How can I lift any foreclosure-related burdens from my realtor?

Question

As an investor, how can I lift any foreclosure-related burdens off my realtor? She’s very knowledgeable with useful connections, however prefers luxury, high-class properties for obvious reasons (higher profits for her). Our previous deals were mostly solid turnkey units, and foreclosures would be new for me and I’m more than willing to do more legwork to secure good deals. I’m just not sure which aspects require a realtor and where I can really take the lead without stepping on toes. Many thanks!

Account Closed · Answer

Well, I don't know the specific laws that Illinois imposes but there are some federal laws and in some states like the State of Washington, you can be jailed for mailing to people in foreclosure. Seems extreme but that is what it has come to. Now granted, most states aren't quite as "progressive" as Washington but you have to do your research before you start. It gets a little complicated unless you know at which point you want to buy the property. There is Notice of Default, "pre-foreclosure", bidding at auction, REO (after the bank gets the property back.) You need to decide what the law allows, (talk to a local real estate attorney). You need to know your exit strategy, how much money you want to spend, most foreclosures have seriously deferred maintenance so how will you take care of that, how will you determine how much money you need to do the project, how long it will take, what if redemption is allowed in your state, what if you have to evict, and on and on. It can be done, but there are simpler ways to make a lot more money in this market. Foreclosures will come around again in a few years but this market is best for "off market" deals not foreclosures. If you stumble upon one, that may be different but know what you are doing before you commit yourself.

Mykia Long · Answer

Thanks for sharing, Mike! I agree on the meager profits for agents with foreclosures, and it's merely an interest for me at this point. I typically search for my own listings (non-foreclosures) and only contact my realtor for tour scheduling, drafting contracts/etc. I saw a potentially good foreclosure deal and I'd only pursue it if I could help move things along since it's not much in it for my realtor. You mention new laws making it more risky - do you think there's any potential in foreclosures today? Also, which type of foreclosures should I avoid and which might offer more potential than others?

Account Closed · Answer

There isn't much money in foreclosures for real estate agents. Anybody in foreclosure hasn't been paying their mortgage and normally that eats up all of their equity. As such, they have no money to pay the realtor at closing. So, perhaps you can get a list of foreclosures from your realtor, do the marketing and only involve her if you find a deal that can make you some money. Tough to do foreclosures, but I made my first million doing them back in the 90's and 00's. I don't do them now because they are risky with the new laws brought in after the 2008 crash. But, to each his own.

James Wise · Answer

Have her put you on an MLS feed. If you want to lessen the burden on your Realtor you can do so by doing a lot of the online research yourself & only ask to look at the ones you are incredibly interested in. Another option is to offer her more compensation so that it's worth her time. These options may or may not sway your Realtor though. It just might not be what she's willing to spend her time on. Many successful agents work themselves into a position where they only do the specific work that they like to do.

Ron S. · Answer

My two cents is there is plenty of money for realtors in selling properties at some point in the foreclosure process, prior to sale. The trick is for them to sell it prior to sale. If it's a full payoff to the lender, the lender has no say so in the amounts paid to the agents. If it's a short sale, that's another story but I wouldn't shy away from foreclosures thinking there is no money is it. That said, I wouldn't engage a realtor without extensive experience dealing with sales of properties in foreclosure. That isn't the world for the agent to learn on the job.I'm not discounting the necessity to ensure you are in compliance with the local/state/federal laws but as a realtor, the assumption is that they know what they can and can't do as far as marketing is concerned. Marketing specifically to borrowers facing foreclosure DOES have some very strict rules in many jurisdictions/states and has very few exemptions for those soliciting.

Mykia Long · Answer

Solid advice, Mike! Thanks again.