Buyer Representation (should I be paying for this?)

Had a recent conversation with an apartment broker, who offered me the opportunity to meet some of his clients who also invest in apartments. The broker asked if I would sign an agreement stating that if I ultimately do any investments with any of his clients, I would agree to let him represent the LLC in the purchase and eventual sale of the property.
I understand the representation during a sale, because I would pay the broker a % of the sales price. But being represented when we are buying a property.....I'm wondering what's in it for the broker in that scenario? Unless the seller's broker is offering a split of the commission, but if not, would the broker expect me to pay a fee directly to him??
In Buying Property - Asked by Eric G. - Oct 15, 2009
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La Jolla, CA

You are asking legal questions, and in California, licensed Brokers or a Sale Agents can contact the CAR Legal Hotline (Free of charge, it is part of your CAR Membership Fees), and you can ask your question to a Licensed Real Estate Attorney. Good Luck.
Osama. A

Oct 15, 2009
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Davide P.
Pinole, CA

I would imagine it would be one of two scenarios that the broker is referring to. The first is if the broker assisting the LLC would only be paid a less than desirable commission and wants the LLC to make up the difference. I.e., listing agent is only giving the LLC broker a 2% split, he would ask LLC to pay 1% if he desired his/her 3%. The second is if the LLC broker finds a property that is not listed (i.e. private seller) and wants to be paid for the work.

Oct 15, 2009
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Abigail S.
Listing Administrator
Kansas City, MO

Buyer representation is common in real estate transactions. Often, the seller will pay for the buyer's agent. But sometimes, the seller will not agree to pay the buyer's agent fee. In that situation (and I imagine its in the fine print of the agreement he wants you to sign) you would be responsible for his fee. If you're not comfortable with that, don't sign the agreement. He's ultimately looking for a way to make sure that he benefits from bringing you together with the other investors.

Oct 16, 2009
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Mary Louise S.
Lady Lake, FL

I have worked as a buyer's agent for 17 years and have yet to have a seller refuse to pay my part of the advertised commission split. I believe it is extremely important for a buyer to have his/her best interest represented. In Florida it is "assumed" that real estate agents are all "transaction brokers" which limits their liability and accountablility to buyer OR seller. A buyer's broker is a "single agent" which provides the duties of: Dealing honestly and fairly; Loyalty; Confidentiality; Obedience; Full disclosure; Accounting for all funds; Skill,care,and diligence in the transaction; Presenting all offers and counteroffers in a timely maner, unless a party has previously directed the licensee otherwise in writing; and Disclosing all known facts that materially affect teh value of residential real property and are not readily observable. Yes, I have my customers sign a "Loyalty agreement" describing what I will do for them and what is expected of them. I collect a loyalty fee which I refund to them at closing. I need to be paid when I work, as do most people. Even if for some reason the professional fee was to be paid by the buyer, I believe the buyer's representative could save them more than the fee in the transaction.

Oct 16, 2009
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Gregory G.
San Francisco, CA

It depends on the deal. Maybe the Seller doesn't have a broker and is not paying a commission... maybe the Seller's broker isn't cooperating... in each of these cases I would imagine the Buyer's rep will be looking for a commission or stake in the deal. Doesn't seem likely he will work for free unless he is selling you one of Madhoff's properties.
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531

Oct 23, 2009
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Holger S.
Wayne, PA

Buyer Representation is different in all states. I'm licensed in PA, NJ and DE. I will refer to PA in my answer. If you are not represented by a buyer agent the agent does not owe you any loyalty or confidentiality so you have to be careful when you talk to the agent to not disclose any confidential information. If you on the other hand have a buyer agency agreement the agent owes you confidentiality and loyalty. All states I have done business in have a Consumer Notice or a Consumer Information Sheet that will explain the different types of agency that is available. The buyer agency contract should spell out if you are paying the broker a fee or not. I typically accept the coop commission as my fee but if I find a FSBO or a property that is not listed I would ask the buyer for my commission. It always boils down to how much you are paying for the property. If the seller is offering a commission it will be taken out of the sellers proceeds and if you are paying the commission you calculate the price and deduct the commission from the offering price and the sellers net will be the same or higher because you are just paying one side of the commission. Personally I think it is a good idea to have a buyer agency because you can be more open and discuss your objective in a confidential manner instead of having to watch what you are saying. I strongly advice you to read the documents first and also ask for a written explanation of the types of agency that is available to you. Finally as an agent I’m not a lawyer so this is not legal advice just the way I do business in Pennsylvania and it works great. For any legal questions you should talk to a lawyer that is familiar with your area.
Call me for a link to your state real estate commission.
Holger Stenberg
Associate Broker/ Manager
Home Buyers Marketing II, Inc.
512 w. Lancaster Ave.
Wayne, PA 19087

Nov 12, 2009
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