All Forum Posts by: Bryan Scott

@Christopher Meyer

Assuming this new property will turn into a Fix-N-Flip, give her the listing to sell for you.  If you did not include commissions in your budget, maybe negotiate a lower list-side commission, which serves both to make it a Win-Win.  Depending on your local market conditions, you could also offer less than the standard 3% to the selling/co-op agent to help pay your list-side.

@Jake Davis.  My simple response is, "follow your dreams," and identify a profession that excites you, gets your "motor" running and even keeps you awake at night.  Given most of us will work at something and for someone for around 45 years, just make sure you have real passion for whatever that is.

If real estate, there are many ways to participate.  You mentioned two of them; investor and agent.  Fortunately, you can do both and both are extremely synergistic (I know, tired term worn out 20 years ago) and complimentary.  The situation is that being an agent is a longer-term view and is very competitive, unless you can identify and build your business around a specific clientele.

General practitioners, starting out, have a tough road to hoe, but can do very well in a "team" environment, so they learn the business from the ground up from a mentor.  Absent this, you need something with reliable income to pay the freight each month.

Maybe there is middle ground?  Obtain your license while still wrenching as a mechanic, then spend weekends hosting open houses for agents in your chosen office and avail yourself of leads this may generate.  Join an office that has a number of teams operating an area.

A team typically has a managing broker, an admin assistant, agents who specialize in working with only buyers or only with sellers, a transaction coordinator (typically not licensed) and maybe others who are assigned certain functions.

As a mechanic, who gets a real estate license, maybe your marketing "farm" is people, not a specific geographic area.  To explain, if you identify and associate with mechanics, then buy a mailing list of similar tradesmen and market directly to them, because you "get" them.

Whatever you do in brokerage-based real estate, just look for a realistic angle that sets you apart from your competition.

As an investor, maybe you should pursue a BRRRR project first. Then, another and another, to get that going. This does not require you be a licensed agent, because it is not cheap to maintain your license, but can easily be done while you still work as a mechanic. When you begin to do more deals, it makes more sense to become a licensed broker, even if you don't necessarily plan to represent clients (other than yourself), but this will not become cost-effective until you are doing more than a few deals each year.

I wish you well!  Happy New Year!

@Bryan Laufenberg

This question is tabled, discussed and debated alot on BP.  Sorry in advance for the length of this answer to you post...

One small glitch you offered was that your agent is also a family friend.  Oops!  Tough to do, but you both will benefit from having a candid discussion so you can calibrate each others professional expectations to arrive at a mutually beneficial conclusion going forward.  If willing, perhaps they could do a financial breakdown so you understand all the "moving parts."  Then, you can decide from there whether/if you have a good match.

Just know that "big box brokers/agents" have lots more expenses than independents (licensees who may choose to go it on their own after at least 2 years in many states).

As an investor, agent and A-type thinker, I like to use the concept of "Zero-based Budgeting" to build my business plan from the lowest common denominator, which is how much does it costs me to represent a buyer or seller and how much is reasonable for me to earn when I do it.  I, for one, need to be able to defend my position if asked the question about commission rates.  Expenses include corporate/admin overhead and direct expenses associated with each client.  In order to stay in business, I need to be compensated for both plus a reasonable margin of profit.

Having done this for a while, I can safely tell you that representing the average buyer will take at least 5 outings looking at about 6 properties per outing.  I break down each phase of the process and list all the details required to check off the tasks required to get a buyer from the interested stage to the closing table.  Same when I represent a seller.  On average, I spend around 45 hours with a buyer and around 30 hours with a seller.  I have spent a great deal more time with some buyers or sellers, but these are the averages, which I use for my budget model.

Next question I have to ask myself is, "What is my profession and my expertise worth on a per hour basis, when compared to other professional service providers?"  All things considered, including competitive market forces, am I worth, say, as much as my attorney, or doctor, or are my services more closely valued at what I pay my CPA?  I am fairly confident that my value exceeds what I pay my electrician, plumber, or handyman (no offense to all of my tradesmen friends BTW).

Fast forward to the end:  This is just one agent's perspective, but my budgeted "shop rate" is $120 per hour.  If I spend 45 hours on average with you as a buyer, that means I believe I am worth at least $5,400.  in your town of Boise, according to Zillow, the average home value price is currently $323,540, so this means my 45 hours worth of representation for you should be 1.67% of that price.  My current, fixed-rate price, regardless of sales price ($200K or $2MM), is $4,995.  If I do multiple transactions with one buyer, I will negotiate further, but this depends on how much work the buyer is doing, or willing to do in the process.

If the listing agent/seller is offering 3.0%, agreed to in advance by those parties, great!  What do you think I do with the difference (1.33%, or $4,303.08)?  Simple...  I give it back to my buyer client at closing.  This is planned in advance so that it is fully disclosed on the Closing Disclosure and all is made part of the transaction legally.

Bottomline is this:  If you never ask for a discount, you won't get one.  If the amount of commission, or the current arrangement is giving you pause, just table the issue and get it behind you.

Good luck!

@Femi Ibrahim

Your post-mortem is spot on.  This is a good punch-list that all investors should use, not just new or inexperienced.

New Western is a wholesale mill for sure, but they also use licensed agents to complete their transactions, who are governed by state license law.  If they have done you wrong, it costs you nothing to open a complaint with the real estate commission.  Their investigation group will do a good job in ferreting out any impropriety(ies) and New Western's E & O insurance will pay damages if their insured (NW) is in the wrong.

Notwithstanding, to do business with them as a buyer, you have to agree to and sign their disclosures.  Based on this disclosure and the constraints they put up for showings, inspections and contracts, it is not possible to do proper due dil, which is why I chose to never work with them in the Denver Market.

In the immortal words of Ronald Reagan, "... trust but verify"!

@Stephen Beckwith

As a real estate investor and landlord, I became a licensed agent because I could not find an agent who would take care of my needs.  Part B of the same reason was the typical price/value question:  Up to 3% on the buyer side for maybe 40 hours worth of effort and same on the list side for maybe 25 hours worth of work w/marginal listing photos, no video or 3D tour and no social media advertising.

If you decide to become a licensed agent, no question you create a target on your back that did not exist prior to becoming licensed.  Any time I deal with anyone in a real estate transaction, I treat all communications and negotiations as if I may wind up in court at some point.  This means I document everything.  Just remember that you are the perceived professional and the seller is not, then conduct yourself accordingly.  When in doubt, disclose and check with your employing or managing broker.  Personally, I find it advantageous, however, if you are lucky enough to find a really good agent, who is willing to work with an investor, talk to them about your concerns about commissions and perceived value and negotiate something fair.

When you are in the real estate business full-time, you will run across lots of opportunities for brokerage business that will more than pay for your efforts of becoming and maintaining active licensure status.  Just avoid "big box brokerages" that take a big chunk of your earned commissions and charge desk and admin fees as well.  If you search the market in your area, you will find one or more firms more than happy to charge you $50/month and maybe a $300 per transaction charge.  For this, you will keep 100% of your commission.  Realtor vs. Non-Realtor status will also cost or save you expenses.

To clarify on a couple of important terms earlier in this topic string, please see the definitions below.

These definitions courtesy of WikiPedia (in other words, not my definitions): 

"A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other assets for another person."

"An agency relationship is a fiduciary relationship, where one person (called the “principal”) allows an agent to act on his or her behalf. The agent is subject to the principal's control and must consent to her instructions."

Long story short, unless you are a party to a contract with a seller, you have no agency or fiduciary relationship, but if the other party is not represented, you have to take some precautions.

On the question of price/value, just because you agree with a seller on market value does not mean you are willing to pay market value. The seller can establish value however he/she wishes; market appraisal, BPO, Zillow, or however. You are under no obligation to sort this out for the seller, unless you represent them. License law in most states does require you to disclose the fact you are licensed though (before or with offer). Likewise, if you intend to flip the contract as a wholesaler, or take title and fix-and-flip the property in the short term, you should disclose this at same time you make your offer in order to avoid issues later.

FYI, "Pocket Listings," are a violation of license law in most states, because they do not serve the public interest.

Interesting!  Not even one good review and not even a hint of a reply from Connected Investors (CI).  Totally unacceptable!  My opinion of CI was much higher before reading every post on this subject.

Hey BP:  If you guys can't do this right, who can?  Your next line of business?

I agree with many others who have said they love the concept, but unless the data has a high degree of accuracy & integrity, it isn't worth the "paper" it's printed on.  In fact, it creates a lot more expense and time for just that reason.

I have used several different database tools.  The data from the best of them is outdated by at least 3-4 weeks before you ever see it.  On some lists, this may be OK, but on others, unless you are the early bird, there will be no worm.

The only appeal for me, on a product like PiN v4, is the time savings and postage savings (vis-a-vis their claims of providing valid email and phone numbers, but if it sucks at that, what exactly are you buying?

Back to ListSource.com, my usual, local, county websites, and good old research I guess...

Thanks for sharing your project.  Just curious, in terms of the comment, "However we did not make a profit on this project," what would you do differently to change the outcome?  Did some aspects, or phases cost more than budgeted?  What surprises did you uncover during the rehab, which were not planned for in your budget?  A breakdown of your actual costs would be useful in analyzing and recommending changes for the next project.

Based on the amount of cash invested, at $150,000, this should have covered the purchase price and most of the rehab costs.  If yes, hard money expenses were expensive, but minimal, right?

Anyhow, based on some quick calculations and assuming your hard money expenses were minimal, you should have broken even, or close to it, right?

@Spencer Small

If you are using your contractor, who just happens to be your Realtor, to represent your interests, so long as he is licensed in the state where the property is situated, then why not just use them as your buyer's agent and pay them the buyer co-op that is being paid by the listing agent?  From that perspective, it's just a buyer side commission.

The amount is whatever is being offered by the listing agent, likely something between 2 and 3%, or whatever you negotiate with "your agent" if that amount is too much for what they are doing for you.  Then, they can represent you formally throughout the transaction and everything is above-board and on the closing disclosures/settlement sheets as such payments should be.  Any other type of payment than earned commission, that is paid to a licensed agent, is basically not allowed by license law, or at minimum, the rules of your real estate commission.

@Jesse Lewis

Well, I don't know how much deeper it is, but a couple of thoughts:

1. As a licensee, who must hang their license under an employing broker, you are well-advised to make them aware of exactly your plans, because everything you do will reflect on their license.  This is first and foremost in your selection of a brokerage office, because some brokers may not fully support your plan.

2. As most pros in sports are highly encouraged, get a degree that will help you earn a living after football, because you may not be in football very long after you get hurt.  The analogy is loosely applied to a mainstream real estate agent, who puts all their eggs in one basket (with one investor).  It may work for a while, but after it falls apart, then what?  You get to play catch-up.

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Why not have something to fall back on?  Trust me, it will make you a much better negotiator and a lot more knowledgeable about how the real estate market in your area works by just doing it.  Better to learn from a seasoned pro first though.  This, together with experience in the field doing deals, will make you a better fiduciary or partner with your investor.

How do I know this?  I am where you are headed.  I started as an investor, became an agent, because I was sick and tired of the service I was not getting, so opted to do it myself.  For the first two years I learned from a really good broker, then went out and applied this to investing, but the business I get in mainstream real estate, assisting buyers and sellers, helps pay my bills when times are not as flush and also keeps me fresh and up to date.

Besides, as a licensee, you will have to maintain a certain quantity of "Continuing Education" credits for each license period (more requirements if you are a Realtor, not just a licensed real estate salesman/broker) so you can't help but stay involved to a certain degree.

Best of luck!

@Jesse Lewis

When you interview with prospective brokerage offices, ask them the same specific questions and compare notes on the answers.  Also ask specifically if you can join a team as a buyer's agent, or a listing agent, or even mirror one of the team members in a mentorship program.  Many brokerage offices have programs such as this to bring their new agents up to speed and get them producing faster.

You do not have to participate in such a program longer than needed, but I highly suggest that, in order to really learn the business well, do this for the first 6 months at minimum, then decide next steps.

Good luck.