BiggerPockets

I'm trying to get short sale leads from realtors. I buy short sales from the bank and resale them using a double close to a new buyer for a profit. I use the realtor to look for buyers as I'm negotiating with the bank for a lower price.

But can I contact other realtors who don't have short sales listed and have them search the MLS for me to find short sales? How would they get compensated?
Thanks.

Thanks Bridget,

Would 3% commission be too much? I'm just getting started doing this and really need some more leads.
Thanks.

I get an agent to fax me an offer of a short sale that is already listed on the MLS. The original listing agent gets 3% from the seller. I option the property and have the listing agent continue to list it on the MLS to find a buyer for me while I negotiate a reduced price with the bank. At the double closing I purchase it and immediately sell it to the end buyer. Doesn't the listing agent just get his 3% from the seller and 3% from the buyer and I give a finders fee of 3% to the agent who originally faxed me the MLS listing? That's a total of 9%. Is this correct?

First off, you can sell to end users so long as all the disclosures are made to the end buyer's side, including their lender. The sale is subject to you receiving title to property.

As far as commissions to the agents, if you use other agents to find you short sale listings (they are not the listing agent) have them compensated by writing the offer to the list agent to represent you (even though you will work the short sale negotiations). This way, your birddog agent gets the 3%, the list agent gets their's, and then the list agent can double dip by finding you an end buyer before you find one yourself. The birddog agent can also search for an end buyer to double dip. This way, the total max commissions paid are 9%, rather than 12%

Originally posted by Mark Yuschak

Stephen, I'm currently working one of these exact deals as a Realtor.

I'm the listing agent on the property. I found a buyer who is an investor and he put the option contract on the place and is curerntly negotiating with the bank. While he's negotiating his deal with the bank, I'm continuing to market the property. A Realtor in my office has found a buyer and wrote a PA. That PA is contingent on the short sale being approved with the seller (which he doesn't care what the price is - he wants out) and the lender. The property will double close since the end buyer is an investor too.

Since this is a small deal, the commissions are all a straight $1000. Even with 3% it'd be the same principal.

For the first transaction:
- $1000 payable to the listing agent
- $1000 payable to the buyer's agent
(both are me in this case)

For the second transaction:
- $1000 to the listing agent (me)
- $1000 to the buyer's agent (agent in my office)

I'd still be 12% if you added up the percentages.

I actually had a question regarding Realtor commission when using an option contract and double closing. A Realtor friend of mine sent me some listings that are short sales. I have contacted a few of the listing agents and will be meeting with them soon. This is sort of how I planned on structuring the deal:

On the A to B transaction, the listing agent "Sally" gets 3% and the buyers agent "Christine" (my friend) representing me gets 3%. The lender will be paying this commission so they may or may not try to knock it down.

Then on the B to C transaction where the original listing agent "Sally" is now listing the property for me, I was going to pay just 3% to whomever brings a buyer to the table. So if Sally is able to find a buyer for me then she has an opportunity to make another 3% on the B to C.

I'm under the impression that if the lender sees 6% going to the same agent (if the agent is representing both the seller and buyer in the A to B) then they will try to cut that down, so using a separate buyers agent (my friend) on the A to B will decrease that likelihood.

Let me know what you guys think. Should I be offering 1% to the listing agent on the B to C?

It's sort of like 2 transactions for one deal. S

I got a short sale going without any realtors and am busy trying now to sell it.
But I think the beforementioned idea is good:As far as commissions to the agents, if you use other agents to find you short sale listings (they are not the listing agent) have them compensated by writing the offer to the list agent to represent you (even though you will work the short sale negotiations). This way, your birddog agent gets the 3%, the list agent gets their's, and then the list agent can double dip by finding you an end buyer before you find one yourself. The birddog agent can also search for an end buyer to double dip. This way, the total max commissions paid are 9%, rather than 12%

Originally posted by Alex Locklear

Can't you just get on the listing agreement as an option holder and have all other offers brought to you? That way you only pay a total of 5-6% commission?

yes you can, there is the smart/easy way and then the other way. Aren't you glad you're being taught the smart/easy way :mrgreen:

LuckyOne-

I think Alex meant to say that no commissions are being paid on the A-B side. It is treated as FSBO.

The listing agreement is for the B-C. The listing agent recieves 3% and the end buyers agent recieves 3%.

Total commissions paid after both deals is 6%.

Thanks Justin and Stephen.

I'm new to short sales.

So you are saying on the A-B side you get your own lead with NO realtor involved, right?

Is it better to
(1) find your own leads
(2) use a buyer's agent
(3) contact listing agent directly

I haven't been successful yet directly contacting the listing agents with short sales with my benefits to their client and the realtor.

In states such as Maryland there are very restrictive laws regarding investors/foreclosure consultants contacting homeowners in default. Maybe I will look in other states.

Thanks for all your help!

Originally posted by LuckyOne

Thanks Justin and Stephen.

I'm new to short sales.

So you are saying on the A-B side you get your own lead with NO realtor involved, right?

Is it better to
(1) find your own leads
(2) use a buyer's agent
(3) contact listing agent directly

I haven't been successful yet directly contacting the listing agents with short sales with my benefits to their client and the realtor.

In states such as Maryland there are very restrictive laws regarding investors/foreclosure consultants contacting homeowners in default. Maybe I will look in other states.

Thanks for all your help!

LuckyOne,

We here in CA have some very restrictive statutes in place also for anyone who is pre-foreclosure (NOD).

We actually market for direct homeowners and also work with listing agents in order to maximize marketing. Of course the best way is if the homeowner comes directly to you so you can have the absolute control and pay less commissions. In this case we don't pay on the A-B and only pay 6% total for the B-C.

When contacting listing agents we offer 3% on the A-B to the agent and 6% on the B-C. As someone had pointed out earlier, this gives incentive for the agent to call us first whenever they get a short sale.

The challenge on contacting listing agents that already have a short sale listed is you lose some control. Did the BPO already get performed (which is critical and most agents don't know how to try and get the BPO favorable, but that's a whole other conversation), did the agent already submit a completed short sale package -- if so, was the estimated HUD-1 favorable? Did the agent already start negotiating -- if so, are they doing it the conservative way which is to submit 3 or 4 offers and let the banks accept the highest one which will kill any chances of a spread? Also in my experience, a lot of listing agents don't get it and think that what we're doing is shady or they think that it will complicate their short sale.

My partner and I spent (still do) a lot of time cultivating relationships with agents and we only have 5 solid agents that "get it" and understands the benefit of working with investors. This is after countless conversations with agents who either never got it, or got it but doesn't produce.

The challenge with using a buyer's agent to bring you short sales is that unless they are bringing you the homeowner directly, you are now going to have another hand in the pot as far as paying a fee to. Unless you can work out a high-volume, low referral fee deal with them: basically $500 referral fee for every short sale listing they bring to you.

Any rate, good luck to you. The deals are out there, you just have to cultivate the relationships.

Moe