Realtors, Leases and Reality
Due to the rising costs of homes, combined with rising interest rates and a total lack of inventory, there’s now quite a few 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. Unfortunately, this is not a sustainable business model for a Realtor.
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 lease properties.
For reasons I will go into below, 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. Next, let’s take a look at the compensation.
The Compensation
For leases, 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 placing a client in a lease.
But here in 2023, 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.
Next, 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 gross. (minus a ridiculous amount of fees, levies and taxes).
-vs-
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. Consider signing the Exclusive Buyer Brokerage Agreement for him.
Second, be willing and ready to take a list of lease properties from your Realtor and check them out yourself on the Internet and then drive by them yourself in order to do the initial screening on your own. Driving by properties is usually all it takes to really cull your list.
Lastly, get your list of real potentials down to a reasonably small number, like 1-4 before you ask to actually go out and see these properties.
If both Realtor and Client 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. Thanks!