I think my market has stabilized, but values haven’t begun to increase yet. I haven’t purchased anything since my last 1031 in the winter of 2007. I have acquaintenances who have cabin fever and are anxious to get back in the game. I threw out an idea to an unlicensed investor and he thought it may work. I keep my appraisal and broker license active to fill in the gaps. If I represent him as a buyer agent and waive my commission and take fractional ownership of the property he would like that better than paying me a commission. On typical listings it would be 3% of ownership and for FHA foreclosures it would be 6%. For land it will usually be 4-5%. For multi-family properties we would negotiate something. Does anyone see any flaws in this?

I would want bigger margins than that for going fractional and waiting for your money.

3% of fractional ownership is not the same as cash commission. Your fractional share of the property is not liquid. What would you do if you want to cash out? Do you plan to use your faction of the property? You may be better off with a commission payment even if it means lower. If you own 20% for the fractional ownership, that is a different story. But 3% seems low and it doesn't give you much use of the property.

What about creating a note for your commission and charge interest on that note for making you wait for the commission to be paid out? The downside is you would be behind the mortgages in terms of priority.

At what point would you go on title for 3% ownership? Some lenders may require disclosure of all parties going on title at the time of the purchase, and some might require all parties going on title to also be obligated on financing. If your friend is doing a 1031, I don't think you can join in ownership. I don't profess to be an expert on 1031s, so if I'm wrong, someone please clarify.

I should have clarified a few things. The investor(s) will only be using me for my license. They will doing their own legwork and research, they’re competent and don’t require babysitting, I’ll simply write the contract and offer advice. I’m content for my portion to be long term. I anticipate most of the deals will be raw land which will be cleared and subdivided and developed within 3-5 years given the current climate. Any SFRs will be long term rentals. I’m only looking for another way to fill in some idle time until this “market correction ends. For the time being I’m only appraising foreclosures, I have no desire to buy any until things bottom out. Thanks for the feedback.

I would renegotiate that deal.

I personally wouldn't do it-the choice is yours to make.

In my area the bank (seller) will not pay a commission to the buyers agent if they are the buyer. Because I would have a financial stake in the deal, I would have to disclose the fact. The buyer is not paying the commission anyways so why not write the contract, get paid, then invest in the investors company?

I personalty wouldn't do it just because 3% ownership is so small you'll never get a substantial amount even in a booming market. but i can see it being a favorable deal, pay zero down, zero interest, receive the benefit of appreciation, and down side is just the commission on one sale.

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