Investor buyer client terms

Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes

6y

@Stan McCune I can totally understand your side of this, with flaky clients and doing work without being paid.

From an investor standpoint, I am guessing I can work with other agents in Greensville and not pay $500 up front, correct? If so, what would I get from you that I don't from others? Do you have access to off market deals that others don't? How many? Do you hold a majority of listings that I get access to before they hit the market or that you give me insight to the sellers motive?

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Evan Polaski the primary reason I’ve had so many investors reach out to me over the years is that I’m one of the few realtors in this area that has legitimate experience as a real estate investor, understands the market from an investor lens, has creative financing contacts, contractor contacts, and is able to identify deals others miss because they don’t really care about the cheap, investor market or just don’t understand it. Most realtors don’t like the investment market because you can’t make a lot of money down here in that market, so a lot just aren’t up on it. My team leader comes to *me* for advice on investment properties.

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Evan Polaski

Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes

6y

@Stan McCune, I completely get it. Most realtors are not also investors, so there is value in that.

And I truly understand the logic behind wanting to do this: no one wants to work for free. I am simply mentioning that you are adding a barrier to the sale (you selling the client you are the agent for them) by asking for upfront payment of your commission.

Here are my thoughts as an investor: Is Stan bringing me something I cannot figure out on my own?
Does Stan have knowledge that I cannot get from another agent in the area?
What if Stan doesn't bring me any deals worth buying? I am out $500.

Really all of this comes down to your ability to market and sell this setup. I have 16 years of real estate experience between college and career. I may have a different view than your potential clients, and likely need far less hand holding. I, personally, would not put a "deposit" down to work with an agent. Working for free is part of the risk of being an agent. And as someone who ran my own business, fitness industry but viewed as a commodity like real estate, I will say if you want to charge more than your competition, you had better have clients singing your praise left and right. If they aren't your business will dry up very quickly, because others will not see the value.

I think there are other ways you can qualify potential clients versus making them pay, and maybe you already do this. Asking for proof of funds before you start showing them houses. Asking what their existing portfolio looks like. Asking what type of asset, neighborhood, projected returns are they seeking. Serious investors will know these things.

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Jason Dillard

Real Estate Broker · Greer, SC · Member since 2013 · 548 posts · 271 votes

6y

@Stan McCune don't focus on buyers. Focus on the deals. Buyers are a dime a dozen. Good deals are harder to find. The right 3 or 4 buyers will buy everything you can find.

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Evan Polaski that's good insight. I definitely bring deals to my clients that others miss, and I could give a ton of examples of that over years, both on and off-market. Inventory levels are a problem with the on-market stuff, but I've developed an eye to be able to identify the breadcrumbs of a good deal that could be easy to miss. One example is a home that was listed as single family but something in the listing description sounded weird for a single family. Turns out, it was a duplex that would've sold for probably 20-30% higher than my client got it under contract for if anyone else had figured it out before I did (which would've resulted in a bidding war).

I've tried to come up with other, non-monetary vetting ideas, but it's not been easy to come up with anything that really works. Some of these people are new to investing and I know that right from the get-go - do I just say no to everyone who wants to buy their first rental/flip property? I have gotten some good clients over the years that started as "new investors," and I don't want to just lose that demographic. Looking at past investment experience isn't fool-proof either. I've had dealings with some who have major RE investment chops but are new to Greenville and want access to my rolodex and local knowledge but then don't take my advice on properties I present to them and go direct to wholesalers for the ones they do purchase.

I fully understand that my job requires me to offer free services, and I always go above and beyond for my clients in that area. But at what point am I giving away too much to someone who isn't truly a client and is unlikely to ever compensate me in any tangible way? It's a difficult balance because I really don't like the idea of forcing money up front (I feel a ton of pressure to perform for those clients) but am struggling to find a workable alternative.

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Jason Dillard I'm not intentionally focusing on buyers. They come to me without me even marketing to them. That said, I do need to focus more on the deals that are out there, and that is part of my plan for this year.

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Ron T.

Investor · Sharon, SC · Member since 2014 · 77 posts · 40 votes

6y

@Stan McCune I wish you luck. As a semi-experienced investor I would never pay a retainer to an unknown commodity nor sign an exclusivity agreement. What if my realtor friend calls me tomorrow with a deal....an agent Ive done 5+ with in the last decade. Now I owe you cut, for what?

I would say that you are asking the wrong question, but if it works for you why do you care what I or anyone thinks?

For me I come from a point of servant leadership. I ask everyone I meet how can I better serve you. Regardless of whether they can help me. I find this is one think Zigler had perfect 'If you help enough people get what they want you will never want for anything'

I know there are time wasters, and I do understand vetting them and disqualifiying prospects. But if you are going to be the highest priced you had best not just be good, you have to be THE BEST. Heavy is the head that wears the crown and folks always shoot for the king...

Good luck.

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Ron T. thanks for those thoughts. I posted this discussion knowing it would likely get some pushback. I think the result has been to clarify some things in my own mind, which has been very helpful.

I think there are two types of investor clients I've had over the years - the ones who place disproportionate value on "deal-finding" from the realtor and those who view "deal-finding" as just one service (and probably not the highest on the list) that the realtor provides.

Those who view deal-finding as one of the many services a realtor provides recognize that not many realtors can provide the expertise, knowledge, and connections that I can. (Hopefully, that doesn't come across as pretentious. I don't usually compare myself to other realtors in this way.) For instance, I just had 2-hour conversation with a repeat investor client where we were analyzing a few properties on some very specific cash/cost-related criteria, developed a game plan for diversifying their real estate portfolio, and at the end, I was able to provide the data (without having gone into the conversation prepared to provide it) on what the average appreciation of a specific subregion has been the past several years and how that compares to the average for the area. These types of clients find considerable value in me being able to have that type of discussion and bring real knowledge to the table, and they know, by virtue of my knowledge, I will be able to identify deals for them.

On the flipside, in my experience, those who prioritize "deal-finding" tend to want the realtor to be something of a news reporter, where whichever realtor "breaks the news" first (in this case, is the first to present a deal) is the one who gets the transaction. I can set these people up on automatic MLS emails so that they get emailed the moment a property in their search criteria appears on the market, but I've found if I present off-market deals, they will eventually find the source of the off-market deal (often a wholesaler) and just go direct to him/her. Eventually, they build their wholesaler rolodex large enough that it's extremely difficult for me to be the first to bring a deal, unless I am the wholesaler (something I intend to do more of in the future, for this very reason). If they truly do believe that any realtor can represent them and that I don't bring value beyond simply being the first to present a property, then I absolutely understand not being willing to sign an exclusive agreement. I think I need to have a clearer value proposition for them, and that's something I will be working on as part of this.

On a semi-related note, I find that the realtors who tend to be the "breaking news" types present a lot of bad deals to their clients because priority is given to being first over being good. I only present deals to my clients that I can justify, and I will talk my clients out of "bad deals," unlike the majority of the others (who normally can't fully articulate the difference between a good and a bad deal). Again, that may not be valuable to some (maybe even most) of the RE investors out there, but this is how I feel it's best for me to do my business.

1 Reply

Ron T.

Investor · Sharon, SC · Member since 2014 · 77 posts · 40 votes

6y

@Stan McCune that is an awesome and well thought out response.

That's why there are choices and options, "Different strokes for different folks"...without totally de-railing the thread I think its worth noting there is a line you are tip toeing there. Once you start analyzing P&L or cash flow and start making recommendations on that the conversation starts to migrate from an agent to one of financial advisor. And that opens Pandora's Box around legality, requirements, etc.

But you are right - investors come in all shapes and sizes just like RE agents.

Speaking for myself I am looking for someone in the middle. I can set my own MLS drip up off set criteria, that doesnt provide any value. (MLS access is easily attainable these days for non agents for pennies or free depending on how much work you want t put in vs automate)

On the flip side I'm really not interested in the average agents rehab cost estimate is, as I have my own views, experience and plans there.

Specific localize neighborhood can insight provide a great value.

Your example above about identifying a duplex that isn't listed as such is huge value. But what about your ability to do that once should preclude an investor from buying another deal from another agent who found the same type of error and you missed?

Do you see how your structure is completely one sided? That was my larger point. Of course you provide value to your clients, if you don't you don't "deserve" to earn a dime. But what do you provide them that should make them agree to forego profits others may also find?

The easy button we all look for is separating the wheat from the chaffe. You want investors not wantvestors. I want to findreal estate pros not people with a job in real estate.

Like I started it with though there is a market for all of us.

Best of luck and hopefully our paths cross one day in the future, Id love to share a beer or coffee and discuss ideas. Its obvious you are a thinker and a hustler and there are far toof ew of both in this area.

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Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

6y

I work exclusively with real estate investors. I don't require a buyer's rep until we're making an offer on a property, and would never request a retainer. I start every new relationship with a 30-45 minute phone call, where I ask a lot of screening questions. I also ask that the client talk to my loan guy or provide a pre-approval immediately. I find this process weeds out 80% of the tire kickers. Beyond that, I'm just very quick to fire clients that aren't willing to pull the trigger when I present deals that match their stated criteria.

Some of my best clients were people that were relative novices when I met them, but were well capitalized, had good jobs, and big goals. I believe most of these people would have balked at a year agreement and $500 retainer, because most of them are relatively risk averse. I think you run the risk of weeding out some of your best potential clients by operating in this manner. I know some of the least qualified new investors happily blow tons of money on courses and coaching, and those are probably the same people that would happily pay a retainer.

I also don't mind competing with other agents. Many of my clients started off working with several agents, but over time saw the value I provide, and switched to working with me exclusively (I'm sure I lost some too, but that doesn't bother me). I don't ever require a long term agreement. I don't want anyone to feel like they have to work with me, if I'm not actually providing value. I would rather focus on building strong relationships with the best clients, and helping them build their businesses over time.

I think if you are going to request a retainer, you should actually go bigger, but also make it refundable if you don't perform. I just don't see $500 as providing the stickiness that you're looking for, but maybe $5,000 would. Are you allowed to hold your clients' funds in escrow in your state? If so, maybe ask that they provide a deposit in the amount of a typical earnest money deposit for the deal size they're looking for. You can justify this as giving them the ability to tie up a deal immediately, because they don't need to wire you funds or mail a check.

[email protected]979-218-2286

Joseph Cacciapaglia powered by Morty

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Abel CurielBusiness Member

Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes

6y

Originally posted by @Stan McCune:

I have a reputation in the Greenville, SC area as a realtor who is an expert in the local the RE investing market. As it is, I backed into becoming a realtor after doing multiple flips, wholesale deals, rental properties, etc., and I love this career and helping people find great investment properties. However, the past year, I've found that it's becoming increasingly difficult to know how seriously to take it when I receive a call from someone looking to invest in Greenville real estate, and so I've implemented some changes to how I work with new "investor" clients in order to make sure that my time is spent working with only those who truly intend to invest.

I am now requiring a $500 up-front retainer fee along with a year-long signed buyer agency agreement that specifies a minimum commission of $3,500 (with the $500 deducted from that commission or refunded after first commission paid) for any new "investor" buyer clients. This agreement applies to anyone that wants services beyond simple automated MLS emails - services like showings, running comps, doing drive-bys, etc. And because I know many investors like to purchase off-market deals without a realtor, I am also putting a clause in the agreement that any purchases made without a buyer's agent do not apply. (In other words, I'm not asking to be paid for transactions where I don't do any work and in which there is no realtor involved.)

The thinking behind this arrangement is that a $500 deposit that is refunded after the first purchase is a reasonable way to identify who is truly motivated to make an investment-related purchase in the next year. If they can't agree to that, then I have a hard time believing they're truly serious about closing on a deal in the next year, at least one that involves a realtor. And I don't want to take my time away from people who are serious and give it to those who aren't.

I'm curious what you all think about this arrangement and if you've seen anything like it before.

Hello Stan,

You raise a good question and I think its a fair question for anyone who has spent a considerable amount of time working with investor clients. Newer investors certainly require more hand-holding and it can take some time before determining whether they're serious with their intentions or not.

I think investors, new and experienced, would raise questions as to why they need to pay a retainer. While I love your value proposition, I do see how you could potentially lose some future business due to the retainer.

An alternative could be to categorize each buyer and set specific expectations for each category. I.e. - A, B, and C Buyers.

A Buyers - Qualified and Motivated. Looking to get a property under contract within 60 days.

B Buyers - Qualified and less motivated. Looking to get a property UC within the next 6 months but are in no immediate rush.

C Buyers - Qualified or in the process of getting qualified and less motivated. Looking for a good deal, are in no immediate rush but are open to seeing whats out there.

In my experience, if the client categorizes themselves, it is easier to set realistic expectations with them. A buyers know they'll be top priority, B buyers know they'll be contacted 1-2 times per week until they move up to being A buyers. C buyers can expect to hear from us 2-3 times per month until they become A or B buyers.

This method has helped my team and I effectively manage our time to focus on top priority clients.

Best of luck to you moving forward!

Abel

REbuild Team - eXp Realty5234 Reviews

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Ron T. sounds good! Once we are past social distancing, I'd be happy to get together over a coffee or beer.

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Abel Curiel those are some great thoughts, and I love the idea of the buyer self-categorizing in an overt way. (Timeline for buying is always something that's part of the discussion, but not something asked quite as directly as you pose it.) I'm definitely going to consider incorporating that, and I'm sure I'll be refining this strategy as I present it to more buyers and get more feedback.

1 Reply

Abel CurielBusiness Member

Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes

6y

@Stan McCune

I tried copying our ABC Buyer form on here but the format doesn't allow it.

Heres what the text says:

Are You an A, B, or C Buyer?

At the GoldBar Team, we want our motivation to match your motivation. This means that if you need to buy a home today, you probably want me to call you every time a new listing becomes available that matches your needs.

Now, if you are not really in a hurry to buy, you probably don’t want me to call you every time a new listing becomes available-perhaps an email would work better for you. Nevertheless, by completing this form you will help us make sure that we can match your motivation.

When touring our office it doesn’t take long to see how busy the buyer department is. For you, the buyer, that’s a good thing. You want a Buyer Specialist who is active and really knows the market. In order for our team to focus on your real estate needs, we must first determine your motivation or readiness to buy.

Since all buyers don’t have the same needs, we categorize our buyers by motivation as follows:

A Buyer: Our highest priority buyer. These are people who have to buy a home. They have either sold their existing home, transferred into town or their lease has expired. In many cases they could potentially be homeless.

B Buyer: Our second highest priority buyer. These are people who are ready to buy, except they have a home to sell first, have a lease to fulfill, or are in the stage of getting pre-approved.

C Buyer: Our third highest priority buyer. These are people that may buy a home when the right one comes along.

As you can see, if you are a B or C buyer, it doesn’t mean you are less important to us. Your needs are paramount. It only means we are working to find homes for our A buyers first, since they could be homeless. Remember, you could quickly become an A Buyer and become top priority. We will always do our best to accommodate you. Should your motivation change at any time, please let us know, so we may adjust our motivation to match yours.

I/We have read the above and feel that I am/we are _____________ Buyer(s).

X_________________________________ X___________________________________

REbuild Team - eXp Realty5234 Reviews

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Stan McCune

OP

Realtor · Greenville, SC · Member since 2013 · 11 posts · 2 votes

6y

@Joseph Cacciapaglia for starters, it's hard to only do business with investors in Greenville due to the price point of those properties. What is your average sale price in your area on investment properties? Around here, it tends to be quite low, often below $100,000. That's part of the challenge. I can obviously require a much higher minimum commission, but that will also cause me to lose business.

I won't work with someone that's not pre-approved, but I've had multiple situations where someone is pre-approved, has the money, and appears hungry to buy, and so I show them a few properties, get them under contract, and then they back out because they get cold feet for one reason or another. It's one thing to have this happen occasionally, but I've had this happen a lot over the past year.

Perhaps I need to do a better job vetting and maybe there are other ways besides making them have skin in the game and sign an exclusive agreement. I'll keep pondering that.

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Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

6y

Originally posted by @Stan McCune:

@Joseph Cacciapaglia for starters, it's hard to only do business with investors in Greenville due to the price point of those properties. What is your average sale price in your area on investment properties? Around here, it tends to be quite low, often below $100,000. That's part of the challenge. I can obviously require a much higher minimum commission, but that will also cause me to lose business.

I won't work with someone that's not pre-approved, but I've had multiple situations where someone is pre-approved, has the money, and appears hungry to buy, and so I show them a few properties, get them under contract, and then they back out because they get cold feet for one reason or another. It's one thing to have this happen occasionally, but I've had this happen a lot over the past year.

Perhaps I need to do a better job vetting and maybe there are other ways besides making them have skin in the game and sign an exclusive agreement. I'll keep pondering that.

If I were sticking to single family homes, then my average sale for a rehab would probably be around $100K too. However, most of my clients buy small multifamily, or at least that is their long term goal. Last year I sold almost as many fourplexes as single family homes, and I expect that trend to continue. I have some investors that started with single family homes, moved on to fourplexes, and are now out making offers on 10+ unit multifamily deals. I don't expect many of those to hit this year, but even 1 or 2 will greatly increase my average deal size.

That's the reason a large part of my upfront screening relates to long term goals and current resources. I like to work with clients with growth potential and aspirations. I believe I provide the most value in the 5-50 unit multifamily space, so it's my goal to move clients into that arena as quickly as possible. If they're just hoping to flip a house here and there or buy a single family home each year, I may not be the best fit, and I don't mind letting them know when that's the case.

My long term plan is to grow my business by helping a small number of clients scale up, instead of trying to accumulate a lot of clients that do a deal or two each. This model is foreign to most agents, because it would never work with retail home buyers. I understand it's not for everyone, but so far it's going pretty well for me. I've even been considering taking on another agent that I can refer business to, because I'm close to being maxed out on clients that I can service in this manner.

Also, if you're having a lot of buyers back out for no real reason, it leads me to believe you might be selling too hard up front. Of course, I could certainly be wrong about this. I actually spend most of my time telling investors reason why they shouldn't buy a property. If they decide to despite those reasons, then they're much more committed going forward. The only deals I've had fall apart recently have been when there were significant new issues discovered during an inspection or a very low appraisal.

[email protected]979-218-2286

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Investor buyer client terms

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