SHORT SALE FLIPS & REALTORS -need input!

[Tim Silvers]

I have an agent with whom I've had a long term (past) working relationship for several years. 99% of her business is (no surprise in this market) short sales as a seller's rep. I, of course, am wanting to find a way to profit from those deals by doing flips while giving her the ability to increase her commissions by listing and then reselling the properties.

After my brief pitch, she was quick to explain that she is a very hands-on 'relationship person' with her sellers from start to finish and does all the negotiating with the lenders directly. She had never heard of short sale flips, transactional funding, or end buyers. When I explained how it works she was quick to say the following:

- "I don't see how the banks would let you profit, for one, plus they aren't willing to take less than the BPO in my experience."

- "I would never list the seller's property for more than the market value and, in fact, I always start listings at below market to move it as quick as possible to get as many offers."

I told her many investors start a bit above at first to try and create enough of a spread for selling to an end buyer. If no bites, then the price is lowered every week or so until there's an offer. She couldn't understand why and said "that's completely backwards".

Speaking of which, since I'm new to flipping, and haven't yet closed a deal, what do you investors tell your agent to list at? I'm assuming a bit over market to weed out the possible bites that might give you a bigger spread you'd otherwise miss out on had you started with a below-market listing? In other words, do you recommend starting the listing above-market and then dropping it at certain intervals?

She then stated that she felt an above-market listing would be a disservice to her seller, namely because it puts the seller at an increased risk of foreclosure, taking longer to move and increasing the likelihood of going further into default.

She was adamant about wanting to maintain strict control of the short sale process even though I explained she could be making much more by leveraging her efforts and handing the short sale negotiations to me, thus freeing up her time to take on more listings.

She again explained she works very diligently to build a hands-on relationship with desparate sellers, so it's a shoe-in for her once she gains their trust.

She also felt that most agents interested in doing these deals would want a piece of my spread. I said that's not legal as far as I know. All an agent's entitled to is a commission on the front (seller) and back end (end buyer - if they find one). I would think it's violation and a direct conflict of interest for them to get a part of the profit from the deal. Can anyone clarify this?

I just need to come up with some intelligent responses to these concerns.

Suggestions?

[Marcus Mccray]

From what I know they are one in the same. You can use transactional funding to close the A-B portion of wholesale (back to back closings, double escrows, and/or assigns) deals.

Its actually better for her to be the contact with the bank and seller especially if she is experienced in doing so. Let her earn her commission and do the heavy lifting, you just be the buyer and have her submit your low ball offer to the bank and negotiate from there. The only time you have to worry is if and when the listing gets a higher offer besides yours. When the bank does approve a price and if there is still enough profit room, have her immediately remove the listing from the MLS and/or relist it at your selling price. Meanwhile you find your End-buyer for the B to C portion of the deal and offer her another 2-4% commission for helping you resell it. The trick to these deals is getting your offer accepted by the bank low enough to leave room for a propfit after your closing costs ie escrow, title, and commissions if going through a Realtor. If there is little to no room for profit after the short sale price is approved you don't have a good deal.

Hope this helps!

Give me a call or email me! My business partner and good friend is out in Vegas! Maybe you guys can get in touch and put some deals together. We used to work in the same real estate office, well we still do except he moved out there and visits back here every month or so and I am still at the office.