Realtors, Leases and Reality

by admin on February 20, 2011

With so many short sales and foreclosures the last few years, there’s now a flood of people out there looking for leases. Not a single day goes by without someone calling or registering on my site, looking for a lease property.

I literally could spend all day every day working with lease clients if I chose to. But there’s a little problem with that and it’s called going out of business.

Nobody seems to know or care how a Realtor gets paid for a lease, or if we even get paid at all. Folks just call right in and start firing off the questions and asking to go see properties.

Well, for reasons I am about to divulge, that’s not going to work. So let’s clear the air on using Realtors to find leases, and figure out how we can work together.

The Work Load

First, finding a lease property for a client is often just as much work, if not more, than finding a property to purchase.

In fact, clients making a purchase are typically much more picky than lease clients and will actually consider fewer properties. On the other hand, lease clients can consider just about anything due to the short term nature of a lease. “I wouldn’t buy in this area, but I can certainly lease here for 12 months….so let’s take a look at all of them…”

Sounds like just as much if not more work than finding a purchase property. What about the compensation?

The Compensation

Instead of a commission, there is a “co-op” fee that gets paid to the Realtors involved in a lease. Back in the day, this co-op fee used to be one month’s lease payment. Half went to the leasing agent and half to the buyer’s agent. Nothing that pays the bills, but you could make $500 or $1000 maybe. But here in 2011, with everybody squeezing everybody, co-op fees are more like a flat $150 or $300, or some small amount, even if the lease payment is say $3500/mo.

Let’s compare a Realtor working with a lease client to one working with a purchase client.

The Comparison

Realtor shows 25 houses over two weekends to a client that purchases a $400k home. Realtor makes $400k x 3% or $12,000 (minus a ridiculous amount of fees, levies and taxes).


Realtor shows 25 houses over two weekends to a client that leases a $400k home. Realtor makes $350.

Huge disparity. This means that if you are asking a Realtor to give up weekends and time with purchase clients to work with you, a lease client, please be aware of what you are asking for and adjust accordingly.

The Solution

Tell your Realtor that first off, you working with him and will stick with him, and only him, until you find a lease property. Basically, you going to protect his whoppin’ $350.

Second, be willing and ready to take a list of lease properties from your Realtor and check them all out yourself on the Internet and then drive by them yourself in order to do most of the initial screening on your own.

Lastly, get your list of real potentials down to a very small number, like 1-4 before you ask to actually go out and see these properties.

If everyone understands the dynamics of leases, and it’s all on the table, then most Realtors will be happy to assist you with a lease property.

Oh yeah – one last thing. Trying to talk home sellers into becoming landlords and leasing is a giant waste of time for ALL parties involved, trust me.

Oh yeah – one more last thing. Offering to pay $2000/mo for a $2500/mo lease is not going to work. I once saw a $4000 property go for $3900 but asking for the discount also raised the ears of the owner and put the whole deal under a microscope. Think about it.

Ok, I think that’s it.

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{ 1 comment }

Mike Payne March 10, 2011 at 3:19 pm

Thank you, Rob, for publicly having the guts to say this. It is NOT that (most) real estate agents are greedy, choosing buyers over tenants. Instead, it’s where is our time better served.

Further, you are 100% correct about time invested to help a person pick a rental. I think what really rubs me the wrong way in the times I’ve chosen to help people find a rental is that they “picked my brain,” asked me to review all kinds of paperwork and show myriad properties, only to cut me out of the $350.00.

I agreed to help; I counseled these people as best I could; I showed properties; and they signed a lease behind me. They didn’t understand why I was upset. I guess they didn’t see how not getting paid for one’s work is a problem. I’ll bet they would be upset if they worked 1, 2, 3 or more weeks and their employer chose not to pay them.

In the Sarasota, FL, area we too are besieged with lease/rental requests. As much as I want to help people, the rental market changes more than the distressed property (REO/short sale) market.

On the phone, I make time to caution people calling about rentals, as rental market unfortunately includes unsavory characters trying to scam people…but this is a whole different topic.


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