How to Use Realtors For Bird Dogging and Wholesaling pt.1

[Eric Medemar]

have seen the question asked many times in the forums "Can I wholesale properties using a realtor" or "Can I Bird Dog properties using a Realtor", so I thought I would take a minute to answer those questions. This is not information that I read in some guide, this is ALL from experience in the field.

I am a licensed agent and have wholesaled countless properties and bought from many different Realtors, I have kept commissions for myself, I have paid other agents commissions. Here is the way that I have done things I hope it clears things up for you a bit.

A real estate commission from an MLS property consists of two parts and in 99% of cases is paid by the seller, with the commission being negotiated up front by the listing agent, here are the two parts:

1. The listing agent side commission- This is the fee paid to the agent who lists the property for sale, they will be paid this part of the commission regardless of who brings a buyer.

2. The buying side commission- This is the fee paid to the agent who brings a buyer to the listed property. The only way that this agent makes a commission on the home is if they sell it to you.

During any real estate transaction including wholesaling the selling agent will be paid by the seller, the buying agent (the agent who you buy from, which by the way can be the selling agent) will be paid by the seller as well. You as a wholesaler do not need to concern yourself with how the agents are getting paid. The fee that they are paid, is in most cases already negotiated by the selling agent at the time of the listing.

Here is an example using one of my actual transactions to demonstrate one of the ways that I can get paid as an agent. I found a property that I put under contract for $50,000, the same day I made made some phone calls and found a guy who would like to buy the home for $62,000.

In this case I used a back to back closing so on the day of closing I received 3% of the 6% total commission for being the buyer, which was $1500.00.

I also received an additional $12,000 gross before closing expenses for the difference between my contracted sales price and the price that I sold the home for.

My closing expenses had nothing to do with the commission, the commission was paid on the seller side of the HUD and came off of the $50,000 gross sales price that I paid. Because I was an agent I made an extra $1500.00, if I was not a real estate agent then I would have made a measly $12,000 for my efforts. As you can see their is plenty of room in a deal for agents.

When an agent calls me with a potential good lead that I did not find on my own I will usually let them keep the buyer side commission rather than taking it for myself. This encourages more agents to call me with more deals, which leads to more money in my pocket. Isn't that the goal in the first place?

Many agents will try to lock you into signing a buyers agency contract so that they can “represent you”, I would not recommend doing this. If you want to have an agent “represent you” on a particular property, just request to sign a buyer agency agreement on that particular address for a limited amount of time. Signing a buyers agency agreement in this manner will allow you the full benefits of having a buyers agent without all of the pitfalls associated with a traditional buyers agency agreement.

A few things to keep in mind when you are dealing with the listing agent on a particular piece of property. The listing agent in most cases has a fiduciary responsibility to represent the seller. However there are several benefits to buying from the listing agent rather than having your own buyers agent.

1.Reduced commission in some cases- In some cases if an agent serves as both the listing agent and the buying agent they will give the seller a break on the commission. Most sellers have a bottom line net price that they are willing to accept. Having said that, with a reduction in agent commission, your offer can be lowered by the amount that they agent has reduced their commission by and the seller will still end up at their minimal net price.

2.Find out about deals before they hit the MLS- The first agents to know about listed properties are always the listing agents. Having said that, if you have a good working relationship with the listing agent you may be able to get them to call you before the home hits the MLS, giving you a chance at deals that most investors will never see. I have worked with many Realtors that will call me even before the property is listed so that I can get an idea about a potential deal. If I buy the deal they end up getting paid both the listing commission and the buying commission, so we both end up winning.

3.Find out about price reductions prior to the MLS being updated- I have had many agents call me prior to price reductions hitting the MLS. In many cases the asset managers at the bank will call the agent and let them know that a home must sell, so the agent will call me and tell me to make a ridiculously low offer, which is often accepted because of my inside information.

A word of caution for those of you who want to bird dog properties rather than wholesale them. If you develop strong agent relationships, be sure to let your investors know that you expect them to buy from the agent who referred the property to you. The last thing a real estate agent wants to happen is to call you with a great deal on a property, then you pass the deal along to your buyer, who then uses their own agent to buy the property. This cuts the original agent out all together which will quickly dry up any future leads that you might receive.

“Can I bird dog listed properties?”, I have seen this question asked countless times here in the forums, and the answer is yes. Once again the agents are paid by the seller and as a bird dog you are paid in most cases by the buyer. There is a small chance that your buyer could later try to develop a relationship with the selling agent and cut you out, but I most agents will respect the way that you do business, so long as you let them know the ground rules of working with you right up front.

I will add more information when I get the chance but I better get back to work.