How Much Should You Pay An Agent To Find A Lease Option Buyer?

Read Transcript for “How Much Should You Pay An Agent To Find A Lease Option Buyer?”

“My question is how much to compensate a real estate agent if you use them to sell a property in a rent to own deal. Do you give them a commission? Should you give them a flat fee?” – Dan

Joe: If they’re an agent, they’re used to working on commission so giving them a commission is not a bad thing. Giving them 20% or 30% of the deal would be normal. If they’re a straight up partner, giving them 50% of the deal would work.
 
Joe: One of the things I find is difficult is getting an agent to work consistently, making sure they follow up with the leads and go through with that whole process, so a lot of times its easier and cheaper to get an hourly paid person to do that work for you. So what I do most of the time (and I’ve done both ways) is to get an hourly person who will do that stuff who I pay $8 or $10 to show that property, to be friendly and maybe close the deal.
 
Joe: We can get somebody who’s good on the phone (most of that work can be done on the phone) and then you can have your boots on the ground, a different person who actually shows up at the property and shows the property if that’s necessary (if it can’t be shown with a lockbox). Vacant properties can be shown with just a lockbox without anybody there with them; we’ve had very good luck with that.
 
Joe: So if you’re working with an agent, you have to find somebody who’s going to follow through with your leads (because you’re going to get leads coming through) and make sure all the leads that are coming from your Craigslist ads, your signs and the marketing that you do come through your office first and they get distributed to the buyer agent if you’re using an agent to help you sell that property.
 
Joe: That way, the virtual assistant who’s going to do the distribution is going to ask for lead sheets to come back from that agent to make sure that those people got contacted. You’ll also want to do some spot checking, maybe to call some of the buyers to make sure, ‘Hey, did Fred get ahold of you about the property that you called about?’ to find out if he’s actually making the calls. If you’re not selling properties, he’s not making the calls.
 
Joe: Make sure you have a way to check on them to make sure it’s getting done. I find that it’s hard to keep agents on board with this stuff. I don’t know why that’s the case, because they can sometimes be the best people to sell your properties, and intuitively it makes a lot of sense to have them sell the properties.
 
Joe: But I think that they feel maybe they can make more money listing and selling properties and getting a commission and doing it conventionally than they can by just taking a cut off of your deals and making $1,000 here and $1,000 there. They’re used to $1,500 to$5,000 paydays like you are as an investor, not $1,000 to $1,500 or what you’ll probably pay them.
 
Joe: So, before I stop, let me talk about hourly paid. Let’s say you made $3.000, a low lease option fee on a $100,000 property. You have $3,000 coming in and you’re giving a third of it to your buyer’s agent. So you’re giving away $1,000 of that income and you’re going to keep $2,000 of it.
 
Joe: If you had hired a non-agent, somebody hourly, to do that for you and to make those calls, and paid them $10 an hour, and it takes on average, five to ten hours of dealing with buyers before you can find a property (usually less than that but let’s say it takes ten hours) that’s $100 that you have to pay that person versus $1,000 that you have to pay the agent, and it’s probably going to be less than ten hours. So I would definitely do the hourly if you can afford it up front.
 
Joe: A lot of people feel that, ‘Well, I can’t afford it up front.’ It’s going to eat away at your income later on and if you build your business around it, it’s not going to be as exciting. So maybe at the beginning, you make the calls, talk to the sellers and put the deals together, and as soon as you put together one or two deals, set aside some of that money to pay an hourly person and do it that way. Alright, I hope that helps.