Sell flip myself or have friend/realtor list it?

Question

Hello BP,

Would like to get your opinion on a situation I am in.

I am currently flipping a house that will be a turn key ready product in a great neighborhood. The inventory in this area is (like everywhere else) very low. I believe it will have buyers ready to make an offer once available because I will price it slightly under market value at $175,000. I got this property directly from the seller thru direct mail.

I do not have my license but I know that I could market the property myself (flyers posted locally and craigslist) and try to secure a buyer. That is my plan while we are doing the renovations. I want to build a list of potential buyers and then when the renovations are complete, I can have an open house for these people and they would get first shot at it. I would be saving $10,500 by selling direct to buyer.

If I don't find a legitimate buyer with that plan, then I will list the property with my realtor who has also been a long time friend. I have told him this and he understands where I am coming from.

Here is where it gets tricky:

- I also know a lot of other realtors in the area that perhaps have buyers for this home. Should I reach out to them and offer to pay 3% commission if they bring a buyer to me? I feel my friend would be upset with me if I did that, but in all seriousness its about the bottom here. Saving the listing 3% would be $5,250!

What would you do in this situation?

Thanks BP!

Robert Wilson · Answer

Chances are the FSBO buyer wants to save commission too... So your net savings might be negligible and while your hassling with selling the property... You could be out finding another deal.

It all comes down to what is the best use of your time.

Dean Carlson · Answer

You're an investor...that's your job and to keep that job you need to make as much as you can on each deal.  You are entitled to earn as much as possible because you're the one that did the work to get the property, you took the risk in buying it, and you should reap the greatest benefits for your efforts.  Don't concern yourself with a friend with a license, they are a dime a dozen (at least in California).  Did your friend offer you a significant discount on commission because of your friendship?  If not - you are putting more value on your friendship than your friend has.  As a real estate investor you need to make as much as you can on every deal because you don't know how big of a loss you will take on the next one.  You're occupation is hazardous, you deserve every cent you can get.

Here is what I would do in a low inventory market: Make an email to promote the property, and offer a 2.5% commission to the buyer's broker. Take the opportunity to promote your brand while you're designing it.  Send it to every agent in your area, post it on craigslist and call the most active agents in the area.  If they have clients that are looking and they can't find something for them in the MLS, they have the opportunity to not only make a quick sale, but also look like a hero to their client.  You may also pick up some other opportunities in the future because of the branding and phone calls.

If none of that worked, then you probably are not really in as hot of a market as you thought, so you better get it into the MLS.

Jennifer Lamb · Answer

Hi @Charlie John

I'm in San Diego, CA. Most agents who represent investors as buyers receive the re-list on the property but often times are willing to re-list it for a discounted commission.

For example, say I earn 2.5-3% when my investor client purchases a property and my commission is paid by the Seller (no money out of investors pocket to pay me). I may be willing to re-list for my investor at 1% to myself and 2.5% to the buyer's agent because I understand your profit margins and I didn't have to go out and search for the listing. However, there are expenses that I would not be willing to cover at 1%, like staging.

If I represented an investor on the buy side with the agreement that I would re-list the property and the investor decided not to use me for the re-list, I would be less likely to bring that investor the next deal I came across.

It depends on what you had previously agreed to with your friend/agent.

Best of luck!

Lacey S. · Answer

Personally, I would not recommend you listing with a friend - ever. It's bad to mix money and friendship because of situations exactly like this. Since you already discussed it with him, I would say you could list it online/MLS FSBO with 3% buyers commission (in a hot market that is probably enough for a sale) but would probably stop short of actually calling other agents to promote it that way. He will find you did that and might be offended.

However, after this sale I would tell him that you don't like to mix business and friendship and that you will either FSBO in future or use another agent but will definitely refer him when anyone you know is looking for an agent.

John Casmon · Answer

@Charlie John A better approach would have been to tell your friend to bring you a buyer and he will get the full commission. Btw, you decide what the commission will be. Give him the first shot at bringing you a buyer, then open it to other agents to bring you a buyer with your last option being to list on the MLS with him.It's important for your friend to have an incentive to actively help you get it sold as opposed to just waiting for the listing.

Bryan Chavez · Answer

The MLS is definitely the best way to market your property.

I believe the best option would be to go with an open listing as oppose to an exclusive right to sell. Which is probably what your friend will try to execute the contract under. An open listing is basically an option that reserves you the right to sell the property yourself. Your friend will still be able to list the property and other agents will still be able to present offers. In simpler terms, whomever the procuring cause is will be entitled to the commission.

Hope this helps and good luck!

Lolita Ellis · Answer

Well Said- @Stephen Hundley and a few others. Flat fee is always considerable and Im sure your friend wont mind sharing any new leads that may come your way. As this is a marketing strategy for the both of you. Plus you could be out looking for home instead of conducting showing, making appointments for inspections, appraisals, title work etc. There is a low more that goes on behind the scenes then just placing a home on the market...... Buyers tend to get emotional too by having a lot to deal with and understand. I think its a good idea to have that barrier.

Stephen Hundley · Answer

If your friend is a top agent, then list w him. Sometimes listing flat fee does more harm than good to your house and top agents still won't show bc it's Fsbo. Use the time you save to find more deals

Charlie John · Answer

Thanks guys!!

Sell flip myself or have friend/realtor list it?

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