From the desk:Investor-Friendly Real Estate Agent

A $3,500 minimum on a $48k house is 7 percent, so nobody will work with me

Buying in a rural county where the houses I want are $38k to $72k. Rents run $675 to $850 and they hold, tenancies here average longer than anything I've seen in a metro. The math is fine. Getting anyone to transact is not.

Every brokerage within 40 miles has a minimum commission, most around $3,000 to $3,500. On a $48k purchase that's over 7%, and post-settlement the seller side offering compensation is no longer something I can assume, so on a lot of these I'm paying it out of pocket on top of my down payment. Three deals last year I paid $3,500 each on purchases of $44k, $51k, and $62k. That's $10,500 against about $157k of purchases.

Add that the two agents who'll actually drive out here are doing me a favor and both have told me plainly that a $48k closing pays them a few hundred dollars after the split and the desk fee, so they take it once and then they're busy.

What I have: a decent list of owners from the assessor rolls, mostly out of county heirs. What I'm weighing is three options. Pay the minimum and treat it as a cost of doing business, which at $3,500 a deal is roughly 5 months of net cash flow per house. Get licensed myself, which means a brokerage split, continuing education, and disclosure on both sides of every deal I do. Or go direct to sellers with an attorney handling the paperwork, which in this state is normal for closings anyway.

I keep landing on getting licensed and then talking myself out of it because I don't want to be an agent, I want to own houses. Anyone actually done the third one at volume in a low price market?

Answer

1tonyv88SO4CPRO6

We manage in two counties like yours and the direct-to-seller version is what most of our owners do below $80k. The part people underestimate is title. Out of county heirs means probate, missing signatures, and a 1997 quitclaim from someone who's dead. Your $3,500 agent wasn't doing that work either, so you're not losing much there, but you need a title company or attorney who will actually chase it rather than kick the file back. Ours charges more on those and it's the best money in the deal.

On licensing: the disclosure part is fine, everyone here does it. The part that gets people is the brokerage relationship. You'll owe a split or a monthly desk fee whether or not you close anything, and at three deals a year on $48k houses the commission you save may not cover it. Run that as an annual number before you enroll.

2 replies

-1priya_n21PO1C

$3,500 on $48k stings but 5 months of cash flow amortized over a 15 year hold is close to nothing. I'd stop optimizing the acquisition cost and make sure the two agents who'll drive out there keep answering, because the deal you never hear about costs more than $3,500.