Real Estate Agent Compensation (sales, leases, broker)

[gsheridan]

We're getting ready to pick a house to rent. We've been using an agent for a couple of months now, and she's been great.

It's between 2 houses, and the house we'll probably go with is being rented out by the owner directly. We still want to pay our agent though, if we pick that one.

What would an agent normally get on a rental? I've seen 6% of 1 year's rent mentioned in other threads. Does that mean I pay 6%, and the listing and buying agencies each get half, or 3%, with 1.5% of that 3% going to the agent on each side?

Has anyone done a deal like this? Will she be obligated to give half of whatever I give her to her agency? I'd rather just write her a check
or give her cash for the full 3%, and have her keep it all. She has even more hours into this process than all of you do

Thanks.

[hats]

You seem like a great person wanting to take care of someone who helped you. You probably do not have any type of broker rep agreement with her so by contract law you don't owe her a penny finding the place yourself.

However, in my opinion the proper amount would be equal to one months rent, unless you're renting a $30,000 a month mansion. In that case just pay her the equivalent of $200 an hour for the time she put in with you.

Pay her in cash. Just stick it in her pocket with a thank you note. Depending on her sales volume with the company they will take anything from 20-50% on average and she will have to pay taxes on her take otherwise.

[Greatday]

Originally Posted by hats

Pay her in cash. Just stick it in her pocket with a thank you note. Depending on her sales volume with the company they will take anything from 20-50% on average and she will have to pay taxes on her take otherwise.

What you suggest is illegal. It could cost that agent their license.

Rental commissions vary - and vary greatly.

More often than not, the brokerage would get a flat dollar amount (there are some that pay a % of the first years rental). But, depending upon the property, it is not uncommon to see $300 / 400 / $500 commission.

As to what the agent gets, it is up to their agreement with their broker.

[hats]

Originally Posted by Greatday

What you suggest is illegal. It could cost that agent their license.

Rental commissions vary - and vary greatly.

More often than not, the brokerage would get a flat dollar amount (there are some that pay a % of the first years rental). But, depending upon the property, it is not uncommon to see $300 / 400 / $500 commission.

As to what the agent gets, it is up to their agreement with their broker.

Please! Who will know? Yes, the brokerage is losing money on the deal so in that regard it is not the right thing to do but otherwise it is 100% the proper way.

Some laws are just retarded. For example on the Series 7 (stockbroker) test there is a question that asks something like "If a client calls to make a trade and you're out to lunch, and you're assistant takes the call does she A. Must contact you to initiate the trade B. Do it her self which is illegal C. blah blah blah.

The legal answer is the broker is supposed to make the trade but in reality your A$$ would be out the door for not getting those fees if that trade didn't take place, losing revenue for your firm. Also your client will get pissed and go elsewhere.

My point is some laws are stupid! Especially tax laws. Until everyone (rich and poor) are taxed equally I suggest keeping your money where the U.S. can't get a penny.

[gsheridan]

I was planning on giving her 3% in cash, and letting her decide what to do. I'd rather see her keep it all because she's put so much time in.

I'm viewing it as a gift of appreciation, since I'm apparently not obligated to pay her or her agency anything, but I can see where her agency might see it differently.

Still, if I give it directly to her, she can decide what to do. I'm more worried about the amount. 3% comes out to around $800. Does that seem reasonable? Are there any agents on here that would like to chime in?

Thanks

[hats]

Originally Posted by gsheridan

I was planning on giving her 3% in cash, and letting her decide what to do. I'd rather see her keep it all because she's put so much time in.

I'm viewing it as a gift of appreciation, since I'm apparently not obligated to pay her or her agency anything, but I can see where her agency might see it differently.

Still, if I give it directly to her, she can decide what to do. I'm more worried about the amount. 3% comes out to around $800. Does that seem reasonable? Are there any agents on here that would like to chime in?

Thanks

That is the right decision! Again I assume you have no contractual obligation to her so meet her out of the office, put the cash in a thank you note, and let her decide what to do with it.

You're doing the right thing!

In regards to the amount, pay her the sum equivalent to one months rent. The commission % structure of 3-6% or more usually pertains to long term leases. I.E. a broker procuring a 20 year commercial tenant will usually be paid a percentage amount of the aggregate sum of the lease and on any lease renewals at a lower rate in the future.

[Greatday]

Originally Posted by gsheridan

I was planning on giving her 3% in cash, and letting her decide what to do. I'd rather see her keep it all because she's put so much time in.

I'm viewing it as a gift of appreciation, since I'm apparently not obligated to pay her or her agency anything, but I can see where her agency might see it differently.

Still, if I give it directly to her, she can decide what to do. I'm more worried about the amount. 3% comes out to around $800. Does that seem reasonable? Are there any agents on here that would like to chime in?

Thanks

Again - Arizona Law MANDATES that ALL compensation to be paid to an agent as a result of a real estate transaction, BE PAID TO THE AGENTS BROKER. NO COMPENSATION OF ANY KIND - REGARDLESS OF HOW CHARACTERIZED, MAY BE PAID DIRECTLY PAID TO, NOR ACCEPTED BY, THE LICENSEE. It is a bCRIMINAL offense for an agent to accept such compensation.

PLEASE believe me - before even thinking about doing what you describe, I suggest you contact the Arizona Department of Real Estates, Investigations section.

BTW - I am a RE Broker with over 40 years experience and a Lawyer as well.

[Bummer]

I agree 100% with Hats, Gsheridan.

However, treat it as a Thank You Gift rather than a payment for services either by including a few "big bills" in a Thank You Card or possibly a Gift Card. With either option the agent would be avoiding taxes as well as any obligation to share with her broker.

[hats]

Originally Posted by Greatday

Again - Arizona Law MANDATES that ALL compensation to be paid to an agent as a result of a real estate transaction, BE PAID TO THE AGENTS BROKER. NO COMPENSATION OF ANY KIND - REGARDLESS OF HOW CHARACTERIZED, MAY BE PAID DIRECTLY PAID TO, NOR ACCEPTED BY, THE LICENSEE. It is a bCRIMINAL offense for an agent to accept such compensation.

PLEASE believe me - before even thinking about doing what you describe, I suggest you contact the Arizona Department of Real Estates, Investigations section.

BTW - I am a RE Broker with over 40 years experience and a Lawyer as well.

Thank you for quoting the law. However, in your 40 years of law and real estate brokerage doing business in black and white where has it gotten you?

Do you have a firm that employs thousands of agents? A lawfirm representing the largest real estate business transactions, REITS, Funds, etc?

If so, I will shutup and admire your ways!

[Greatday]

Originally Posted by hats

Thank you for quoting the law. However, in your 40 years of law and real estate brokerage doing business in black and white where has it gotten you?

Do you have a firm that employs thousands of agents? A lawfirm representing the largest real estate business transactions, REITS, Funds, etc?

If so, I will shutup and admire your ways!

3000 + agents.

Big real estate contracts / defense