I’ve a spec house for sale, and agents are active showing clients, now that it is complete.
Yesterday, I happen to be there, meeting with a paving sub. An agent comes, another car comes, and I am introduced by an agent I know to some clients, who then tour the property. The clients are from another state, a three-hour flight from here.
Allegedly, as things develop, they may or may not be interested in buying mine, but if they do, it will be an investment in a rental property. Not the one they want for themselves. We are in a year-round vacation location, and many of the homes in the area are operated that way.
They tell me they are intending to build a huge new home on a lake lot they own nearby, and ask if I would be interested in working with them. I say perhaps. He goes to the car to get the planset, and we look over his drawings. It’s 8,000 sf of huge rustic elegance.
The clients’ archy is in another country, and is not doing them a “full service” job. Therefore, qualifying builders, getting bids, construction progress observation, etc., is up to them. No help from the archy. Their touring around to see homes is maybe a means of seeing what’s happening and meeting some builders.
The agent now takes this position: I’ll push to sell you as builder, and if you get the job, I want a commission.
Happened to anyone else out there?
Replies
Never came up, but then, I don't do whole houses either. My reply is, it seems like some kinda scam/shakedown. I guess it makes sense on the agents part, but how you gonna know it isn't your work, results, and sparkling personality that isn't winning you over, as opposed to some nebulous muttering from a real estate agent?
I guess in the end, it boils down to how much, and are you comfortable with it. Sounds like a great gig, though, so I can see the compelling reasons to get an inside edge; and believe me, so does the agent.
Good luck, whichever way the wind turns.
I'm no expert on these things by any means but, it seems to me that had she proposed this idea before you had met the client it would be a reasonable thing to ask. The situation sounds like she brought them only to look at the house and you were there by happenstance and the client initiated the discussion with you. If she is their realtor she is supposed to be looking out for their interests, not yours. Sounds like she is looking out for her own above all else. If the client likes your work and calls you back, pursue it. Leave the realtor out of it.
Tom
Douglasville, GA
Sounds like a tacky way to do business on the realtors part, but neverless Id still throw them a few percent on an 8k sq ft home. You'll still make money, and by lining the realtors pocket, Id bet you'll get more referrals from them. Seems like good business on your end anyway. Good luck.
In the car biz and others, I'm sure, that's referred to as a "Bird Dog Fee". I don't mind paying it, and it can be a good or a not-so-good thing. What I object to is someone putting themselves in the middle of a transaction just to collect some $ for themselves. Like they were entitled to it by virtue of witnessing the transaction.
I've paid 'em but seems kinda sleazy to ask for it...I see it as a bonus to being the facilitator of a deal, not just present at the right place at right time.
My first inclination would be to say thanks but no thanks. I would rather do my own selling even if it might reduce my chances of getting the job. I think that it is just as important to get to know the client and to understand their motives as fully as possible as it is to get the job. Maybe you don't want to work for these people no matter what the monetary profit. The selling of the job is a vital part of this feeling out process.
My second thought was, how much of a commission are we talking about here?
Similar situation. We've sold a few specs through realtor. 6% commission, fairly standard. After working with realtor for a few projects he considers us one of "his" builders. Realtor mentions he has someone interested in having a custom home built and would try to steer the folks our way. He would naturally expect the full 6% if we get the job.
This has happened with two different agents out of two different realty companies. I never actually discussed the details of the commission with the realtors, nor did I ever actually even meet one of these prospective clients, but these are my thoughts;
Let's say the home is $100,000. That's $6000 for the realtor. On an existing home (spec) the realtor has to advertise, show the house, staff open houses, attend the closing etc. In other words he is working to earn his 6%. On a referal, the realtor makes his recommendation of you and then he is done. I can't see how this justifies a full commission.
This also makes it difficult to bid competitively. If you have to pad your bid by 6% to cover the commission, what happens to the customer who also seeks bids from builders not affiliated with a realtor? If they are shopping largely based on price, you are at a disadvantage right from the start. I would think a 1 or 2% commission would be great for the effort required. After all, I've sent people to deal with particular agents and I haven't received any commission checks from them for their sales.
6% is only a fair commission when you're selling a house under maybe $400K. With home prices going up so much in so many places I think realtors are being unrealistic about continuing to get that much. There are at least a couple of 2% brokerages doing business in the Bay Area, and I'm sure other places. But to give a realtor 6% of your contract for a referral? Ouch. At least on an actual sale they have to do some work and take some liability.
The bells just went off....
They say bait and switch...
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming....
WOW!!! What a Ride!
.......why don't you ask the owner how much of a commission you should pay the realtor?
That oughtta clear things up in a hurry.
Eric
Don't think it's a good idea to have the agent be your agent. Confuses aligience, sounds/can be percieved as sneaky, won't reflect well if discovered (at the very least it will be concidered), and you are no longer stearing the ship.
Regarding the last reason - your reputation is in the hands of someone else who is concidering his/her own position with less regard to the responsibilities they are charged with. Not a good mark of character. They may/ probably will push you so hard they will make your bid suspect (regardless of if you get the job). They also may be trying to strike this deal with other builders (quite likely).
If you need an agent, you don't need this one. They are only their own agent. If you get the job a nice thank you (theater tickets, dinner at the best in town, stereo, really sharp breifcase, etc) would be appropriate, but NO MONEY. Then it's business and you are in bed with them.
If - in another situation - one pays someone a referal fee, do you send them a 1099 at the end of the year? Do you get their SS# when you are giving the check?
F
on the one hand, business is business. on the other, when did you EVER hear of a realtor paying a finder's fee for somebody sending them biz on an informal referral? in other words, if you turn this around and one of your clients says, "i'm thinking of buying some more properties. since i'm new to the area, do you know any good realtors?" would you be expecting a little something from the realtor? or, like most of us, would the mutual hand washing process be more of a one good turn deserves another positive experience over time?
i'm always a little leery of people who always want a direct piece of the action on every deal they happen to be around- and obviously you are too, that's why you asked, right? take firebird's advice- ask the client what he thinks.
m
ps- realtors have a well-deserved reputation as scum. my mom used to be one and i've heard all the stories.
Interesting thread... I'm with the don't pay crowd.
The agent wants a finders fee. Seems the client found you. Agent wants money to do the followup and sell you to the HO. Seems like that is your job to sell yourself.
Seems like the agent may backhand you if you don't pay her. Stay in contact with the HO. You need to get the agent out of the picture.
Again... Do you get $$$ for referring someone to the agent?
Peace,
MartinHeads I win, tails you lose.
Some random thoughts
raising the price 6% doubles the price after 12 iterations.
People stay in a home 3? years on average.
The price (not value) of a home doubles every 18 years based soley on realtors commissions, assuming that each buyer/seller just broke even.
Samt
Actually, the realtor how sold out last home, you refer a client to him and one of his assistants is at your door with a crisp new $100 bill in an envelope with a thank-you note within 24 hours..
Phill Giles
The Unionville Woodwright
Unionville, Ontario
that's my idea of a tip, a gratuity, a nominal 'thank you', if you will. it's in an entirely different league from the sort of commissions and outright palm greasing being discussed in this thread. at some point a difference in degree becomes a difference in kind- and the difference between "a crisp new $100 bill" and expecting/paying 1-6% on a mid- to high 6 figures deal clearly crosses that threshold in the average businessman's mind.
m
I think it really depends on what/who you are as a builder. Suppose you're a high-volume paper contractor who has subs for everything on the job, and mostly needs buyers for your lots and your homes. You take the deal the realtor is bringing and plug it into your spreadsheet, and if the numbers are good enough you sign the deal and pay the realtor. Business, pure and simple. Most of us low-volume, small-crew artisan contractors get as much work as we want without paying fees and can't imagine throwing a percentage of our bottom line at anyone. But face it... if you were looking to go big-time and do nothing but sign buyers to deals, you'd be looking for referrals and if they were cost-effective you'd be paying for them.
as i said much earlier, business is business. the question then becomes, 'can they deliver?' by a reasonable cba, is it worth the money? but there will always be lines drawn by legitimate people as to what is an honest, open deal for fair value and where it starts to smell a little funny. the original example given in the first post obviously has a little difficulty passing the smell test due to the seemingly somewhat underhanded way it was proposed out of sight of the would-be buyer. that why i and a couple others have advocated full disclosure to the prospective client.
m
Ask the realtor what they pay as a referal fee to others. The last one I dealt with said he'd give me $100 for any referals that worked out. That seems a fair price for you to pay. Deal with the homeowner only. At the very least, tell them what the realtor is up to so they know who their dealing with.
Deskguy is right on target. Ask how much the realtor will pay you for each future referral you make that closes is a great idea.
Also, expanding on what David wrote; as the builder you will have both initial and continuing liability issues that could come into play. By being a "paid representative" the realtor should also share the responsibility.
T
as Rev Ted just said: "By being a "paid representative" the realtor should also share the responsibility."
tell the realtor to have his/her attorney draw up the agreement specifying how they will be assuming this liability- make sure they include terms like "jointly and severably" (?), which basically means that any one of the parties can be held fully responsible for all of any problems- and you'll soon find out how badly they want their 'commission'.
m
My answer - "No thanks, I'll have the job based on my reputation for quality, and my own destiny, not on the references of some shill drumming for a buck"
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Hi,
This is Katrina (Andy's wife) and a Realtor for 24 yrs. I don't know if the Realtor was a Seller's Agent or a Buyers' Broker. If the Realtor is a Sellers' Broker their obligation is to the seller, not to the buyer even though they brought the buyer. What they owe buyers' by law is "fair and honest treatment". As far as whether or not you "owe" a commission to the Realtor if the buyers' buy a house through you is nebulous. If I were her I would have tried to protect myself and spoken to you prior to having her buyers meet you. You do not have a contract w/ her and so if the buyers called you directly there is really nothing she could do about it. On the other hand if the meeting betw. you and the buyers just happened to occur because you just happened to be at this property and it really was circumstantial you should do what you ethically feel is correct. If you end up building this huge project for these customers and never would have met them if not for the fact that the Realtor introduced them to you, do you ethically feel that she is owed something??? You also don't want to cut your nose off to spite your face. If the Realtor has an excellent rapport w/ her buyers perhaps they would not feel that is fair to cut her out of the transaction. As far as what she said about "pushing" you- that does sound alittle tacky to me because I don't ever "push" anything on anyone. I present the facts and accurate information about a property and community so that they can make an educated decision themselves.
The secret of Zen in two words is, "Not always so"!
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If the deal went through, such that you did build for this particular owner, I would not feel right completely cutting the agent out of the picture. Full commission? Not a chance. Maybe not even a fixed percentage. But ceertainly a thank you note and a c-note or two.
Whenever you are asked if you can do a job, tell'em "Certainly, I can!" Then get busy and find out how to do it. T. Roosevelt
A friend of mine was subject to this kind of "greenmail" a couple of years back: It too started as an accidental contact (he was checking landscape work on an infill home he built and that was being flipped at closing - the prospective clients were friends of a couple who were being shown the current house who came along for a look-see ride). While the agent started with an offer for her to talk him up as a contractor, her pitch quickly changed to her doing all the contracts and becoming the broker for the house: it became very clear that unless she got a piece of the pie, she would be steering them in another direction. On advice (can't remember who he called) he offered her a $1000 finder's fee payable on ground-breaking, which she accepted - he still calls it a "hold-up".
Phill Giles
The Unionville Woodwright
Unionville, Ontario
Im regularly pay a bird dog fee. In my case it's $500.00 and it's easily worth it to me. I tell all my customers up front about the fee and ask for their help. The sale always goes easier when I have a referal and when I'm recommended. Thus the value of the fee to me, and the customer who sends customers my way gets a reward for his time and effort.
I pay the fee only upon completion of the deal, if the sale should fall thru because of finance or any other reason no fee is paid!
Bob, you post Their touring around to see homes is maybe a means of seeing what's happening and meeting some builders. Leaves me wondering just what relationship this agent has with the potential client?
Do they know the agent, or just a yellow pages pick?
The ? is, what leverage does this agent have with the client?
They have seen your work, that's what will make the sale unless the agent does some badmouthing to change their opinion.
And, second question, how much of a commission is this agent looking for?
I've found that people looking for a commission quite often have an inflated idea of what my profit is. "Yeah, I double my money on everything I touch, giving you 5 or 10% is nooooooooo problem."
Joe H
Bob, you gonna post any pictures of this house? This is the Susan Susanka house?
Or did you & I missed it?
Joe H
I had the same thing happen to me except mine was an interior decorator. She asked me to bid a job for some wealthy client of hers and told me once I got my foot in the door I would be on the gravy train since they had many more projects in mind..
So I bid the job at cost, no profit. She insisted all financials be confidential between the two of us. I left plenty of room in my bid for her to enjoy some mark-up as gratitude for the referral.
Next job came and she wanted the same deal. No referral for me. I cut her and the project loose. I get work on my own merits. I don't need a partner.
In your case if the Realtor and your prospective client stopped at a restuarant for lunch would the realtor take the restaurant owner aside and ask for a piece of the action? After all the agent steered them to that restuarant.