Why use a realtor to make offers?

Question

I've done some wholesaling but I'm considering transitioning into buy and holds. I have a couple of questions about one of the strategies commonly discussed on the show and in the forums. Brandon Turner recommends finding potential properties, running the numbers, and then placing multiple offers a day/week. I know the common practice is to use a realtor to place these offers. Is it necessary to use a realtor to place these offers? What's in it for them on a buy and hold? I know on a flip you can give them the listing when you go to sell but why would they do it on a buy and hold? If you're asking them to write up multiple offers a week I assume that takes a decent amount of time on their part. I want to provide value to the realtor as well, I'm just not sure how on a property I'm not reselling. The second part of my question is why can't I just call or mail an offer to these owners myself? I am probably going to look for properties on Craigslist and I'm constantly driving for dollars list so I'm not going to be using the MLS at this point. Does the use of a realtor give my offer more credibility, is it illegal or unethical not to use a realtor?

Millie H. · Answer

Hi @Rick Pozos, @Andrew Johnson, @Russell Gronsky, @Steve Vaughan, @Fred Heller, & @Matt Shope, We make our offers both with agents and on our own. We have found it important to be very straight forward with agents when making a ton of offers that this is a numbers game and that having a solid system is everything. Our agents create templates so we can simply change the property address and offer amount for each. We know that our of X properties, X will be accepted. We don't want to work with an agent that is going to give up after the first couple of offers. We give our agents bonuses. For example, if the accepted contract turns into a fix and flip, the agents earns the buyers commission, a 2-5k kicker for taking pictures through the rehab, and has the relist. If the property turns out to be a wholesale, we pay a 10% kicker of the wholesale fee directly to the agent by check. We have agents that earn 6 figures a year just from the wholesale bonus. It has to be a win-win-win for everyone so as long as everyone is incentivized and on the same page it all works out. We work in several different markets and found it easier to recruit agents in markets like the Midwest rather than the West Coast. We currently have properties available in Indianapolis, Atlanta, and Fort Worth that agents are happy to work with us on. We will be wholesaling about 70% of the properties that we currently have available.

Steve Vaughan · Answer

The realtor that presents your offers and represents you is paid 2.5%-3% generally for doing so by the seller. That said though, they want to make sure they are dealing with a qualified, serious, realistic and decisive buyer. Carting around someone not all 4 of those things would not be worth it.In theory, it costs you nothing out of pocket to have a buyer's agent, but for those of us that go solo, it gives us room for more concessions. I'd use a realtor if I was newer though for sure.Nothing unethical about not using a realtor for direct dealings with off market owners at all. There's more risk for new buyers, but not a moral issue. If you know how to price properly, complete and adhere to standard state PSAs, contingencies, disclosures and addenda, open escrow and prove you are financially qualified to buy, go for it!

Rick Pozos · Answer

If you are driving for $$ and talking with sellers already, why not make the offer yourself on off market deals. If the property is NOT listed and it is just two people coming together about a sale of their property, do it. In Texas, NON-Realtors like myself, CAN use the contracts that Realtors use, and I usually do.Once you start doing a bunch of direct marketing and driving for $$ you will have to get familiar with contracts and the whole closing process. You might as well learn it now. Just like anything else, it is work to learn everything, but well worth it.

Andrew Johnson · Answer

Matt Shope One thing to keep in mind is that the listing realtor will get both sides the commission if they represent the buyer and the seller. Maybe it drops to 5% instead of 6% but you shouldn’t assume that “going direct” is going to “save you 3%”. So now you have someone (the realtor) that’s trying to represent both sides during a negotiation but only being paid by one. I’m sure some realtors can do that well and others can’t. However, if you know exactly what you want to offer and they just need to navigate the process, you’ll be fine. Now if you’re going straight to owners with no realtor representation then I’m sure you could just use a real estate attorney, title company, etc. and get deal done with some recognizable cost savings.

Russell Gronsky · Answer

@Matt Shope, if you're just getting into buy/hold, use an agent for your first one or two so you can see if there is any value for you in using them. Some are very connected and can find deals "that don't exist". Those two features alone can be worth the cost from a rock star agent but you can buy/sell RE without agents. A Real Estate attorney can do a purchase agreement for you for $500 which is probably significantly less than what an agent's commission would be on a transaction. What Brandon Turner says about making multiple offers a week or month works because he buys multiple properties a year so his agent knows he will make lots of money with Brandon so he doesn't mind writing up offers. But to be honest, it takes about 10 minutes for an agent to write an offer, especially if you identified the property and know what price you want to offer at. BUT, if you still feel bad for the agent, you can cut down on the number of offers by calling the listing agent and seeing if:1. The listing agent is willing to represent both sides of the transaction. Many agents will balk at this but in CO it is very easy to do...just takes buyer and seller to sign a form that they acknowledge 1 agent is representing both sides. Check in your state if that is the case.OR2. You call the listing agent and ask them something like, "I'm willing to pay X dollars for 123 main street. Would the seller be interested in seeing an offer for that amount?" If they say the seller is interested in seeing the offer, call your agent and have them submit it.

Fred Heller · Answer

There's nothing illegal or unethical about you submitting offers on your own. However, you will have no representation, which means no one is looking out for your interest in the transaction.What's in it for the Realtor is that he will get the commission when you purchase a property if it's a listed property. If it's an FSBO, the commission will be paid by either the seller or you. Many FSBOs will pay commission to a buyer's agent, but that's negotiable.Your Realtor will also be able to give you fairly accurate comps for potential rental income. And guide you in many other ways during the transaction.Having said that, if you're going to throw out a bunch of lowball offers hoping one of them sticks, then the Realtor is just spinning his wheels, and probably won't want to work with you.

Bart H. · Answer

We routinely use our realtor for purchases and sales, and yes on occasion we could probably save a couple bucks without a realtorOn the flip side our realtor is a business partner of sorts, she brings us off market opportunities, She provides input on purchases and sales.Just this last week she was nice enough to meet an appraiser at a property we were getting refinanced. A transaction she wasn't going to get a dime for. Look, some people are transactional, yes you can maybe save a few dollars here and there, but that is dwarfed by the upside of one deal your real estate agent brings to you.

Matt Shope · Answer

Thanks everyone. I'm comfortable making the offers but I want to make sure I'm giving them the best chance at being taken seriously by homeowners. I also want to make sure I'm within the law. I'll probably try both ways and see what works best. Thanks.