Wholesaling question: What if the seller I'm working with is already working with a realtor?

Question

Hi all,I'm on the verge of going out there and beginning my marketing phase on my seach for properties to wholesale and want to make sure I have this question answered before I'm actually faced with this scenario: Suppose I'm screening a seller for motivation and begin to ask questions about the property and the seller tells me he or she is already working with a realtor? Does that mean a deal is not possible? Am I supposed to somehow make it work with this realtor or should I even bother? Would we split the profits somehow or would the realtor and I have to enter into some kind of an agreement on paper? I There's a good chance the realtor will not be wholeseller-friendly, I hear they don't like us. How would a seasoned wholesaler deal with this scenario? Any input would be grately appreciated. Thank you in advance... :)

Brian G. · Answer

Not a wholesaler but the best outcome (in my opinion) should be: "Mr. Seller thanks for getting back with me. It is great to hear you hired a professional realtor to sell your property. Lets do something, if for any unforeseen reason your property doesn't sell per the time stipulated in your listing agreement, please keep my number handy and I will be more than happy to revisit/evaluate your asking price. What is your listing deadline again? XX/XX/XXXX ok perfect.... Lets agree that I'll give you a call then and see where you at. I hope you have a great day and please don't forget to call back"... Simple, transparent, professional and you don't burn any bridges with local realtors while preserving the relationship.

Natasha M. · Answer

@Javier Osuna when you wholesale just do a double close. This way you've owned the home for at least 5 minutes before you sold it. I totally agree with what @Christian Marin says. There are some agents that don't care as long as they get paid. Just remember that you have to be fair to everyone involved in a transaction. There really is enough money & properties out there for all of us.

Christian Marin · Answer

@Javier OsunaI work with Realtors all the time. Don't let the fact that the seller has a realtor stop you from going after the deal. The listing agent will be paid their commission by the seller So you don't have to split anything with them. With any property you find you'll have to analyze it to see if it's a deal so if you have a home listed for $50K and you know it'll be a deal at $40k then tell the agent your offer is $35K. The seller will most likely counter back and you can too. If the seller accepts your $40k price you can now add your wholesale fee to your end buyer (your profit). This scenario benefits you in the fact that if you let the agent know they will keep both sides of the commission if you get it at that price the agent will help you more than if he wasn't going to. I have agreements with multiple agents where they keep both sides of the commission and it's awesome. I get a heads up on properties before they list them and I usually know what price the seller will accept. I've even had an agent get me a Fannie mae property for $25k cheaper than the list price. Why wait for the listing to expire and lose the deal to another investor? Sellers will be motivated whether they have an agent or not.

Steve Vaughan · Answer

Generally speaking, you are trying to do what realtors do, but they actually have earned the license to do it. Of course they don't like it! If I was screening a seller who has a listing agreement with a realtor and the realtor did not procure me, I would ask the seller to get hold of me when the listing expires if the home is still unsold. Those sellers are great! If you found the seller through the MLS or the sign in yard or because of the realtor, they will be due the commission anyway. They procured you. In general, there isn't enough meat on the bone for you and the realtor, especially with listed property valuations. These aren't the motivated sellers you seek as you probably already know. Good question @Javier Osuna !

Javier Osuna · Answer

Thank you everyone! I suppose going after a deal that has an "exclusive right to sell" clause could have legal reprecausions since the realtor would still feel entitled to their comission, even after the listing has already expired. Ultimately, I guess it would be up to he seller to cut them a check for that realtor's commission out of their proceeds. Bottom line, their property didn't sell which means that now, more than ever, they will be under time pressure to sell which could give me a negotiating edge, even though I understand there are no guarantees. All I'm trying to do is take their headache away. On the other side of the coin though, I would hate to find out I'm being sued or accused of brokering without a license by some scorned realtor. I will need to prioritize getting that CA license at the soonest possible chace. If nothing else, I have now learned off the 180 cooling off period on expired listing with exclusive right to sell. Even though the MLS is a resource, there are other sources for properties out there that will not necessarily involve a realtor. I will still pursue the deal, so long as the listing agreement does not have an exclusivity clause or prvided enough time has passed so as to not get bit in the butt or fall into unethincal practices. When I get a property under contract, would you recomment adding an exclusive right to buy (or market) the property? I'm inclined to say YES since I would be giving the seller an earnest money deposit right? Also, it is my understanding that at least in California, you may buy and sell up to a certain number of properties per month in CA before you need a brokers license. Can someone confirm? If my memory serves me correctly, you need a broker's license if you're doinf five or more a month. Could someone velidate this or correct me if I'm wrong? Please feel free to comment. As far as being a "newbie with no money" well, touché... That maybe the case, however its only if have no real intention or the know-how for creatively helping someone solve their problem that I become a "time waster" Most of us weren't born rich and have to start somewhere.

Martin Scherer · Answer

Most Exclusive Right to Sell Agreements have and 180 day after listing expires and if it immediately sold most agents would be knocking at the sellers door with their hand out.If they relist with someone else and a previously interested buyer shows up the original listing agent can still demand a portion of the commission."Under the sleeve" as you have termed "fraud" is trying to cheat the agent out of a rightfully earned commission. That is why I will not sell personally to a wholesaler period. Many describe what they do and in many instances that requires a license. Others are just plainly not disclosing the true transaction to the sellers and are in violation of State codes but most really are just newbies with no knowledge and no money---time wasters.

Brian G. · Answer

@Martin Scherer 100% in agreement with Exclusive Right to Sell Agreements. Like everything in life there are always exceptions (more often in distress-sellers territory). Sometimes the urgency to sell could throw a savvy seller outside the "Exclusive Right to Sell" and into a non-traditional flexible listing (rare). Others just didn't care of the type of listing. At that moment, they just needed to unload the property fast to later find out (miserably) that it didn't sell - they didn't know any better (no investor pitched them). And yet there are some extreme sellers that will wait for the "Exclusive Right to Sell" listing and "Protection" periods both to expire and make a move with the only offer they ever received. How can an agent demonstrate afterward that the seller had a buyer "under the sleeve" the entire time? Also, agents more likely than not will be limited of time, will he still pursue a fee? And to the extreme, if an agent corners a distress seller with a "Exclusive Right to Sell Agreement" that doesn't sell, could the seller wait for the termination date and re-list under a non-traditional flexible listing with another agent and then sell to his "under the sleeve" buyer? I'm not promoting unscrupulous behavior but sometimes desperate seller do desperate things and if they perceive motivation from @Javier Osuna would they attempt to get creative? Hmmmm. I think so...

Brian Gibbons · Answer

Welcome to BP!I live in LA and train RE Investors.Being excited and exuberant is good.Understanding the Seller's Issues are more important than anything.Knowing the existing financing allows for creative solutions outside wholesaling, like a Terms Purchase Offer.Here is a form for all Seller SuspectsYou want to know all of this info.And work with expired listings. These Home Owners are motivated to sell, and stay away from listed with agent houses, unless you knock on their door and give them info on Lease 2 Own. PM Me if you need negotiation tips.And consider getting that license in CALIF.**********************************************************************************************PROPERTY INFORMATION WORKSHEETAddress __________________________________________Date _________Location / Cross Street _______________________________Map Pg# _____Seller _______________________Ph# ____________Alt. Ph# ___________Listing Agent _________________Ph# ____________Alt. Ph# ___________CONDITION__Occupied / __Vacant_____ Bed/_____ BathConstruction _____________A/C ___________Elect. Amps ________Garage _____Year Built _______Roof ____________________________________________________________Exterior __________________________________________________________Interior __________________________________________________________Kitchen __________________________________________________________Baths ___________________________________________________________Plumbing ________________________________________________________Appliances _______________________________________________________Neighborhood ____________________________________________________Other Work Needed ________________________________________________________________________________________________________________FINANCIALS1st Lien Bal. $_________ 2nd lien Bal. $_________In Foreclosure: __Yes/__NoAsking Price $_________My Offer $_________Resell Approx. $__________Terms: __ Subject To, __ Agr. For Deed, __ Seller Fin., __ Lease Option, __ All CashAdditional Notes __________________________________________________________________________________________________________________________________________________________________________________CONTACT RECORDName Date Note____________________________________________________________________________________________________________________*************************************************************************************************Questions for All Sellers*************************************************************************************************MOTIVATED SELLER - QUESTIONNAIRE CHECKLISTThe following is a list of sample questions you should ask a seller.When talking to a seller, try to ask the questions through the course of a conversation and try not to sound like you are reading from a list.(Note:You will not ask all of these questions depending on the answers the seller gives and your investing objectives.)Asking About The Seller And Their Property:Can you tell me a little bit about your home?(# of bedrooms, baths, size etc.)What do you like most about the home?What do you like the least?Are there any repairs needed?What is your sales price and how did you arrive at it?What do you think your house would appraise for in excellent condition?What do you think your property could rent for?Is your property listed with a real estate agent?If you don’t mind me asking, why are you selling?Asking About The Existing Financing:Do you own the house free and clear?Do you know if your mortgage loan assumable?Would you sell the house for what you owe?If not, how much are you looking to get above what you owe? (Subtract that from sales price toget loan balance.)How much are the monthly payment on the mortgage?Are the payments current?What Kind Of Deal Can You Get:If I paid you all cash and closed quickly, what is the least you could take?(Follow-up by asking if that is truly the least they would take.)Will you consider leasing the property to me with an option to buy if I guarantee the mortgage payments and maintenance?Do you have a problem with someone living in the property until I get it sold?Would you consider optioning the property to me, if there is absolutely no risk or cost to you?@Javier Osuna

Martin Scherer · Answer

@Brian G.Problem with your scenario the owner still owes a commission. But, forgetting that for the moment, if the property doesn't sell during the listing term it is because it is over priced. If the owner feels it is worth that much what makes you feels he will take your offer which will be significantly lower? Most of the wholesalers I have been involved with charge more per transaction in their "fee" (read commission) than the agent so why bother with a property listed on mls.Now going back to the original point. Unless the owners listing agreement specifically allows him to sell and save the commission (doubtful) the agent has earned a commission due to your contact with the seller during the listing period i.e Exclusive Right to Sell Agreement which is nearly all listing agreements.

Javier Osuna · Answer

Wow!! All great responses! Thank you so much for replying everyone. I have a pretty decent understanding within the field of residential real estate, but I must admit that I have been concentrating more on my specific niche, as opposed to real estare itself as an industry. That's a pretty vast subject and I feel I would have been overwhelmed. I’ve been doing plenty of self-education for nearly a year now, attended a core course in investing recently and have been hanging out at the local REI club for the past three months. I’m not saying I know everything, but I do know what an agent's job is, why they feel the way they do, etc… I merely wanted to know how a more seasoned wholesaler would deal with such a situation and am glad to know my reasoning wasn't that far off. Some times you just need someone with more authority than you to give you "validation" you know... I do understand and agree than having a RE license would be a great plus. This is why getting a realtor’s license is among my short term goals. Thing is, I just cannot allow myself the luxury of waiting around until the license comes before I take to the streets. Rather, I just need to know what to avoid. Now I will know how to deal with a situation where a realtor is already in the equation. I will simply need to respect what they do in order to not butt heads with that realtor and head into trouble as a result. I’ll just know to keep my head low, not burn my bridges with that seller or agent and to follow up with that seller if and when the home has not sold by the date the listing expires. I can totally see where they’re coming from when it comes to wholesalers/investors and can totally understand. I also understand and agree that there simply isn’t enough meat on the bone for both of us and even if there were, no agent will split their commission with someone who doesn’t have a realtor’s license. That’s news to me right there, so thank you for that! Now I will know and won’t wind up looking like a complete idiot/newbie on the field. I actually have a couple or realtor friends in my circle; I guess I can always pick their brains if need be. Mistakes will be made along the way and I’m ready to face them. I’m just making sure I steer clear of the major ones, so I don’t wind up getting sued or something. I’m just at a stage where I simply need to get out there and start knocking on some doors. I’ve done plenty of analysis-paralysis and have grown tired of inaction! You and only you know when you're truly ready to enter the school of hard knocks and I feel its that time. I will never know what wholesaling can be like in the real world, until I go out there and pop my cherry! In other words, I need to “shit or get off the pot”. I know it’s a numbers game and I’m prepared to do the hustling and stay persistent until successful. I appreciate the overwhelming response! Thank you again, and if anyone is interested, I would love for us to connect. We’re all in this together. Much success in your investing!