) as to the meaning or effect of a contract is a felony (practicing law without a license) under most state's definitions. Worse, John lives in Texas, which I've heard is especially aggressive in enforcing it. For example, Nolo's materials were illegal in Texas for years. Suppose the seller tells their agent you told them they don't owe a commission? If said agent is sufficiently miffed they have a large psychological incentive to ruin your life by reporting you.

[pilot76180 51]

I think, for clarification, I need to take it back a step and show how everything typically unfolds so it makes more sense.

After we send out the mailings, 99% of the time the seller is the one contacting me, so let's take that approach first.

When a seller contacts me, my goal, is not to bombard the seller with all of the details of the program. My goal is to get the info on their property which includes the address, the listed price and what they owe. Then I want to get their e-mail address. I actually give them a 2-3 minute schpeel, THEN, I get the info on their house, and tell them I will put some preliminary info together and e-mail it to them so we can take a look to make sure it works for them financially, then we can take it from there. That is usually it for the first conversation. Normally the issue os "How does this work with my agent?" doesn't come up till the follow up call, but when it does I say **And this is near verbatim of how I word it***

Me: "We can actually work with your agent so that your agent keeps it listed while we go to work marketing our lease purchase program. The huge benefit to you is you now have both poles in the water, if you will. You're now marketing to a much larger crowd. Keep in mind our goal isn't to say 'use us and us only', our goal is to be here to hep you get your property out there in front of a much larger audience. As a matter of fact, if someone comes to us that isn't listed, and the numbers work, we'll actually refer them to an agent that works with us so they can have it listed at the same time. I never tell anyone to cancel their listing, because you never know what's could happen. I can't tell you how many times we've been contacted by a seller who's had their house on the market for months, then we start to get our marketing campaign rolling, and within 2 weeks wham! the seller has a contract! Keep in mind we are marketing on multiple avenues that the agent isn't, but so many times when we get involved the activity really pops."

Seller: "Well, if you find somebody first, how does that work with my agent? Do I still owe them a commission?"

Me: "That really comes down to you and your agent, but there are typically two ways that I see sellers take care of that. Sometimes, the seller and agent will have an agreement that if the seller doesn't get a contract, the seller doesn't get paid. Other times though, the seller and agent will have an agreement that if we find someone first, the seller will pay the agent some flat fee of say..$500 or $750 or whatever the case may be, to compensate the agent for their time and marketing etc., but that's between the seller and the agent. But you will definitely want to let your agent know that you are looking to offer the house as a lease option as well, because our goal here isn't to step on toes or go behind anyone's back, our goal is just to be another pole in the water to bring people in."

 

That is how the conversation goes.... as you can see, in this case, I have paid the agent nothing, and will never even talk to the agent. I don't need to anyway, and to be honest, most agents don't want to talk to me I guess, as they rarely ever call.

When the seller says he's ready to do it, BAM, we're on it, and I don't know what he's worked out with his agent, and don't care.

 

Scenario 2, the agent calls me.

Let's fast forward to the first 30 seconds of the conversation where they ask, "Now, how do I get paid?"

Me: Typically we're able to pay half of one month's payment once we assign our contract, so the same amount as if you had just leased it, except in this case of course, you didn't actually even have to lease it, and we usually assign our contract within 45 days or so, so you get paid pretty quickly.

 

(Possible follow up question)

Agent: Do I get paid a commission when they buy it?

Me: "That's up to you and the owner, although normally the numbers wouldn't make it workable to the seller depending on the situation, but that's up to you all, and if you went that route you would just have to keep up with their phone number for a year or so."

 

Notice I've just told the agent that they would have to keep track of someone's number for a YEAR!!! That usually sets in their mind that they could just take the 1/2 months rent in the next 6 weeks or so, which they could really use to pay bills, and move on down the road.

 

See, I'm not trying to aggressively call things out as black and white, and cause an uproar. It's all about how you approach the questions.

In the training MC and I have, you actually hear me talk to sellers, live and unscripted. You get to hear how easy it can be. (sorry for the plug, but talking to sellers is a HUGE hurdle for people)

I think a lot of people on this or any forum have phone jitters that keep them from succeeding. I had them when I started because I didn't have a firm grip on what I was doing or even pitching!

I had to work through that and develop a method that was easy and simple.

[MichaelC 160]

Great info, JJ. Thanks!

In the past when I have worked with a listed property, an occasional issue has come up:

1) I like placing my sign on the property because they are effective at making the phone ring. With a REMAX sign already in place, what are you doing?

2) The listed price and my lease purchase price aren't always the same. How are you explaining that to your callers?

[MichaelC 160]

I would love to start marketing to listed properties. But I don't look good hanging from a tree.

Yeah, I could see how that would create some bad vibes, Rex. Better sleep with one eye open.

[pilot76180 51]

Great info, JJ. Thanks!

In the past when I have worked with a listed property, an occasional issue has come up:

1) I like placing my sign on the property because they are effective at making the phone ring. With a REMAX sign already in place, what are you doing?

2) The listed price and my lease purchase price aren't always the same. How are you explaining that to your callers?

We put a sign in the yard as well, unless HOA regulations only allow one sign, then we don't bother, as we get so many leads via internet.

Our price is usually only slightly higher, maybe by our fee of say...$4k or whatever...and we easily explain that to the buyer as the fact that the seller is having to pay taxes and insurance for a year AND they are getting that back anyway in rent credits!

WHAT A DEAL!!!!!

[<Steve> 82]

That is how the conversation goes.... as you can see, in this case, I have paid the agent nothing, and will never even talk to the agent. I don't need to anyway, and to be honest, most agents don't want to talk to me I guess, as they rarely ever call.

When the seller says he's ready to do it, BAM, we're on it, and I don't know what he's worked out with his agent, and don't care.

hmmm. This is the issue that is making it hard for me. It is possible that the seller does not even contacted the agent, and I know the seller can not explain what I am doing as good as I can. It could be perceived and argued that I am going behind the agents back to get their deal and then blown up that I am brokering with out a license.

 

I think if there is an agent in the mix (a 4th party), I would need to have that agent on board. And should the agent's memory fail down the road, I need some kind of disclosure or simple agreement that would need to be signed by the agent to serve as their memory.

 

devil's advocate,

expect the best but prepare for the worse.

[MichaelC 160]

Steve, your concern is understandable, but I don't completely share it.

Let's look at it this way. If a buyer were to come along and contact the homeowner directly and buy their house, were the Agent to get wind of this down the road, they would surely want their commission. But the Agent has an agreement with the seller, not with the buyer. I'm not an attorney, but I am of the opinion the liability in this situation lies with the homeowner who tried to sneak around the Agent. That Agent is the seller's Agent, not the buyer's.

What John is doing is the same thing, only there isn't even a purchase at the time he is involved. And as you know, our paperwork puts us clearly in the deal as a principal. As I see it, we are well within the law to do the deal this way. On the other hand, having an extra disclosure isn't a bad thing if it helps you sleep at night.

When all is said and done, I think we can agree that John has hit on a rich source of potential deals.

[pilot76180 51]

MC is right, if the owner doesn't talk to the agent, it's not my concern. Although, the seller will almost always tell the agent, as it's obvious when the agent sees our sign!

I don't need an agreement between my company and the agent that concerns the agent and the seller's agreement...that's not my business.

I've had a few occasions where a seller didn't tell the agent, and teh agent called me.."blah blha blah whah whah whah..." Sorry, our company singed a lease option with your client, and I specifically told him to discuss it with you first before we did anything. It sounds like you better talk to your client and get that straightened up..

Like MC said...let's say you leased a house from someone that was trying to sell it...OK...so the owner didn't pay the agent anything...the agent is upset because they feel like they are entitled to something..

OK..they aren't going to call you, the tenant, and tell you to pay up...their beef is with the owner.