Chapter 17: Realtors What Makes Them Tick

Chapter 17:

Realtors ? What Makes Them Tick

. . .

"First things first: Real estate agents and brokers post their properties for sale in a centralize data base called the "Multiple Listing Service" (MLS). Any agent or broker can sell any property posted for

sale there.

When a property is posted on the MLS for sale, it's called a "Listing."

The real estate agent that lists a property for sale represents the seller (seller's agent).

Other agents are called the "buyers Agent" or "buyer's representative" You guessed it, they represent the buyer.

Real estate agents are required to work under a licensed real estate broker (If they are not a broker them self).

Typically, the commission for selling a house is 6%. It would be price fixing if all brokers set the commission at 6% so the commission is always negotiable. However, more often than not the fee ends up being 6% of the sales price. Go figure!

Real estate agents work together; or at least they're supposed to. It is very common for one agent to list the property for sale and for another agent to bring in the buyer. In such cases, the commission is split 50% - 50% (3% each).

IMPORTANT! If the agent that lists the property for sale also sells the property, they get 100% of the commission (less whatever they have to pay their broker of course).

In almost every case, the broker gets a cut from every agent working under his license. This cut is anywhere from 50% on down. Some offices have a sliding scale; the more an agent sells for the year, the less they pay. There are some offices where the agent simply pays a rental fee for their desk and use of the facility and equipment and share in the expense of the secretarial help. In other cases, the agent keeps most, if not all, of the commission but there is little support if any. The agent is on their own.

IMPORTANT! When an agent or broker withholds or delays listing his customer's property for sale on the MLS system, it's unofficially called a "Pocket Listing." Generally, it's a lucrative

deal that the Realtor feels certain he or she may already have the perfect buyer for. It may be a deal so good that they are certain they can present it to a handful of favorite customers and sell quickly. It is ethically wrong and against Realtor standards to pocket a listing but it happens all the time. Among other reasons, agents and brokers have been known to pocket listings because they want 100% of the commission (both sides: the listing side and the selling side).

Now that we know how the real estate agent game is played from the commission angle, let's look at how to effectively work with agents to achieve your goal of buying houses at bargain prices.

#1. If you want to make a lot of low-ball offers through a buyer's agent (an agent that represents you as opposed to the seller), you're probably going to have to team up with a young, aggressive agent. The theory is that young agents don't have a lot of business and thus they have ample time to work this angle. And it's true. It's a lot of work and typically seasoned agents aren't up for playing the lottery in this fashion. Seasoned agents should have their share of high potential customers already in place.

Choose listings that have been on the market for a long time (90 days or more) or that just hit the market (minutes ago), check the "Days On Market" (DOM). Remember, not only are you making low-ball offers 30-50% less than asking price, you're also asking the listing agent to split the 6% commission with your buyer's agent (3% each). Expect to buy 1 out of 35 offers and you won't get discouraged.

#2. If you see a for sale sign in the front yard of a house, try to get hold of the listing agent. If the listing agent sells the house they will get both sides of the commission (100%). It's a natural state of being; people work harder, and pull stronger in your direction, if they are going to be paid double. If you buy the house from the agent that listed the house, the agent gets both sides of the commission ? 100%. It makes it worth the listing agent's time to be enthusiastic about your low-ball offer.

#3. Taking in consideration #1 and #2, let's see if we can't optimize our results when we choose to make mass amounts of low-ball offers by:

Gaining access to MLS. Set up a cookie-cutter operation for making offers.

Making the offers yourself, without an agent representing you. If you have a license yourself, exclude yourself from the commission and leave 100% of the commission to the listing agent.

Presenting your offer/contract directly to the listing agent so they make 100% commission if the deal goes through.

I'm spending time on this because using the right system with the right angle works and it is very profitable. It's not easy. There is NO easy money. But you can get the art of mass offers systematized and streamlined to the point that a paid assistant can do much, if not all, the work for you. It is popular to use virtual assistants (Vas) from overseas these days. Many of them have a quite different pay scale than we're use to. I've seen VAs in the Philippines charge as little as $1/hr. I didn't negotiate that price. That's what they were offering!

When you get this system honed in correctly, you'll be busy looking at the deals that get accepted. Ooops, almost forgot to mention; you don't go look at these deals until your contract is accepted. In order to have this luxury you'll need to put a three to ten day inspection or feasibility clause in your contract that allows you to back-out without penalty or loss of earnest money.

On the subject of earnest money, make a copy of an earnest money check made out to the title company of your choice (use the same title company on every offer you make). Make copies of that check and put a copy with every offer you make. When a deal gets accepted cut a real check and run it over to the title company.

Finding the Right Realtor

Want to find the right agent for the job? Place an ad on . Your ad should read something like this:

"Real estate investor is looking for a dedicated real estate agent to make offers, offers, offers. Send your qualifications to Mitch AT

Put the ad in several different categories: Homes For Sale by Owner, Homes For Sale by Broker, Wanted, and in the Jobs section if it's free. DO NOT put your phone number, just an email address.

Do you remember the conversation we had about avoiding spiders and spam kings? Here's a little reminder.

To avoid spiders and spammers always manipulate your email address as shown below.

Mitch AT ...or... Mitch@MitchBuysHouses(.)com

Have the prospective Realtors email their qualifications. If they can't figure out what you're doing to avoid spam... they aren't qualified.

Never sign a contract with a "Buyer's Agent." If a real estate agent asks why you don't want to work exclusively with them, explain to them that you cannot survive off of one real estate agent anymore than they can survive off of one customer. However, you are willing to work with them on a deal by deal basis.

As an investor, you want to work with multiple Realtors but some Realtors will want you to work exclusively through them. You can't for several reasons. Most Realtors specialize in one localized area. They become proficient with a certain type of deal and stick with it. They are working with multiple clients and can't dedicate enough time to assure all of the best deals are found and passed on to you.

You can find investor-friendly Realtors several ways. One is by sending out an email to a large number of Realtors to see which ones show an interest. Another way is looking at the smaller

real estate ads without pictures. Realtors dealing in high-end properties are probably NOT your best bet. However, all Realtors should run across at least one or two great deals a year. Why they don't buy them on their own is a mystery to me.

Look for Realtors marketing properties in working class neighborhoods. Seek out Realtors marketing houses needing some work... properties needing elbow grease and/or are fixer uppers. They are most likely to understand and/or run across the investment grade properties you're looking for.

Once you find a Realtor with potential, you'll need to have a sit down meeting with them. You want to let them know precisely what you're looking for. You want a Realtor that decides quickly and is genuinely excited about working with you. And they have to understand, exactly, the task at hand.

Let Interested Agents Know What to Expect

Your agent is going to make lots and lots of offers, but, they won't be expected to run you around to every house like their retail buyers do. You'll drive yourself to the properties that interest you.

Occasionally, the Realtor will need to pull comparables but for the most part, you should know the basic values in the areas you're mining in.

For you, the relationship is mostly a lead generation platform. Make sure the Realtor understands that your offers will be low-ball offers and to expect plenty of rejection. You may make 50 offers in a month and only have 2 or 3 go through.

We used to promise Realtors that we would use them to sell the house. Agents love getting round trips like this, but times have changed. BE WARNED: Many of the MLS systems are now tied into the County Appraisal Districts and when you list your property at market price or higher...be aware that the tax assessor/collector may value your property at what you've suggested the sale price should be in your MLS listing. If you've got a very low tax basis, you may want to avoid listing the property for sale through an agent. If you're selling your properties with owner financing, then traditional agent /brokers are a bad choice to begin with. Most of them just don't get it.

Never ask for lower commissions. Agents and brokers typically have plenty of inventory and DO NOT need to sell a house that pays less. In fact, go the opposite direction. Since you are looking for houses at cheap prices, offer to pay agents that bring you a great bargain an extra $1,000 for thinking of YOU first! This will get their attention. I like to pay that $1,000 directly to the person who brings me a deal, agent or not.

Let's get something straight right now. When it comes to paying an agent an extra bonus, some will say that that you can't pay the agent directly. Most investors are NOT a member of the Realtor club. Most investors are not licensed, don't pay dues and are NOT subject to the rules and regs put out by the Board of Realtors or any other Realtor-related regulatory system. Investors, like you and I, have a responsibility to buy houses to feed our families. The agent's

obligations to his or her broker are none of our business. If an agent needs me to write the check to their broker instead of them, then they need to tell me so. Until then, I pay the agent, or anyone else who brings me a house for that matter, their bonus directly! We are a free people and we can incentivize whomever, as long as it is not a bribe to do something illegal.

What the ideal Realtor does for you: 1. Finds great deals you can't find on your own. 2. Provides a brief assessment of why it's a great deal. 3. Gives an opinion as to what repairs are necessary to sell the house quickly. 4. Makes prompt offers, offers, offers based on your criteria. 5. Follows up on the deal without you having to prod him or her. 6. Possibly provides you direct access to the full MLS as their registered "Listing Assistant."

Another Strategy for Finding the Right Realtor

Visit the neighborhoods you're interest in investing. Stop in at a few of the independent real estate offices. Explain to the agent on floor duty that you are an investor looking for an agent to work with that is intimately familiar with the local neighborhood.

Ask them if there are any agents in the office that work with investors. Often the floor agent will be willing to work with you or recommend another Realtor for you to talk with.

Sample Emails

Collecting email addresses of Realtors is super easy. These people want you to find them. I found that if the Board of Realtors exists in your town, that's where you start. First, ask if they have a digital list containing all of the Realtors and their contact information. If they don't have a digital list, ask for any list. If they don't have a free list, ask if they will sell a list.

If they have a website, go there and see if you can search for a specific real estate agent by name. If you can search for agents by name, try this: type in the letter "A" in the search box and hit "Search." If the website is set up like my city's site is set up, every Realtor with the last name beginning with "A" will pop up. Simply rinse and repeat "B" through "Z."

Don't give up, eventually you can figure out how to get a list of agents and brokers.

Hopefully, the agents' email addresses are included. If they are not included, you'll have to go the extra mile... and call each and every one of them to see if they would be interested in having you as a contact/client. If they're open to the idea, then get their email address by exchanging information with them. You volunteer your Name, phone number, and email first. After they receive your information ask them for their information. It's pretty easy and straight forward.

Don't do all this yourself. Sub it out to a private contractor. If the list has the emails, pay someone from India or the Philippines to put them all in a spreadsheet.

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