Becoming a Realtor VS Using a Realtor

2 Replies

My husband and I are investigating flipping. My question is, to those of you who flip SFH, is, would one of us becoming a Realtor be an advantage or would it cause problems with the purchasing of homes. ( I am aware of disclosures)

I have sent out many querries to Realtors in my area. NONE! have contacted me back. No one will work for us like we do. I thought that being a Realtor would educate us on the different mortgages, get us in the door at financial institutions for REO's, etc.

What have you encountered? Just surfing for thoughts and ideas.

Thanks for your help,
MJ

Part of it depends upon which definition of flipping you mean -- buying, rehabbing then retailing or buying and selling to others who will rehab.

In neither case will being a real estate agent or working with one be at all helpful when it comes to buying properties. The properties on the MLS will almost never be good candidates for these types of deals.

So, the real estate agent thing becomes an issue when you look to sell the house. If you are "flipping" to other investors, then you absolutely do not want an agent involved. If you are selling a rehabbed house to an end user, then you might want to think about getting an agent (or possibly becoming one).

The truth is, though, that unless you plan to actually earn money by being a real estate agent (i.e., helping other people buy/sell) then there will be little financial reason for you to become one yourself, in my opinion. Where is there money to be saved when selling a house? Let's say you just hire an agent and you are looking at a 6% total commission. If you were the agent yourself, you would still have to offer buyer agents their half, so now there's only the 3% to save. But a good chunk of that will go to your broker (maybe 50% for an average setup) so you'd be looking at saving 1.5%, but you would have to do all the marketing, etc., while if you just hired an agent he/she would take care of that.

There are also costs associated with being an agent, like desk fees for your broker, licensing, continuing education, insurance, etc. So, you'd have to be selling an awful lot of houses, saving that 1.5% to make up for these costs. You might be able to save even more by ultimately becoming a broker yourself, but that's even more work, expense, and usually requires 3 years of being an agent.

As far as the REOs go, it's almost the same thing in reverse. I've bought these before. You do need an agent. The listing agent will get his/her share (say 3%, but often they actually get a lot less because of volume contracting, but it's immaterial to the buyer) and the buying agent will get 3%. So, if you were yourself the buying agent, I guess you could again save half of 3%, but I think if you really get into flipping you'll find that REOs aren't the most attractive deals anyway, and the 1.5%'s you'll be saving will be few and far between.

[I just use 6% b/c it's standard where I am, maybe you're in a 7% type of area, but you get the point.]

We will be buy, rehabbing then retailing

I can't thank you enough for the "food for thought" even so I considered the costs associated with being a Realtor, I did not think about adding them into the hard costs of what it would cost us in rehabbing since I would be focused on the property and not actively looking for listings/sales.

I am impressed with this forum since just stumbling on it and will look forward to reading more enlightning posts.

Regards,
MJ