Getting your first deal done

[Will Barnard]

I created this thread from questions and answers via PM from another BP member to me and thought it was good stuff for all to read, so here it goes:

This first question stems from another post which can be found here:
http://www.biggerpockets.com/forums/67/topics/37607

"I'm searching for my 1st deal and I've been reading a lot of your posts and have learned a great deal. I hope to learn more from you as time goes on. You inspire me with all your wisdom, success, willingness to help others, etc. Personally, one day I would like to be in your shoes. "I will do whatever it takes."

If you wouldn't mind, I had a question on one of your post:

Greg -

In some markets this is impossible...the banks are refusing to allow the REO listing agents to provide "pocket deals" (deals that never hit the MLS) to their clients or investors.

Originally posted by Will Barnard:

Not in my market and how can a bank know or prevent a broker from telling me about a property located on 123 xyz st that is currently occupied but will have the eviction process happen soon? How can the bank prevent or know that the broker gave me the lockbox code immediately after the eviction so I can do my walkthrough inspection BEFORE anybody? The fact is, I do this every week, sometimes every day.

"How do you find the right broker or asset manager you are speaking of? How do I find REO listing agents that will work with me when I don't have a license to do all those things for them as J Scott mentioned? How would you advise me to go about networking and getting in touch with these people? What do I need to do for them in order for me to get the same access as you have with your brokers/agents/asset managers?"

[Will Barnard]

My answer:

"Regarding track record when speaking to REO agents. I don't recommend making up a lie, however, I do recommend (and did this when I started out) controlling the conversation to avoid such specific questions. Here is how I did it:
I am a rehab flipper and was looking t your listing on 123 ABC St. I am liquid at this moment in time and am looking for my next rehab project. I have $_____ in cash readily available.
By stating this, you have avoided the inevitable question of "how many deals have you done?" They just naturally assume you have done many when you say "I am looking for my next project. Not a lie, you are looking for it and you never stated you had done any before, but it is perceived that you have.

It also sounds as if you are in a tough market. For deals under $100k, I recommend you never go beyond an all-in cost (acquisition + Rehab) of 70% of exit value.

As far as working with more than one agent, of course you can. You are not looking for buyer's agents to represent you; you are going direct to the list agents who have the REO listings and letting them get both sides of the commission. In doing so, you can work with 100 different agents that way, and there are no legal violations or ethical violations.
As far as getting the real comps, you DO NOT get that from the REO agents. Of course many will toss out what they think the exit value is, but of course that is often miscalculated and often overly aggressive. You only get that info from your own due diligence and that of your ONE agent on your team that is YOUR selling agent on the back end when you flip the home. That agent is giving you the number that they feel will bring a quick sale on your exit. They have no reason or benefit to embellish that figure; otherwise they lose business if you can’t make money.

The REO agent is not the one who lists for you on your re-sale, that is your ONE agent. The REO agents get the double ended commission on the front end when you buy because they get the list side and buy side of the commission paid by the bank."