All Forum Posts by: Zee Anon

Asset protection/limited liability.

Possibly some tax benefits as well, though those would be quite minimal -- not the main goal of this, just mentioning that it'd at least offset the cost of setting up the LLC

Somebody in my network has been successful as a flipper. I have liquid capital I'd like to diversify away from stocks and into RE. We've already agreed on rates, and I'm going to ensure all the paperwork protects me just like it would any other lender (proper contracts, personal guarantee, etc)

The part I'm unsure of is what type of entity it should be under, just a regular LLC? And if the LLC exists purely to lend money, do I need some sort of license? If so, are these difficult to apply/get approved for? I'm located in Texas, flipper(s) will be out of state.

@Lynn McGeein Very well put, thanks so much for the information. 

Agree on all points -- I only make these offers on properties that have been on the market for longer than average, so it would be good for all parties involved to at-least consider it. 

One last question, relating to trying to get a buyers agent for a reduced commission: how would I phrase that? Do I ask them to represent me and rebate me X% of the commission, or is it an informal agreement where they'll ask sellers agent to put X% of buyers side commissions towards the purchase price? (due to some states having different laws regarding who can receive the commission) 

Really good information @Lynn McGeein thank you very much for giving us the exact protocol. A few question I have for you.

You say that the broker wouldn't allow the reduction, so based on that, why would they not allow it if both the agent and broker are getting the same amount with an unrepresented buyer as they would with a represented buyer?

Here's my best guess:
Allowing this would create precedent to allow it more often, so even if they don't care about this specific transaction, it could greatly reduce their margins by getting less transactions where they collect the full 6%

*on a similar note, do are unrepresented buyers/renters actually make up a large portion of transactions (20%+?)

My last question is relating to @Tchaka Owen's comment that he would not present my offer to the buyer and said he had no obligation to. Is it true that he's allowed to not show my offer to his client because of the stipulation on commission? Either way it seems highly unethical to deny your client a legitimate offer because its not what the agent personally wants. 

Good post @Kim Knox

My main argument against you is that you aren't doing double the work, maybe 5-25% more work on average, assuming it's a savvy buyer. If they're an ignorant buyer, then yes I agree it's not a great deal for you as the sellers agent. Either way, my point is about whats best for the buyer, not the sellers agent, so I do admit that sometimes you'll take a small hit in this scenario. I would note that if this reduces the average time on the market for houses you represent, you'd make a lot more money in the long run though. For me, it often speeds up the deal by being able to have a more direct line of communication, but I understand this isn't always the case.

I also agree with you, if the net amount on two offers is the same and one is using an agent, it makes sense for both you and the seller to chose the one with the agent.
If that were the case, I could pocket 1.5% of it, and put 1.5% towards the purchase amount so the net is still higher for both me and the seller. 
The point is that if this is being offered, it likely means it's still on the market or has been for a while, and is an opportunity to make a sale happen quicker by being presented with an offer that otherwise wouldn't exist. You can always "wait it out" in hopes of the same offer with an agent, but I'd guess plenty of sellers would prefer to just go through with the deal if its the only one on the table that's giving them their asking price. 

As to your last point, I think this might be an issue of semantics? I would never phrase it as a "rebate" from the sellers agent, I would want it "credited" back to me, and the way to do that is by having the seller modify the commission and lower sale price by the same amount that's being credited. Correct me if I'm wrong on this one though

That's awesome! Saving the 3-6% can be massive when dealing with small margins.

Glad to hear from the investor perspective, as it seems the only people disagreeing with me are realtors. 

@Mike Cumbie Thanks for the reply. You have some valid points, but I'd argue some of them are not quite relevant to this conversation.

Let me start this by saying I'm a high stakes professional poker player, so I'm quite aware when somebody "doesn't get it". That's not at all what I'm referring to. I'm talking specifically about buyers/renters who DO get it, such as myself. Literally all I need help with is the legal side of things, which I can hire a RE attorney for. Other than that, what value does a realtor on my end bring, when I'm the one doing all the work? 

The above point seems to be getting lost in the discussion, so I'm going to clarify this:
I think a realtor on buyers side makes sense for 80%+ of transactions.
For me, and for many others, it does not (even though we're in the minority). I simply want to educate that minority, such as the OP of this thread, that it's a very viable option. 

As to your other points,

I agree that dual representation is often murky water and can be unethical. That's why I frame my deals this way. I'm making it crystal clear that I know they represent the seller, and I am representing myself. That's why I don't really like your court analogy -- I'm fully aware that the real estate agent does not represent me, I would say it's much more similar to representing yourself in court on a traffic ticket where you've already looked up the relevant laws. You're right though, the person going in unrepresented needs to be fully aware that the sellers agent is not looking out for them. 

When you say "other agents tell you to get your own", well yes of course they do -- if I was an agent, I'd also probably want to deal mainly with agents, because dealing with another professional makes the deal go quicker and smoother with less headache for you. I totally get that. But it's not about what the sellers agent wants, it's about what the buyer wants, which is to save money. 

@Derek Carroll 
Fair enough, that's your right to only do business with those who have brokers, and I completely understand your reasoning. That being said, I would just consider this to be one of the minor risks of attempting to purchase with no broker (running into somebody who won't do business with you), and I'd also argue that this is likely the stance of the minority, with most being content doing deals directly. And yes, agree with your last point, can normally negotiate so always ask! 

 Of course they can say no, but why would they? 
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether). 

As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer? 
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer. 

 If my offer wasn't submitted, I'd be talking to the agent's broker and I could always go online or to the clerk's office to find out who gets the tax bill on the property and simply send a letter to the owner with my offer and letting them know what their agent is up to.

What you've proposed makes perfect sense and isn't stealing from the agent in any way.  They'd lose a percentage to your agent if you had one.  So, what's the difference?  The deal got made.

All you need is a title company - or a RE attorney in an attorney state, as far as completing the deal as a buyer.

 Thanks for the reply Sue. That's my thoughts exactly -- I'd simply pay for the attorney myself and handle the paperwork. It's not for everybody, but for many intelligent people I think it's very much worth the extra effort. 

I think responses like Tchaka is why it's not a known strategy. As a realtor, he's clearly very biased against what I'm suggesting, and has even gone as far as to say he would implement unethical practices to stop me. 

 1) I don't understand why you think me saying I'm going to get a realtor if they decline is me threatening them. So, you brought up a fair point "I'll have to do more work by representing both parties", but that's why I'm still offering the extra 1%. They get to close the deal quickly and make a larger commission, why exactly is that so bad? If they don't want to do the extra work, so be it, that's their right to decline -- so I'll get my own realtor and everything's fine. However, I'd like to point out that every lease agreement I've signed, they've done very little (if any) extra work, and I'd argue they often did less work by communicating directly with me. 

Everybody wins in this situation. The only person who "loses" is the lost middleman who I never needed to begin with. 

2) I'm not a licensed realtor, so I'm not going to tell that you're wrong, because frankly I don't know. However, I'm very skeptical that this is accurate, and I'd like to again ask you for a source on this claim.

I'm going to try and word this as clear as I possibly can to avoid any confusion, because you're deflecting from the point and bringing up irrelevant arguments.
I am NOT dipping into the realtors pocket. You were never getting the double commission. I'm the one actually doing the extra work, scoping out properties, scheduling showings, negotiating contracts, etc -- the sellers agent is not doing that for me. I am. 
If an agent refused to credit me back the 2%, I would simply hire a realtor to do the work I'm doing and actually look out for my best interest. 

What I'm suggesting makes both parties better off. Once again, the only person who's "pockets" I'm dipping into is somebody who was never needed to be involved in the process. 

It appears as if you're trying to discourage people from implementing my strategy by claiming the landlords would never hear my offer. For one, that's false, as I've had multiple deals like this. For two, I want to again express that by not bringing my offer to the landlord, you are acting extremely unethically, since my offer is better for EVERY party involved. 

Your examples regarding doctor bills or landscapers make no sense. There's no potential middleman there that I can cut out. I'm not suggesting we apply this to every industry, simply this one where the job is not necessary

 Of course they can say no, but why would they? 
If they say no, then you say "okay, I'll use a realtor then". And now they've lost the extra 1% (or potentially lose the deal altogether). 

As per your second point, I actually didn't know that. Can you provide a source? Why specifically are they not required to submit that offer? 
Either way, I would consider that highly unethical for them to not submit an offer that's in their clients best interest because they aren't making double the commission. Once again, this narrative is sounding more like realtors trying to protect their industry rather than what's best for both the seller and buyer.