creative FSBO ?

Question

I have read mixed reviews about sites like forsalebyowner.com regarding their flat fee MLS listing service. I read in another post that giving an agent just 3% deters them. BUT doesn't the buyers agent split the commission anyway?

Here's what I was thinking (because I studied marketing). My partner and I really don't want to cut 6% out of our profits. Say we listed on the MLS- one of the flat fee services. We would also market to area real estate agencies. And in particular form an agreement with a friend that is a realtor, ie: if he brings the qualified buyers that ends up closing, he would get 3.5%. We would do the open houses and the rest of the marketing to drive traffic. Being that he would be using his agency, wouldn't he be able to keep the entire commission for himself and not have to provide a cut to his office?

I thought this would make sense as the after rehab property we put on the market in our area will not have much competition- it will be one of maybe 6 other properties that could be used as comps. And the advantage over those houses is that ours will be up to date- while most of those are still stuck in the 1950s!

Any thoughts?

Deyano M. · Answer

Very interesting!

How does a listing agent typically react if you come in to buy a property and are licensed? Do they frown upon that?

In the meantime, I probably won't get licensed for the first project. Do you have any other tips or thoughts to consider?

Deyano M. · Answer

thank you!!

Dick Green · Answer

I received you e-mail....currently I'm unable to respond from the box.

One good way to purchase forclosures is to negotiate with the owners prior to the foreclosure sale.  There's so much data on the net, I can't vouch for all of them.  Here's a few that I feel comfortable with.  One of the sites will answer your questions about broker requirements.
http://www.firstpreston.com/
http://www.uslandco.com/
http://www.thomas-law.com/mtgbrokers.html

Hope these will answer your questions.

Deyano M. · Answer

Thanks Obi-Wan! May the force be with you too!!

Dick Green · Answer

That makes good sense to me.

Sounds like you have a good overview of the area.  I believe you and your partner should do well.

Deyano M. · Answer

Thanks Obi-Wan....

Yeah- I have a realtor friend who I ended up getting into a conversation around this subject and he agreed- a buyer is a buyer.

Ok- only one problem with investing in "my area". I live in Essex County Massachusetts, ie: near Boston, Camridge. Just rated most expensive place to live in the US of A!!! Why? A combination of salary averages mixed with the cost of living, taxes, and price on real estate. A single family here is $300K. A single family where we are looking to invest is $120K. The area we have targeted is where we grew up- so we know it well, and has better projected revenue for us- the area is growing and alot of commercial investors from NYC are putting money into the community: parks, arts/crafts store fronts, cafes, restaurants. It is a historic area as well.

Does that make more sense?

Dick Green · Answer

How does the selling agent react if they discover they are dealing with another realtor who is purchasing?

There's three major ingredients to a transaction:

1.  Buyer
2.  Property
3.  Money

The qualified buyer is in my opinion the most important ingredient.  In other words if they really want to sell they don't care.  I would also recommend starting out in your own city rather than out-of-state ownership.  They are generally more risker and harder to manage.

Dick Green · Answer

As mentioned there's pros and cons to being licensed.  One of the dis-advantages in licensing is having to make certain disclosures to perspective sellers and buyers.  Another biggie is fuduciary responsibility to whomever one is representing, whereas not being licensed one is able to take advantage of a given situation without recourse.  Just to name a couple.

As to advantages......there's access to mls and other reports to find great deals.  The other is being able to increase commissions in a transaction and either apply them to the purchase or take the cash.  On the purchase of my last home I paid myself $30,000.  Also, I don't know what the laws are in your state but, in Texas licensed agents are allowed to conduct what is know as NET SALES.  Which means i.e.  lets say the seller who you are representing is selling a property for $100,000 and that's all they want.  The seller knows the property is worth more and is willing to allow you to make the difference in commission or use the difference to facilitate a sale on the property.  Let's also say this same property is worth apprx $145,000.  As long as you disclose the values and what you intend to profit from the transaction, it's perfectly legal to net the difference between $100,000 and the sale price of the home.

Deyano M. · Answer

Thanks for the advice...

Ok- a couple of things.

1)I tip very well at restaurants because I managed one when I was younger- worked my way up in the ranks of the industry. Touché

2)That analogy doesn't quite compute for me. The way I see it, in some cases, the selling agent will get much less than 3% (given the scenario that there is a buyers agent and selling agent). Our friend that is a realtor said that is usually the case and we actually got the idea from him. He said he would help as much as possible with the FSBO. Not sure if he is trying to leverage working outside of his office in some way, but if we were to list it with him and a buyer comes in from another agent, he is getting less anyway. But I do understand your point. Of course ideally, he would want to list AND find the buyer.

I'm looking at it purely by numbers- cutting an extra $8K off the top is tough- especially with a partner. We are doing this to make money (obviously).

We have thought about one of us getting a license and I think that is something we will pursue in the future. One issue is that we are both out of state (from where the property is.) The other problem is finding the time away from our day jobs to find a buyer. But logistically, getting a license does make sense. So you are saying Obi-Wan that if I had my license, I can buy a property and take a nice 3% off the top in the deal?

Any other suggestions or thoughts- I am open to them...

Thanks again!

Dick Green · Answer

Just a thought.....There's a way to get around sharing your profits and still utilize the multiple listing service.  Take a little time and dough then one of you obtain a Real Estate License.

There's pro's and Con's.  But it's a great way to gain access to mls and juggle commissions on sale and purchase transactions.

i.e.  I make money when I purchase or sale a property.
.....just a thought