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## Buyers Pay Buyer's Agent Commission In Off Market Deals

 

Unlike on-market MLS transactions where the seller pays the buyer's agent commission (typically 2.5% - 3%), the standard in off market and wholesale real estate transactions is for the the buyer to pay their agent's commission.

 

There are a few reasons why buyers pay their buyer's agent commission:

 

## The Deal Is Not Priced For The Seller To Pay A Buyer's Agent

 

Most off market deals for investment properties -- properties in poor condition, distressed sellers, leased rentals -- are not priced with the expectation that the seller or wholesaler will be paying a buyer's agent's commission. Why? Because most off market deals do not involve buyer's agents who ask for the seller to pay their commission. Off market deals either do not involve a buyer's agent at all, or they involve an investor-friendly buyer's agent who understands that in an off market transaction their client (the buyer) pays their commission. 

 

If you want the seller to pay your commission, then add your commission on top by increasing your offer price.

 

## Avoid Unnecessary Friction

 

Many single family and small multifamily investors deal direct and do not have agent representation. Asking a seller or a wholesaler to figure out how to pay the buyer's agent commission is an added complexifier and reduces the chance the agent-represented buyer will have their offer accepted.

 

### Buyer's Agent Off Market Faceplam Moments

 

Aside from the commission component, agents who do not have off market deal experience are known to add significant friction to the deal. One example is pushing back when the wholesaler's contract specifies a title company but the agent wants to try to change the title company. 🤦

 

Another example is when the agent gets upset that the wholesaler is making more on the deal than they are, and then tries to reduce the wholesaler's assignment fee. This is not the way to get your client a new property. 🤦‍♀️

 

The most cringeworthy example is perhaps when the buyer's agent contacts the seller or wholesaler and asks if they pay buyer's agent commission and then tells them that their commission is 4% (standard agent commission is 2 - 3% off market and on market). Going one step further, when they are told that they should have their buyer pay their commission or add it to their client's offer price, they steer their client away from the deal. This is an incredibly common occurrence and fascinating exposé of the failings of the current agency model and rampant breach of fiduciary duty. 🤦🏽

 

A final example is when agents don't understand wholesale real estate and assignment of contract. If this applies to you or your agent, read [Wholesale Real Estate 101](https://www.offermarket.us/guides/wholesale-real-estate-101). 🤦🏼‍♀️

 

### Agents For Flippers Get The Flip Listing

 

Fix and flip buyers typically have an agreement -- implied or explicit -- with their buyer's agent that the agent will be the listing agent when the rehab is completed and the property is ready to be sold on market. That commission check will be higher, so the agent doesn't need to rock the boat trying to get the seller to pay their commission in the off market deal.

 

## Who Pays Agent Commission On OfferMarket?

 

Off market listings on the OfferMarket investment property marketplace are designed to accommodate buyer agents. Buyer's agents submit offers directly on the OfferMarket listing and specify how they would like their commission to be paid. To avoid unnecessary friction that can lose the deal for a buyer, it is recommended that the buyer pays the buyer's agent's commission.

 

In an off market transaction, the buyer is expected to pay their agent for bringing them the deal. But we recognize that it's open for negotiation.

 

Depending on the seller's motivation, net proceeds sensitivity, and buyer demand for the listing (i.e. multiple competitive offers received), the seller may reject a request from the buyer/buyer's agent for the buyer's agent to be paid by the seller. The seller may request a lower commission, since off market transactions typically have lower commissions to the buyer's agent (2% instead of 2.5% or 3%). The seller may counter offer and request a higher offer price in order for the seller to justify paying the buyer's agent commission.

 

## Buyer Agents That Understand Off Market Listings Add More Value For Their Clients

 

Off market, wholesale and For Sale By Owner (FSBO) real estate transactions are typically not priced for the seller and assignor (wholesaler) to pay buyer agent commission. Unless the seller explicitly states in their listing that they are offering a 2% or 3% commission to buyer's agents, it should not be expected of the seller and/or assignor to pay the buyer's agent commission for an offer at asking price. 

 

If you're an agent representing a buyer in an off market transaction, there's no need to worry, there's always a way to make the deal work for all parties involved.

 

The following are the most common arrangements to ensure the buyer's agent is fairly compensated:

 

1. Buyer pays their agent a 2% commission (most common for wholesale, distressed properties)
2. Buyer increases the purchase price in their offer and asks for the seller to pay a 2% to 3% commission (most common for wholesale, distressed properties)
3. Seller happily accepts offer at asking price and pays fair commission to buyer's agent (most common for [FSBO](https://www.offermarket.us/real-estate-glossary/fsbo) and [OfferMarket Exclusive Listings](https://www.offermarket.us/listings).

 

Investor-focused buyer's agents are easy to work with and get an off-market deal done quickly. Buyer's agents who are not familiar or experienced with off-market transactions frequently introduce major friction which derails deals and causes unnecessary effort and stress for all parties. If you are an agent representing a buyer in an off-market transaction, it is important that you reset your expectations according to the norms of off-market transactions and adapt to get the deal done for your buyer with terms that work for everyone.

Buyer's agents (and buyers represented by agents) that understand off-market, wholesale and FSBO listings add more value for their clients.

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Who pays the buyer's agent commission in an off market, wholesale transaction?

Stewart Beal joins us to talk about his "super size house hacking", BRRR, property management and his most important lessons for becoming a successful real estate investor. Enjoy the show!

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468 Unit SUPER SIZE House Hack with Stewart Beal - OfferMarket Podcast

OfferMarket Podcast, Episode 1: 468 Unit SUPER SIZE House Hack with Stewart Beal

Unfortunately, there are many things that can bring down property value. It helps to categorize these items into as follows: 

 

1. Property-centric
2. Market-centric

 

## Property-centric home value destroyers

 

Property-centric items that bring down your home's value are much more in your control than market-centric items, so it's important to make sure you are alert and maintain your property proactively before small issues become big, expensive problems.

 

## Roof leaks, water intrusion, foundation issues

 

Roof leaks that go unaddressed can cause major property damage (water damage, mold growth) that can quickly destroy the value of your home. Foundation issues that result in water intrusion or structural instability can be very costly and hazardous. Other items that result in water intrusion and biological growth (mold) include separated siding, unsealed entryways and windows.

## Pest infestation

 

Termite damage bed bugs can require substantial and expensive remediation. Rodent infestation can cause structural damage due to chewing through hard to access places. Rodents can also cause electrical wiring damage. 

 

Thus, [mice removal](https://www.peststrategies.com/pest-guides/rat-and-mouse-guides/mice-removal/) is essential to protecting your home.

 

It's important to be proactive to address pest concerns. If you are managing a rental property, remind your tenants every month that they are required to communicate and maintenance and pest related concerns proactively.

 

## Tenants with poor hygiene

 

As you might imagine, poor hygiene can cause pest infestation, foul odors and other issues that can bring down the value of your property.

 

## Tenants who damage or neglect the property

 

If you lease your house to people who break things or don't report maintenance issues, you can expect costly repairs that you may be left on the hook for.

 

## Delinquent tenants

 

It may be costly and time consuming to evict delinquent tenants. These are commonly the same people who damage or neglect the property. That's why it is so important to thoroughly screen prospective tenants.

 

The list goes on, and the message should be clear: *an ounce of prevention is worth a pound of cure.*

 

## Market-centric home value destroyers

 

Market-centric factors can be much harder to control for and avoid.

 

## Economic downturn

 

Whether local to your community or city, or nationwide (i.e. 2008 financial crisis), economies can experience short term shocks and longer-term structural issues which will be discussed below. When this happens, the price people are able and willing to pay for your house may be less than in the recent past.

## Rising interest rates

 

When interest rates increase, the interest payments for new mortgages goes up. Buyers can't afford the same purchase price range as when interest rates and their associated monthly payments are lower. As a general rule of thumb, rising interest rates will cause home prices to decline.

 

## Population decline

 

Related to the concept of economic downturn, when a local market experiences a declining population, it means there will likely be an imbalance of the supply of houses relative to the demand for houses. Housing demand and home prices may further decline, as many buyers become hesitant to purchase houses in markets where the proverbial bottom is unknown.

 

## High property taxes

 

High taxes can lead businesses and residents to relocate elsewhere, resulting in lower demand for housing inventory.

 

## High crime rate

 

Crime is directly correlated with property values. When crime goes up, people put their houses up for sale, high supply and low demand means property values go down.

 

## Poor governance

 

Corruption and unreliable city services can make would-be homebuyers look elsewhere. Lower demand for your house means a lower price.

 

## Low quality public schools

 

Many parents and guardians of children approaching or in the K-12 age range are sensitive to the quality of public schools. If your home is in a school district that is experiencing a decline in rankings, there will be lower demand for your home -- lower demand means lower property value.

 

As with property-centric home value destroyers, the list of market-centric home value destroyers continues on and is closely inter-connected. 

 

Before buying a house, understand the property and market-based factors that can bring down property value and do your research!

There are many things that bring down property value. These things fall into two categories: property-based and area-based. There's more to learn at OfferMarket. 

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What brings down property value? - OfferMarket FAQs

What brings down property value?

Grow your real estate investing business with the most competitive DSCR loan product. OfferMarket also provides DSCR rental loans, bridge loans, hard money, fix & flip, rehab, ground up construction loans.

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### What does AVM mean?

 

AVM stands for Automated Valuation Model. An AVM is a pricing algorithm (computer program) used by acquisitions departments at real estate investment firms and [iBuyers](https://www.offermarket.us/real-estate-glossary/ibuying) including [Opendoor](https://www.offermarket.us/blog/opendoor-competitors), [Offerpad](https://www.offermarket.us/blog/offerpad-competitors), [Zillow Offers](https://www.offermarket.us/blog/zillow-offers-competitors) and [RedfinNow](https://www.offermarket.us/blog/redfinnow-competitors) to determine how much to offer for a given single family home.

 

AVMs are proprietary in nature, meaning they are unique to each iBuyer (think secret sauce). AVMs factor in sales data, economic data, demographic data, renovation and [ARV](https://www.offermarket.us/real-estate-glossary/arv-after-repair-value) assumptions in order to provide an attractive cash offer to sellers. 

 

If an AVM is not accurate, it can result in significant losses for the iBuyer -- this is likely the reason why Zillow paused their iBuying service in Q4 2021. For this reason, it is prudent to apply a layer of disciplined human analysis to refine and train AVM output.

AVM stands for Automated Valuation Model, a proprietary algorithm used by iBuyers such as Offerpad, Opendoor, Zillow Offers and RedfinNow.

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