BiggerPockets

Initial Flat Fee MLS Thoughts

Wednesday, January 25

The only property I am actively trying to sell right now is actually my primary residence. I researched flat fee MLS listings for a bit and decided it was the way to go for me.  I just listed a week ago and have had a few showings.  I quickly found out that there are additional benefits beyond saving 3% in commission that I believe will help sell the property.

It gets your property listed on your local MLS as well as all the other major real estate listings sites  such as realtor.com or zillow.com. You still get the benefits of a selling agent as they will still provide contracts, review documents and answer any questions you may have. I have found that a lot of flat fee broker are a la carte so make sure you ask exactly what is included with the package you are selecting

As the seller, you are in complete control and in direct contact with the buyer’s agent. It’s much easier to answer questions and call out things that you may otherwise not be able to. You eliminate the middle man when communicating with the buyer.

The ability to sell without a realtor is still an option as most flat fee brokers will allow you to sell by owner still. I highly recommend getting your number on the sign in the yard if this is the case. The MLS requires the broker to put his # on the listing. If somebody calls your listing broker, they pass onto you and you still don’t have to pay the 3% in some cases.

It allows you to do your own marketing. This includes taking your own pictures, hosting your open houses, etc… Who knows your house better than you? Absolutely Nobody.

I do believe that if you are buying/selling a lot of investment property it still makes more financial sense to get your own real estate license as it gains you access to the MLS but if you sell properties less frequently, flat fee can definitely make sense.


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Seller Financing Tips

Tuesday, January 24

I just recently met with a motivated seller that had 3 4 unit properties in my market. I tracked him down by calling on all the neighbors of a property that I just closed with seller financing. I have closed a few seller financed deals lately and feel like I am getting  pretty good identifying ways to improve upon my approach.

First Impression

As we started to talk, he kept mentioning things that I never really thought about. It really hit home with me that your first impression is perhaps that most important moment of seller financing. He observed I was clean cut, dressed well on a Saturday, professional, took good notes, and was composed. After all, I was going to try to get him to secure 20-30 year financing for me and a degree of trust was definitely needed.

Sellers Motivation

When I was taking with the seller one of the first things I look for is their motivation to move the property. You want to know this as you can play it to their advantage. There seems to be two situations that I come across most.

Seller wants to retire: These sellers are usually emotionally attached as they have owned the properties for a long time. I have found that assuring them of your solid management practices and emphasize your pride in ownership helps. This is a good time to mention all the volatility in the equity markets lately and to talk about the guaranteed returns they would earn from being the mortgage holder. The will also benefit by spreading out there tax burden.

Property is distressed:  I have only purchased two mis-managed properties with seller financing and both were paid off, which is the ideal situation.  In one case, the property was a 6 unit building that 3 units were occupied, 1 was a non-payer, and 2 were drug dealers. The seller was also paying taxes on almost 300k so it was just a huge expense to them (I ended up paying 140k). They inherited it through an estate.  I explained to them that no banks will loan on a property without 2 years of reasonable financials and they were either going to have to carry the financing or give in to a lowball cash offer.

Terms

In my experiences, the subject property has either been paid off or had a low mortgage balance. The sellers are looking for solid retail offers and in a lot of cases, don’t understand the current real estate market. This is crucial to understand as you don’t want to insult but you need a good deal. I typically layout a table with purchase prices ranging in a 30k-40k range and as the price increases, the interest rate reduces. The mortgage payment is the same but the principal/interest mix changes. This doesn’t hit you to bad on taxes because higher price=bigger depreciation deduction and higher interest rate= interest deduction. The higher price may even benefit future borrowing as lender add depreciation back in.

The Closing Process

Layout the exact steps to have the mortgage recorded and closing facilitated. I have a attorney and title company that know what I am doing and are great at talking with sellers I bring to them. I think this a huge key to being successful. The average seller doesn’t always understand everything that needs to happen and it can be complicated and intimidation

In conclusion, it’s all about your presentation to the seller and how you well you relate and communicate to them!

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