All Forum Posts by: Peter Mckernan

Keep looking this is an evolution.. Maybe you did not explain it right, or maybe they want to see you succeed on your first deal then will throw money into the investment the next go around. You might need to build that skillset to show those family/friends you are able to do it.

I don't look at the interest rates anymore.. After they went up in 2022 and many people including myself thought they were going to come down the next year, but that did not happen. I always told clients even when the rates were going up not to buy something on short-term thinking (i.e. ARMs or buy-down rates), just buy forever, and if the rates go down, great. The buyers that can save 50-60K (or more) today in by using these tactics..

1. See properties sitting on the market for a long time, every market is different, my market anything over 30 days is a long time. Once you see this, it is a sign telling you to start to negotiate off that list price (could be 50K right there).

2. See properties that are in and out of escrow, that is another sign the seller might be getting tired of getting their hopes up and then the hopes get crushed. You can start negotiating then (it could be that 60K).

3. See properties on the market and they start to drop the price, another sign to get in and start to negotiate down on the price. This shows motivation to sell and you as an agent/buyer will be the good time to jump on it to make it happen! 

The long-term moves are to get a concession to buy down the rate for good (not a 2-1 or 3-1 buy down), it's a smaller number (i.e. .25% or .5% decrease on the rate), and getting their full closing costs covered is money out of their pocket today they'll be saving that could be huge to give the buyer more money for repairs and/or furniture along with just life expenses.  Also, adding this with getting 50K off the list price will put you in an even better position as a buyer.

I would not only question who you work with but what their worth is to you. Some key things that you need to know..

1. Sounds like you are a buyer, so you should know that the buyer's agent has to have you sign a buyer broker, the game changed last year but did it.. The offer is still typically (100% of my transactions since August 17th last year) asking for my buyer agent commission to be paid in the agreement.. And this market 100% of the sellers have paid it (my market). So 25K is really not coming out of your pocket unless your market is different.

2. The agent is the person who will have all the data, when you do comps are they on Zillow or Redfin? That has great data, but does it have sniper-style data like the MLS? Zillow and Redfin give a buyer the 10K-20K foot view of the comps, the granular view is the MLS. Does your agent know how to do that and pull the right comps to get their value to 25K commission? I would be asking them to that info in detail for you, and all of the properties you offer on.

3. Contracts: do you have 6 days a week access to attorneys on staff who can answer your questions from a legal standpoint? You can get the contract from any agent and write it yourself, but if the seller is trying to take that 3% EMD are you able to call a legal hotline to ask questions to attorneys that know the contract and do it for FREE.. Not pay your attorney $300-$600 an hour to review the contract they do not work with that much? A licensed agent with the California Association of Realtors does have access.. You would too if you work with one..

4. The big one... Negotiation, can you get huge price reduction from the seller on concessions or on the purchase price.. My team and I have gotten (just the other day) a house $1.6M reduced down to $1.4M 30 days on the market, a property 68 days on the market reduced to $100K, and then another $24K in closing costs. The list goes on with the negotiations, and saying that you'll work with the agent in a dual agency role to get them to throw their commission into play for the seller to reduce from 1M to $975,000 is not that great when you can work with an agent that can get you a house for $925K and $20K back at closing while you are paying them $25K (typically not though).

5. The last one that I would throw out is inspection, disclosures, and title challenges. There was a title issue with someone doing an FSBO with a lender of mine that I work with at lot. The seller was selling to the tenant living in the property. The tenant knows some property line issues, the seller did know a little bit about it, but not enough. They got into escrow, and then the tenant started to create a real challenge for the seller and ended up taking them to court for performance/lot line issues on the property. This tied up the property in a legal battle between the seller, buyer, and lender for a long time and cost the seller $200-$250K in damages.

Know who you are working with 

Great points @Bruce Lynn

Great info!! This is something a lot of people need to read going into flipping.. One thing I would mention in here is to know the numbers but know the ARV.. This gets people burned too many times by getting comps from a wholesaler, believing the comps, and then trying to sell it at that outprice that the wholesaler/bad agent gave is a huge miscalculation. Really the person that is going into the flipping game should know the market very well to do these comps on their own, and back it up by asking their trusted real estate agent/professional for confirmation. Two set of eyes are better than one!

On top of what Sasha mentioned, I would tap into friends and family. I got a rehab loan for a flip from a friend for 9%, no draws, and got all the cash upfront to finish the project. This helps save you money in interest if you can tap into that.. It is something that gives you the leverage to make more money and have the ability to not pay the debt on it monthly either (your burn rate on it). The loan I got is no monthly payment's either, so we are not worried about paying the debt monthly just 9% of the loan at closing. 

State and market specific to be honest, some areas have a lot more REOs than others. For example my market, there are about 1-2 REOs for every 1500 sales. Not a good one to go with. Tax Liens are not a big thing here in CA either. So it really is market dependent. 

To not be overwhelmed I would pick one and stick to that for awhile, then add in another and so on. 

When selling a house as you know the fees typically come from the seller's net proceeds (commission, closing costs etc.). So, if you are taking 2% of the 5% from the listing commission, it would not come from the agent, the agent has the contract with the seller for the 5%. It (2%) technically would be coming from the seller by reducing the 5% to 3% and then you get a closing cost credit for 2% at COE. Agent gets paid from the net proceeds unless the seller is unwilling to pay the buyer agent fee/commission, which in this case you do not have an agent; that agent would ask (if they were representing you) for the buyer/you to pay them their commission from a buyer broker agreement (if the seller was not paying commission).

So it's the same difference, the seller will pay it (2%), and the agent will not come out of pocket for it. It will be structured as the seller's concession to the buyer of 2%, then the agent gets 3%, or whatever the seller agrees to pay that agent after the 2% goes to you. The agent will not be paying you/seller/buyer because the agent does not bring money to the seller/buyer in any fashion in a transaction (typical transactions), unless this agent is a partner to that person buying the property, or they are a principal to the property.

Let me know if that makes sense. 

The off-market strategy is like a business strategy as a whole. As you were in property management, not sure if you ran your own company, but as you look at it.. It is like building a business, there is a tactic(s) to get those leads. 

Couple off-market ones to go after:

1. Probate 

2. pre-foreclosure 

3. trust/estate (could be nitched out of probate due to the different messaging)

4. Tax liens 

5. REOs
6. Family law attorneys  (divorce)  

I would say going on a team.. Agents on teams will get leads, learn the business and leverage the team for their higher income and future business success.