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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 Buyer's Agent in Off-Market Deal?

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

## **What is After Repair Value?**

After Repair Value ("[ARV](https://www.offermarket.us/blog)") is the estimated value of a property after it has been renovated or improved. This metric is crucial for real estate investors, house flippers, and lenders as it helps determine the potential profitability of a deal. Investors use ARV to assess whether a property is worth purchasing and to strategize their renovation budgets effectively. Lenders also rely on ARV to decide the amount they are willing to finance.

For example, if you bought a house for $100,000, invested $50,000 into a cost-effective renovation, and it then appraised for $200,000, the ARV is $200,000. To estimate the ARV of a property, you can look at the comparable home sales and listings ("[comps](https://offermarket.us/real-estate-glossary/comps)") to see what properties with similar characteristics in a neighborhood are selling for.

Using the [BRRR method](https://offermarket.us/real-estate-glossary/brrr-buy-rehab-rent-refinance) real estate investing method, your budget of purchase price plus rehab would ideally be no higher than 75% of the ARV. For example, let's say you bought a property for $50,000 and invested $25,000 into repairs. That's $75,000 of invested capital. Now, when you go to a lender to refinance the property by taking out a mortgage, the home appraises for $100,000. The ARV in this example is therefore $100,000. Since most lenders require 25% down for non-primary residences and investment properties, you're able to cash out 75% of the appraised value of the property -- that's $75,000 which is is the entire amount you invested in the project.

## **How do you calculate After Repair Value?**

To calculate ARV, investors use a straightforward formula:

However, this method alone may not be sufficient. A more accurate way to calculate after repair value is by analyzing comparable sales, also known as "comps."

1. **Research Comparable Properties (Comps)**: Look for properties in the same neighborhood that have similar features, including size, age, and condition, and that have recently sold. 
2. **Adjust for Differences**: Compare the property you are evaluating to these comps. If a comparable home has features your property lacks, adjust the value accordingly. 
3. **Estimate Post-Renovation Value**: Once you determine an average price per square foot from the comps, multiply that by the total square footage of your property to estimate its ARV.

For example:

* A similar renovated property sold for $250,000 and has 2,000 square feet. 
* Price per square foot = $250,000 / 2,000 = $125 per sq. ft. 
* If your property is also 2,000 square feet, its estimated ARV would be **$125 x 2,000 = $250,000**.

## **How to Determine After Repair Value**

Determining ARV involves more than just running numbers. Here’s a step-by-step approach:

1. **Evaluate Market Conditions**: Understanding market trends is crucial. A rising market may allow for a higher ARV, whereas a declining market requires a more conservative estimate. 
2. **Assess Property Condition and Repairs Needed**: A property requiring extensive renovations will have a lower initial value but a potentially high ARV if improved properly. 
3. **Consult with Real Estate Professionals**: Work with local realtors, contractors, and appraisers who have experience in valuing post-renovation homes. 
4. **Use Online Valuation Tools**: Real estate platforms like Zillow, Redfin, and Realtor.com can provide estimated property values and recent sales data.

### **How to Determine After Repair Value of a Home**

For investors looking to determine the after repair value of a home, the key is to find **the right comparable properties** and ensure they reflect the home’s potential post-renovation condition. Look at homes with similar renovations, location, and amenities. If your property will have a new kitchen, updated flooring, and modern bathrooms, ensure that your comps reflect those upgrades.

## **Does an Appraiser Determine After Repair Value?**

An appraiser can determine after repair value, but typically, they assess a property’s **current** market value. However, if an appraiser is working with a lender for a rehab loan (such as a hard money loan or FHA 203(k) loan), they may provide a **subject-to appraisal**, which estimates the property’s value after planned renovations.

To obtain an appraised ARV, the appraiser reviews the renovation plans and finds comparable properties that match the anticipated improvements.

## **How to Estimate After Repair Value**

Estimating ARV requires a blend of research, market knowledge, and expert input. Here’s a simple process:

1. **Gather at least three comps** that have sold within the last six months. 
2. **Adjust for unique features** (e.g., pool, garage, extra bedrooms). 
3. **Account for market shifts** (recent sales, interest rates, and demand trends). 
4. **Factor in renovation impact** (quality of upgrades and added value).

## **How to Figure Out After Repair Value**

If you want to figure out after repair value, consider working with a real estate agent, appraiser, or professional investor. They can provide an expert opinion based on market analysis and comparable properties. Additionally, leveraging technology such as automated valuation models (AVMs) can help refine your estimates.

## **How to Find After Repair Value**

There are multiple resources available to find after repair value:

* **MLS (Multiple Listing Service)**: Best for accurate and detailed comparable sales data. 
* **Real Estate Websites**: Zillow, Redfin, and Realtor.com provide estimated values and recent sales. 
* **Local Real Estate Agents**: Their expertise in market trends and pricing is invaluable. 
* **Professional Appraisers**: A certified appraisal provides a well-documented estimate. 
* **Investor Networks**: Joining real estate investment groups can provide insights into ARV calculations and local trends.

## **Final Thoughts**

Understanding how to determine after repair value is critical for making profitable real estate investments. By accurately estimating ARV using comps, market research, and professional insights, investors can maximize returns and minimize risks. Whether you’re flipping homes or investing in rental properties, mastering ARV calculations will help you make smarter investment decisions.

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If you've found this helpful and would like access to more rental property investing insights, sign up for OfferMarket. Membership is free and comes with the following benefits:

🏠 **[Off market properties](https://www.offermarket.us/listings?ref=content-after-repair-value)**
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If you are not already a member, we hope you will [accept our invitation](https://www.offermarket.us/listings?ref=content-after-repair-value) to join us!

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The After Repair Value (ARV) is the value of a property after completion of a renovation. 

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After Repair Value (ARV) | OfferMarket Real Estate Glossary

Understanding After Repair Value (ARV) in Real Estate Investing

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If you own rental property, collecting rent every month from your tenants is a top priority. The traditional rent collection method has always been to send a rent check. From a tenant’s perspective, writing a personal check once a month is straightforward. However, if you are a landlord trying to eke out a living from a few rental units, processing rent checks is a clumsy, time-consuming process. Accepting rent payments by check can also severely impact your cash flow. 

 

But surely, there must be better ways of running a successful rental business than collecting rent checks. After all, most consumers use the internet for banking and shopping online. Also, digital wallets like PayPal, Venmo, and Zelle are popular for splitting bills or making electronic payments. There is also a growing trend among professional landlords to use mobile payment apps specifically designed for rent collection. 

 

Are you a landlord looking to save time and make rent collection more straightforward? Do you want to find out about ways to collect rent better suited to the modern renter in a digital age? If so, please continue reading to find solutions to your greatest pain point — collecting rent on time. 

 

## Why Look for Alternatives to Rent Checks

 

Let’s face it — it takes a lot of your precious time to process a rent check. Did you know that it can take up to seven days from when a tenant writes and mails the check until the cash is available in your bank account? Would you not prefer to get rental money in your bank account in a matter of hours rather than days? 

 

Here is a typical timeframe of how long it takes to process a tenant’s rent check. First, the tenant writes and mails the check. This usually takes up to three days to arrive unless there is a longer wait due to postal delays. After receiving the check, you must drive to the bank, stand in line, and deposit the check. Then you must wait for one to three business days for the check to clear. 

 

Additionally, since October 2021, many landlords may have to wait even longer for checks to arrive. [CBS News reported](https://www.cbsnews.com/news/mail-delivery-slower-usps-october-1/) that changes in the United States Postal Service would result in four out of ten first-class mail items having slower delivery times. In some cases, this means your tenants may incur late fees because their personal check was late.

 

Here’s a list of compelling reasons to avoid collecting rental payments by check:

 

- Checks can bounce
- Rent checks can get lost in the post 
- Paper check payments put you at risk of identity theft
- You must manually record rent payments, meaning that it’s easy to make mistakes

 

## The Challenge of Using Rent Check Alternatives

 

One of the biggest challenges [successful rental property owners face](https://www.offermarket.us/blog) when switching to rent check alternatives is convincing their tenants. After all, sending a check is straightforward for tenants. It’s landlords that are burdened with the hassle of processing paper checks

 

Surprisingly, paying rent by check and cash still seems the most popular method. For example, the [Federal Reserve Bank of Boston](https://www.bostonfed.org/publications/research-data-report/2016/how-do-people-pay-rent.aspx) reported that 42 percent of renters still mail a monthly rent check. In addition, a surprising 22 percent of landlords continue to accept cash payments. The study found that a meager 8 percent of tenants paid rent using an electronic method.

 

## The Best Alternatives to Collecting Rent by Paper Check

 

As a property owner running a profitable business, you must be in control of rent payments. This means that you can specify acceptable ways for your tenant to pay rent. In most states, you must provide at least two methods of payment. 

 

Using a mobile payment app is the best alternative to a paper check. Not only is it convenient for you as a landlord, but your tenants are probably already using one to make online payments. Also, you have an electronic “paper trail,” which is more secure than keeping paper documents. However, some digital wallets or “peer-to-peer” payment methods are better than others for rent collection. 

 

Here are the pros and cons of some popular payment apps, including some designed specifically for landlords. 

 

## PayPal — Rent Check Alternative

 

PayPal is one of the most well-known digital wallets, and many landlords use this as a rent check alternative. Tenants can pay rent directly into a landlord’s bank account, or you can request a rent payment. 

 

However, [PayPal is a poor option](https://blog.rentdrop.io/alternatives-to-paypal-for-collecting-rent-online) for collecting rent because there is no payment protection. Additionally, you can’t block partial payments. And PayPal can sometimes freeze a tenant’s accounts if they suspect any questionable activity. Finally, PayPal has monthly fees for using a business account.

 

## Zelle for Rent Payments

 

Zelle is a popular mobile application that lets users quickly transfer funds. A benefit is that the money appears directly in your bank account if you sign up to Zelle. And there are no transaction fees. 

 

But there are cons to using Zelle for collecting rent. For example, it’s possible for a tenant to pay someone else accidentally instead of the intended recipient. And it’s hard to resolve disputes if you use this service. In addition, like PayPal, the lack of payment blocking and purchase protection means that Zelle is not great for online rent payments. 

 

## Buildium — Property Management App

 

Buildium is a property management app popular with many landlords. The app streamlines rent collection, sends reminders, calculates late fees, lists vacancies, and allows tenants to request maintenance visits. It is also possible for landlords to post vacant properties on sites such as Zillow and Trulia. Landlords can also accept payments, send out invoices, and process security deposits.

 

One thing to consider with Buildium is that it’s expensive. So, if you only manage a few rental units, it’s not a cost-effect alternative to rent checks. In addition, for some users, the plethora of features makes it challenging to use. 

 

## Rentdrop — Mobile Rent Collection App

 

[Rentdrop](https://www.rentdrop.io/) is a straightforward rent collection app, allowing landlords and tenants to collect rent online for free. Rentdrop has some handy features for landlords like scheduling automatic payments, processing security deposits, tracking rent payments, and sending rent reminders. In addition, the convenient app allows roommates to split the rent, and landlords can also offer tenants flexible rent payments. 

 

Rentdrop lacks some of the features of expensive property management apps. But the service is free for landlords and tenants to use and is an excellent alternative to collecting rent checks. 

 

## PayRent — Property Management Software

 

PayRent is a mobile application that helps landlords manage their properties. Landlords can use the app in place of rent checks. The app makes it easy to track a tenant’s rental payment history. Also, tenants can pay rent using either a debit card, credit card, or checking account with an e-check. 

 

However, there are some drawbacks to using PayRent. For example, you must pay transaction fees, which can cost up to $50 per month to use.

 

## Alternatives to Rent Checks — A Takeaway

 

Sending a paper check is fast becoming a part of history. So if you run a successful business, there are many reasons to stop accepting rent checks and convince your tenants to use an alternative method. Not only are digital payments more secure, but they will also save you time and money and help free up valuable resources.

Rent payments have evolved with technology. Learn how modern solutions streamline the rent payment process in 2022.

Rent Check Alternatives — 5 Superior Ways to Collect Rent

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