How to Find Flip Deals on the MLS and work with Sellers Agents

A Deal is a Deal Regardless of Where it Comes From!

When you go to the seminars regarding real estate investment, if you pick up any real estate guru book, buy property with no money down, find deals for as little as $10, get into real estate using other people's money, OPM, they all have the same recurring theme. That theme seems to be the that worst place to find deals for real estate investment be it the multi-family, buy hold strategy, fix and flip, is the MLS. I'm here to tell you that they're not just wrong. I'm here to tell you that they're completely wrong.

Let me first of all state my position. My position is simply this, if you find property, regardless of the means, whether it's from Craigslist, whether it's from the MLS, whether it's from someone calling you on the telephone and telling you they think they found a deal, if it's your next door neighbor telling you that they're selling their house, doesn't matter where that deal comes from. If you can buy it and make money from it and actually benefit from it then you should use that avenue. In other words all avenues are great when it comes to finding real property for money making and investment.

Let me tell you why I think the person who tells you not to look for deals on the MLS is an idiot. First of all, the regular consumer, when they're ready to sell their house or if they need money fast and they've got some property to sell, or, mom, dad, grandma, grandpa, aunt, uncle passed away and left them some property, I think the last thing on their mind is let me call Jack Rainmaker and see if he's going to make a low ball offer on my house. Let me call We Buy Ugly Houses or let me call the guy down the street to see if he'll offer me cash to sell my house. We always joke about swinging a cat and you'll find 3 realtors. Everybody knows a realtor. There maybe be people who are members of their family that are realtors, the next door neighbor, the guy across the street. What about the realtor who helped them buy their current home or find their current rental?

When You Think "Sell Property" You Think "Call Realtor"

Everyone knows a realtor! The average Person's initial first inclination when they think they've got some real property to sell is to do what? Call your local realtor. What do they do? They call their local realtor. They might call 3, 4, 5 different people, acquaintances, friends, relatives, neighbors, whatever it might be, and say, "Hey listen, I want to sell this house. I want to sell this property. How do I go about it? How much money can I get?" The bottom line is they want the money and they want top dollar. Granted, if there's financial pressure and they need the money tomorrow or the day after

In order to sell had to remove unpermitted patio built by previous owner

tomorrow because grandma's having an operation, then they might take matters in their own hands and seek more drastic measures in trying to sell the property. When you seek drastic measures to sell something it means you're going to take a much bigger hit. In other words, give away more money, leave money on the table, take a bigger discount.

That's when these other third party property purchases come to mind. The reality truly is the majority of real estate transactions are going to be made through the multiple listing service.

Las Vegas MLS Numbers

You can find Cheese in the MLS

During the month of September 2016 in the Las Vegas Area there were more than 18,000 active listings and 6,000 sales transactions. These active listings were for single family, multi family, townhouses, condominiums, sales, rentals, as well as land. The same goes for the 6,000 sales. If you grab the 6,000 sales with what was sold without the help of the MLS I would have to defer to Clark County tax assessor records that show 2,000 transactions. This number is just a place holder until I research it.

The bottom line is the majority of real estate transactions occur through the MLS listings and sales with the involvement of a Realtor. Therefore, if you're an investor and you're looking for investment grade property, a very valuable resource would be the MLS since the MLS represents 80% of the business that's out there. Combing through deals on the MLS is a thankless task. First of all, it's not really the easiest program to read or become familiar with. As a newbie investor it's somewhat daunting. The second thing is that unless you've got specific market knowledge it's not going to be inherently obvious to you when you look at a property that that property would be undervalued or under-priced based on its neighbors and various comps within the area.

A Lot of Businesses Selling Investor Software

As the newbie investor you're spending time running comps, running data comparisons, to figure out whether or not the home you're looking at is priced at market value, below market, what you should offer on it in order to make money. Of course, what's happening now is that there's a plethora of businesses who make their money selling prospective flipper investors, software. Software that tells you what the house that you're looking to buy is worth. Software that tells you what it's going to cost you to rehabilitate. Software that tells you what the possible after rehab value (ARV) of the property will be. All of this software is fine, but I have a feeling the only people who are making money (not the real estate investors who are buying the software) but the guys who developed and are selling the software and this statement is coming from me, the technologist who automates everything!

In fact, the application I developed for my own use only, the MLS offer system, Property Prospector, is based on technology and software that I developed. I have never tried to rent it or sell it. It's been typically for my own consumption only. As an investor, software or an application, can only

A new roof in Las Vegas can add another $18,000 in value

help you in one way and that's to process data faster than a regular human being, and keep everything organized, documented and in one place. At the end of the day you, the investor, still have to deliver the data so that the technology tool, or the software application, can do its thing.

Let's go back to the property owner who's trying to sell their property. We've already discussed the fact that most property owners will go to their local realtor to list the property and to advise them on what the property might be valued at or list for. With the advent of Realtor.com, Zillow, Trulia, Redfin, for a consumer there are a lot of options out there to figure out how much is their house is worth? What could I get for this property in the event of a sale?

These property websites are great because they give you lots of information about the homes in the area, historic sales, so on and so forth, but they're pretty lousy at giving you a true estimate on what the property might be worth. Of course, human nature prevails, and being human beings, we want the top dollar for the property. If we see a house that kind of looks like ours that sold down the street for $142,000, well my house is slightly better, I think it will sell for $158,000.

You call your friendly realtor, Joe. Joe comes in, gives you a presentation and tells you what he thinks the property is worth. The bottom line is you're the seller, your listing agent Joe will list the property at whatever price you set. In talking to many, many, many, many realtors, generally realtors will accept the listing price set by the seller in a desperate attempt to obtain the listing. In speaking with realtors, most realtors hope that over time, as offers come in and as the property sits there and stagnates, when the listing price is too high, reality will eventually set in making the seller more reasonable and more affable toward lower prospective offerings. It is my belief that at the end of the day the selling price is a reflection of; the market, comparable sales, supply and demand, and the overall condition of the property and neighborhood.

My own observations of the MLS have shown me, that eventually over time a property will sell at close or near the listing price. By the same token there are many, many properties that are on the market more than 120, 180, 300 days, even when the average days on market is 62.

What's the Right Price?

When it comes to real property, I believe there are 2 components; There's value and there's price. Value might be what you think the house is worth. You might think the house is worth $300,000 because that's the value that it represents to you. However, price is the number at which someone is willing to write a check. Even though you might value your house at $300,000 maybe the only one person out there right now willing to write a check for $180,000. In that instance this is the true price of your home.
Now, if you wait a long, long, long time, maybe someone will come along who sees the price at the value you perceive it to be, and you might get lucky but I doubt it
If you've ever had property insured you'll find that insurance companies use a third number, and that third number is replacement value. In other words, if your house were to burn down to the ground what would it cost the insurance company to replace the home. Of course, in many instances the replacement value is far greater than the actual price or value that you might set on the home. Like anything, there are some exceptions, but we're not going to get into that right now.

Save Money? Sell it Yourself?

On the MLS, just as there are people who think that the value or price of their home is higher or greater than the AS IS MARKET VALUE, the opposite is true also. There are properties on the on the MLS listed by Owners who understand that the house is not perfect, that it has no electrical, that the roof needs repair, that the air conditioning is broken. The house may have been the victim of squatters or vandalism or being in a poor part of the neighborhood. The house was built in 1977, and guess what it still looks like 1977 only with almost forty years of wear and tear, you know what I mean, the blue carpet and the white tile kitchen counter tops and gold bathroom fittings. These have a bearing on the value or price of the house. Just like any seller, if you want to sell it and get the money you will typically price the house at a list price that's below existing market values, because you recognize that it needs to be updated. Houses may be listed under, market values for a variety of reason, divorce they want a quick sale, probate the heirs just want the cash, foreclosure let’s sell it before the bank takes it, any number of reasons.

When you're scouring the MLS for deals, you're looking for homes that are priced at below market value. In other words, in a neighborhood where most the houses are are selling for around $130,000 to $140,000 and you see home listed by a seller who wants to sell it quickly or understands that there are blemishes and is listing l the home for $120,000.

As an investor, you might be thinking even at $125,000 there's not a lot of room to make money. The fact that the home is priced at below as is market value is one clue. The seller in this scenario, is possibly a motivated seller. This is the first takeaway. The key to working the MLS is to find property that is listed at below as is market value. The first clue to identifying a bonafide motivated seller.

The next step is how to get the seller to the price that I want to buy it for to make a profit? Let me pose a question to you. When you see a property on the MLS what is the purpose of making the offer? I ask this question of all realtors that I deal with and all would-be investors flippers and nobody gives me the real answer, or what I would consider as being the correct answer. Most people respond with “to buy the property”. My response is yes and no. From my perspective, the purpose of making an offer is to establish lines of communication between buyer and seller. In other words, to create dialogue. The offer is almost immaterial; most consider it a lowball offer and that’s okay. The idea of the offer is to establish dialog.

Good Pizza Bad Pizza same goes with any Business!

Unfortunately, in today's world of business and with realtors both the buyer's agent and the seller's agent, incompetency reigns supreme.

I can't tell you how many times I hear from would-be investors, "We got a real estate agent. We worked with the realtor, and the realtor made 6, 7, 8, 9, offers and we didn't really hear anything back. None of our offers got accepted." This is further complicated by a realtor who is a dumb ass. “Called my realtor 20 times, didn't call me back, was lazy, was forgetful, wouldn't follow-up, wouldn't follow through”. You get the picture. Now you have a double whammy. My experience has been that the seller's realtor in some instances will not respond to an offer or if they do, will just send an email stating, "Your offer was rejected."

How do you Find a Great Realtor?

Let's stop the bullshit. First of all, when a buyer makes an offer the listing agent, the seller's agent, has an obligation based on the Realtor code of conduct that they must present every offer, even if it's for a dollar, to the seller. The seller must either reject, accept, or if they choose reject the offer with a counter. Whatever the response, the document needs to be signed by the seller and this needs to be made available to the buyer through the buyer's agent. This is a requirement, not a choice, or, if you feel like it. My first word of advice to you as the investor, when you make an offer be sure that you get whatever the response that your agent gives you or the seller's agent gives you, that you get it in writing from the seller and that it's signed by the seller.

Believe it or not, in Las Vegas there are some dumb ass realtors who think that this is not mandatory, that this is just if you feel like it. It's not if you feel like it. It's part of the ethic's code, and it's part of their job. Whenever you make an offer the seller's agent has to present it to the seller and the seller's agent has to obtain a signature on whatever the response might or might not be. Of course, there may be extenuating circumstances. The seller is out of the country, the seller's in the hospital, the seller's dead, whatever.

Sometimes I hear from certain seller's agents; “my seller told me not to bring him any offer that's not at list price.”, Yes, a seller can request that. Whenever an agent tells you this, you need to consider two things. One, when did the seller say this? Did the seller say this when the agent first listed the property 6 months ago? Regardless, I guarantee you between now and then, the Sellers circumstances may have changed, so those rules may no longer apply?
Second, the Sellers Agent needs to provide this in writing. “Can you give me some kind evidence that the seller did indeed say this to you? If you can't then you need to follow the process and follow the code of ethics and get me what I need, which is a written response to my offer from the seller. After all, we did go through the challenge and the hard work of writing our offer in the first place.”

In my experience, there are many, many realtors who are lazy, and thinking that the seller will turn this offer down, won't even take the offer or make the seller aware of the offer. There are some instances where the buyer's agent, your agent, might think that the offer you're making is unrealistic and will not give it the effort it deserves or be 100% behind you. If that's the case get rid of the freaking agent. You need to make sure that your agent is 100% behind you. If not find someone who is.

As I'd mentioned before, when you make an offer it is to establish lines of communication and establish dialogue.

Pay attention to this; The dialogue, or communication, is Not via Email.

The dialogue and communication needs to be voice to voice. I still don't get it. Whenever any communication comes along people say, "I emailed the guy." Don't email the guy. Pick up the freaking phone and call him or her. Last time I looked emails don't sell, people do. Yet in this society of email and text there is no interpersonal interaction it's a lot safer because then no one feels uncomfortable when they are sending an email. In my mind the only purpose of the email is to document what it is you're trying to accomplish. “I've called you 6 times and you have failed to respond.” I'm going to document that with an email. I'm not going to leave a voicemail, I am going to keep calling until I hear a LIVE voice on the phone, I want to hear it directly from the seller's agent lips that the seller rejected my offer and why.

More importantly I'm going to establish a dialogue, a rapport, with the seller's agent. I'm going to find out everything I can, and I mean everything, how old they are, how long they've been in the business, how did they obtain the listing from the seller, what their relationship is to the seller, a friend, a neighbor, someone's mom from school, whatever it might be. I'm going to get to know the seller's agent and the seller and the circumstances behind the sale. I'm going to talk to the seller's agent and find out what is it going to take to make the deal.

Making Offers and Getting Deals is a Numbers Game!

In many instances, nothing except pay full price! But not in all instances. I'm looking for the exception. I don't make 7 or 8 offers, I make 40-50 offers. I'm going to get to know 40 or 50 seller's agents. I'm going to get to know 40 or 50 circumstances behind the sale because I guarantee you that somewhere in there, there is a deal that can be made a truly motivated seller. This is a numbers game. Why?

I have proven it. Out of the 40 or 50 realtors, seller's agents, I get to know and build rapport with and build dialogue, there's going to be 5 to 7 (generally 12%) of them that will accept my offer after a little horse trading. After a little haggling, after a little negotiation, and I'm going to have a deal. I'm going to have 4, 5, 6, 7 deals.

That's how you bring properties under contract. When you only make 8 or 9 offers you might get lucky, even a blind squirrel finds a nut now and then.

Make more Offers and Increase Your Chances of getting a Deal

You don't bring properties under contract by making 7 or 8 offers hoping that someone will accept it. You don't get properties under contract by not speaking with the seller's agent, by not insisting that the seller signs off on all your offers. I can't tell you how many investors I speak with who actually give up. I typically hear the following; “We spent 2 or 3 months making offers. We made probably 10 or 15 offers, that's the top by the way, and nobody got back to us. All our offers got rejected. All of the realtors, including our own, were a pain in the ass to deal with and so we gave up.” And of course, this after the poor Schmuck paid $30,000 for the Seminar! I will write about the REI Seminars in another post. It’s going to be a doozy. All of those guys should go to Jail!

I'm glad that those investors gave up because that means there's less competition for me. The key to finding deals on the MLS is multitude of offers. Seven to Eight is not going to cut it. You might be lucky enough to make 7 offers or 10 offers and get a deal under contract. That's fantastic, but that's blind luck. I create my own luck. I know if I make thirty offers I am going to pick two to three deals. Finding investment properties is a discipline and a numbers game.

A Few Rules on working with the MLS

Number One rule is volume. Be prepared to throw out 20, 30, 40, 50 offers, as many as you can in a short period.

Number Two make sure you're working with a top notch agent and that the agent, the realtor, knows that you're serious and by working with you they will make money, because you are going to get deals under contract and close! You Realtor might go through shell shock, because they have never had to write thirty offers at a time before and it can be time consuming writing them up. So, try and find a realtor who has worked with investors before where they wrote several hundred offers. Choosing the right Buyer’s Agent is critical, be sure to interview them and ask them tough questions. How to pick the right Buyer’s Realtor and what to ask them will be my next featured Blog.

Realtors The Ultimate Entrepreneurs!

Please understand that in the United States of America, the Ultimate Entrepreneur Capital of the World, the Realtor is the ultimate entrepreneur. They pay for their own education, they pay for their own licensing, they pay for everything. They pay for access to the MLS. They pay to be a member of their Realtors Association. It's all money out of pocket. A realtor wants to know that if they work with you, that their efforts will not be unrewarded. It's the whole time in, benefits out or value out scenario. If you're unsure of yourself, if you don't know that you can get the financing in place, if you look like you're an idiot and you don't know anything, guess what? The likelihood of a top-notch realtor working with you is less than zero. You'll be left working with the C and D team players. It's bad enough already because seller's agents, you don't have choice over. You don't have a choice whether a great property with tremendous potential is being listed by a winner or a loser. You need make sure that your Buyer’s Agent, the agent who is representing you is top notch Class A.

Now on the Seller’s Agent side, you want them to be a below average agent. If they're a below average agent, the property has probably sat out there too long, and they're not good at communicating with their seller or even that responsive to calls. This is to your advantage as an investor. The reality is that the buyer's agent that's representing you needs to be top notch and needs to know what they're doing. They can make or break the deal.

Number 3. Make sure that every offer gets a response and that the documented response follows the ethic's rule. In other words, sign by the seller. You need to be able to establish that the agent made the offer to the seller's agent. The seller's agent represented the offer to the buyer and the buyer thought about it, or maybe dismissed it at a hand, but has signed the rejection or signed the counter.

Number 4. Make sure that your agent establishes good rapport and a good dialogue with the seller's agent. If you think about it, a seller's agent has an immense amount of control, over their buyer. The seller's agent, especially in a multiple offer situation, can make the buyer lean more towards your offer then someone else's offer. The seller's agent can convince the buyer that their house is not worth $180,000, but in light of the fact that they haven't had an offer in a year, that maybe they should take your $160,000 cash offer that's going to close in about 10 days. The seller's agent has a lot of influence, but why would the seller's agent do you any favors if you've done nothing to establish rapport or dialog or done something to earn their favor.

Number 5, make sure that your agent stays on top of things and that they're being responsive to the seller's agent and reactive to you. When an offer goes out they should be chasing down the response within the 24 hours of making the offer. In fact, I have a very simple process that I share with all of the agents making offers on my behalf.
From the top;

1. Contact the seller's agent by telephone and let them know that you're sending an offer to their email. A lot of people think contacting someone by telephone means leave them a voicemail message. No, that's not the case. Contacting someone by telephone is reaching them and physically speaking with them.;

“Hey mister seller's agent, how are you doing today? Great. My name is John Common and I'm the buyer's agent for a local investor. This investor buys a lot of properties here in the Las Vegas area for himself, other investors. Fix and flips, and rehab, as well as buy and hold rental properties.

I just want to let you know that we came across your property at 123 Cherry Lane and my investor is very interested in purchasing it. I want to let you also know that is an all cash offer and we can close within 10 days. I am going to be sending the offer in a few minutes via email. Could you please look for it in your email box. If it's not there in the next 10 or 15 minutes look in your junk mailbox. If it's not there please call me immediately. My phone number is 702-609-5909 and let me know that you're not in receipt of my offer. It's very important that you and your seller get back to me in a timely manner because my investor has allocated more than a million dollars this month to purchase real property and I don't want you to miss out because he's already allocated the funds to other properties.

Before I email you the offer, is there anything you can tell me about the property and previous offers you've had and anything I should know about the property and the seller?"

Incompetence Reigns Supreme. Business 101 Answer your Phone and Do what you say you are Going to do!

This is called establishing dialogue, establishing rapport, creating a sense of urgency. Every realtor wants to make a commission. Every realtor wants to know it's a cash offer because a cash offer means money's in the bank. Every realtor wants to know that you can close in 10 days or less. That means they're going to earn a commission check really soon!

When speaking with the seller's agent your realtor needs to be upbeat, needs to be excited, needs to be confident, and needs to use all those same catch phrases that I'm telling you. These are all hot buttons, and remember enthusiasm sells. Energy creates more energy. Urgency creates more urgency. Of course, you need the little stick to say, "Hey listen, if you don't respond quickly enough you may lose the opportunity. You may lose the opportunity and losing commission for you and I so please hurry up and get back to me."

Typically I ask that my buyer's agent follow-up with the seller's agent within the hour by telephone. "Hey, this is John. Just wanted to let you know that I emailed the offer. Could you please confirm that you have received it and that you understand all the terms and conditions?" Hopefully the seller's agent has seen the offer, has read through the offer, and of course, is going ballistic because it is, after all, a low ball offer from an investor.

This is where you're going to get a reaction from the seller's agent. The reaction could be coming from any direction. It could be oh my gosh, this is a low ball offer. Oh my gosh, my seller has turned down offers higher than this. Whatever it is, your buyer's agent needs to be seasoned enough and professional enough to tell the seller's agent, "Look, my investor asked me to make an offer. I am making the offer. Now you may look at it, and I may look at it, and we both might put different interpretations on the offer, but do me a favor, it is an all cash offer. My investor is serious. My investor can close in 10 days. Could you please take this offer to your seller and get their feedback? That's all I'm asking you to do."

This is where if your buyer's agent is smart will have a laundry list of things to go through about the property with the seller's agent. I see here that the property's been on the market for 246 days. It needs this, it needs that, it needs this, it needs that, it needs this, it needs that. I'm not here to discuss the shortcomings. What I would like you to do is go ahead and present the offer to your seller and come back to me. Please don't reject the offer out of hand. If your seller doesn't like the offer that's fine. Tell me why. Tell us why. Tell us what they're looking for and maybe we can come to some type of compromise.

In other words, your buyer's agent is asking the seller's agent let's keep the lines of communication open. This is not me, this is not you, that's just what the buyer's saying. That's just what the seller's saying. Why don't we both work them together and hopefully we'll get a commission out of this. How about that?

At the end of all of this you can still get nowhere but that's okay. You'll get nowhere when offer 1, with 2, with 3, with 4, with 5, with 6, with 7, with 8, with 9, with 10, but you will get somewhere if you make 20 offers or if you make 30 offers, or if you follow the same process 100 times. You will get deals under contract using this system.
“The bottom line is I'm here to make a deal. How can we make that happen by working together? I'm sure that you've listed this property and it wasn't for good health or good measure. It was to make money, so let's make money together. Let's do what's best for my client and your client.”

That's the challenge with real estate today. Everyone wants to make money easy way, and of course, the one problem is the commissions are so high. Who came up with 6% as the commission? On a $230,000 transaction, realtor commissions are $13,800 split between the Realtors and their Broker. Their broker's going to get a cut and there's going to be extraneous fees like doc fees and so on and so forth, but nevertheless, your average realtor needs to only make 4 or 5 deals a year to make the median wage. Those are the realtors you want to avoid. Align yourself with a realtor that needs to make $300,000-$400,000 a year in Las Vegas.

What have you learned? You've learned that it is most people's natural inclination to go to a realtor when they're looking to sell real property. You've also learned that when people undervalue or list their property at below market value, they're doing so on purpose because they recognize that their property does have some inherent challenges and that the price needs to be a reflection of the condition of the property.

You have learned that making an offer is designed to do one thing, open up the lines of communication. Establish dialogue between buyer and seller.

You have learned that your agent needs to consistently communicate with the seller's agent by a voice, not text, not email, and needs to work at establishing rapport, at establishing dialogue, and establishing a real business relationship. You've learned that you must insist that the seller's agent follows the ethic rules, and guidelines as is required when an offer is made and in responding to that offer. You've also learned that making offers is a numbers game. To get any kind of traction you need to focus on volume.

Typically statistics, for me, about 17 to 18 percent of the offers turned into some form of acceptance where we ended with a negotiated number. Once I conduct my due diligence about 25% of those properties are kicked out because unless I feel really good about a deal I'm not going to take it. Essentially out of a hundred offers, 17 under contract and 3 and 4 will be kicked out. I'll end up with a net of 13 or 14 prospects or properties under contract.

The average deal will net the minimum of $20,000. That's what I'm looking for my walk away money. I have a potential with these 17 deals, or these 14 deals, of netting $280,000. I want to do this every single month. I don't mind sharing this information with you because there's so much business out there I'm not afraid of you competing against me. In fact, if there are more people that are out there doing it the right way, we will slowly but surely over time raise the standards of doing business in Las Vegas real estate.