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Creative Real Estate Financing Technique #13

Borrow the real estate brokers money and/or real estate agent commission when looking for creative financing home buying. From time to time you will come across a property listed by a broker that is being offered for a 10% down payment. 

Typically, the seller is asking for 10% to cover the broker's commission, as well as closing costs.

The brokers money and or the real estate agent commissions are generally 5% to 7% of the purchase price. If a real estate broker both lists and sells the property, the broker receives the entire commission. If another broker is involved the usually this commission is split 50/50.

Borrowing a portion of the commission or giving the broker a portion of the ownership in lieu of all or part of the commission is sometimes possible, especially when buying a home and dealing with a listing broker. If the listing broker is also the selling broker, the commission will not be split, and the broker will be in a better position to loan part of it to you.

If you find some initial reluctance from the real estate broker, you might try to make the proposition more attractive by offering to give the broker a note for an amount larger than the commission. For example, if the real estate agents commission is $5,000, you might consider offering $6,000 promissory note. The note might bear interest at 10% with payments of 1% per month. In other word, every month you would make a payment of $60 to the broker. At the end of the year you would have reduced, or amortized, the note by 2%, or $210. The note could become due and payable in five to seven years. Generating all or part of the down payment in this way is relatively inexpensive.

Before approaching an agent or real estate broker about borrowing commission, it is important to understand how the commission is determined in a real estate office. When a seller lists a piece of property with a broker, the broker's compensation is spelled out in the contract. It is usually computed as a percentage of the total selling price. Similarly, a real estate agent or salesperson has an agreement with the broker that sets the amount of commission received by the salesperson when a transaction is completed. The rate of a broker's  and salesperson's commission is always negotiable.

Another way of doing business is the Re/Max method and is one of the best ways to exercise this creative financing technique. Re/Max is a nation-wide brokerage firm that rents office space to its agents. In addition to rent, they also must pay a fee for the benefits of advertising done by Re/Max. The real estate agent receive 100% of the commission on property sold. These agents and brokers are usually more receptive to lending all or a part of their commission to you than the more traditional agents and brokers. Check with your broker to find out about the commission arrangement for his or her salespeople when buying a home.

Example Summary Technique #13

Borrow the Real Estate Broker Commission

 

What You Need To Begin:

A broker or agent who is willing to give up commission until a future date, a listing broker or real estate agent is best.

 

Summary Of Terms:

Broker's commission is usually 5% to 7% of the purchase price.

 

 

 

 

Procedures:

  • Initially offer the broker a portion of commission or part ownership.

 

  • Offer broker a note for a slightly higher amount with interest and a payment schedule.

 

 

Results:    

  • You have alleviated the need to put 10% down at closing. This is a true no money down deal.

Specific Situations to Apply Technique #13

 

The Property

Property Listed for Sale by Broker

 

The Buyer

No Cash at All

Lump Sum Cash Due Soon

Large Monthly Income

 

The Seller

Real Estate Broker Money to Create A Note