Tips for working with Real Estate Agents?

Question

Hello,

Newbie investor here.  My goals are to start out flipping and use the proceeds to build a rental portfolio.  Someone who has been in the business a long time (over 800 flips) told me that to get one deal, you have to analyze about 100 properties.  From those 100 or so properties that you analyze, roughly 20 might be worth making an offer on, and probably only one of those offers will be accepted.

My question is, how do I find a realtor who is willing to submit that many offers for me with such a low acceptance rate?  I want to flip 10 properties this year.  If only 1 in 20 offers that I submit will be accepted, that would mean that I would have to make 200 offers.  What real estate agent is going to write 200 offers for me on the chance that 10 will be accepted?  How can I make it worth their while?  Any tips for working with real estate agents would be greatly appreciated.  I'm not interested in becoming an RE agent myself.

Thanks!

Russell Brazil · Answer

Id suggest getting your own license in this instance, or consider paying an agent per offer.

Jacob Wathen · Answer

Hello @Deann Stevens,

I would suggest working with a hungry new real estate agent. One that has little experience but knows the market well and understands real estate investing. They will be more willing to spend the time with you to put in a lot of offers. They will establish a template for just you and make it an easy process.

I will say you won't end up putting in 200 offers because a realtor will be able to communicate with the listing agent and determine if the seller will consider a low ball offer prior to submitting it. That will save the agent and you a little bit of time and help to preserve the agents' reputation. That will in turn help to preserve your relationship with the agent.

I do agree that it may benefit you to get your own license like @Russell Brazil mentioned. If that does not make sense with your life then I would definitely try to find an ambitious newbie.

I have a couple clients that ask me to write offers on every single distressed property they see. The problem is there are so many other investors in my area (Portland, OR) doing the same thing but they have a lower reno budget and are able to be a bit more competitive. That being said, one of the most important parts about making sure you can be as competitive as possible is to make sure you have a team of workers that you can trust to do the work quickly and for a decent price. A realtor should be able to help you build a team if you do not have one already.

Jacob Wathen

Chinmay J. · Answer

Easy there... Direct Mail is not as easy as it sounds. It requires a good budget and consistent effort to get results. Study shows that most people respond to DM after 5th attempt or so.  The money spent on direct mail in first couple of months alone would be more than enough for you to get our license and access to MLS.  If MLS can be exploited in your geographic area, you should go ahead and give it a shot, either by getting your own license or finding a savvy realtor willing to work with you.

Another option you can do is go to Zillow and look for FSBO properties (For Sale By Owner). They don't typically show up on MLS. Contact the owner and ask for a meeting/walk through of the property.  Look for DOM (Days on the Market), which will tell you how long the property has been sitting there. In sellers market like we are in right now, the sooner you act the better.

Last thing I want any newbie doing is spending a bunch of money on Direct Mail, then getting frustrated and giving up.

Deann S. · Answer

@Chinmay J., @Jacob Wathen, @James Maradits, thanks for the additional suggestions.  I'm taking notes!  I hope to be able to post about the acquisition of my first project before too long.

James Maradits · Answer

Make sure you understand the market well and are realistic with your expectations.  If you're asking the realtor for comps, repair estimates, etc for 100's of properties they are going to get burnt out real quick.  As an investor you should be able to come up with a lot of these figures on your own.  Also understand that asking a realtor to preview and write offers for dozens of properties, only to occasionally receive a measly $500 commission on a low buck REO property isn't likely going to keep them around.  You may want to find an additional way to compensate them for their time.

Throwing out extreme low ball offers on properties that just hit the market or already have multiple offers is a waste of time, but still for some reason people don't seem to realize that.  You might get a low ball offer accepted on a property that has been listed for weeks with no activity occasionally, but if it just hit the market and has tons of activity it is unlikely that the seller is going to hear a lowball offer.

I have no problem submitting offers if the buyer can provide proof of funds and has reasonable expectations.

Andrew Johnson · Answer

@Deann Stevens I think I'd ask your 800 flip friend if these are MLS offers, cash-offers through their own marketing, if they have their own license, etc.  I think things are a little different if you (for the sake of easy numbers) sent out 10,000 mailers, had a 1% response rate, giving you 100 conversations (i.e. properties to analyze), make 20 verbal offers, and close on one property.  That's a materially different scenario than pulling up 100 properties on Trulia, finding 20 you like, and have a realtor write-up 20 offers at 30% below market.  If you do the latter you might end up with zero accepted offers :-)

Chinmay J. · Answer

@Deann Stevens -  Just to piggyback back on what @Russell Brazil has said.. Its definitely worthwhile getting your own license.  You will not only learn a lot about real estate when studying for the exam, but also will be able to save great deal of money in commissions to other agents. 3% on the buying said can be applied to your closing costs. 3% on the selling side can be saved when you list the property for sale.

Total savings of 6% would mean the difference between profit and loss on a particular flip.

As  a side note, if the property doesn't sale quickly or at a price you want, and you want to keep it as a rental for the time being, you, as a realtor can list your property for rent on MLS without paying the hefty commission to the agent.

Aaron K. · Answer

As long as you are realistic in what you offer you should not have any trouble working with an agent, ask your agent if what you are offering is reasonable, if not maybe you need to raise the standard for when a property goes from something you evaluated to something you want to write an offer on.  For example if 20% below asking is what you want to offer and your agent tells you this is not realistic maybe only offer on properties where your numbers are 10% or 15% below asking.

Deann S. · Answer

@Andrew Johnson - another great strategy - direct mail.  I have a lead for someone who creates lists for investors.  I don't know why I'm so focused on the MLS :)

Tips for working with Real Estate Agents?

Most Popular Reply