Realtor Short Sale Leads
Real Estate Investor · pittsburgh, PA · Member since 2008 · 13 posts · 0 votes
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.
Hazel:
Well it depends on the person -- although I know my response was agent-specific because Luckyone was asking about having buyer's agent bring the investor short sale listings. And my only point to that was IF you have a buyer's agent bringing short sales from a listing agent you are now eating pretty deep into profits. Assuming the investor is offering 2-3% commission to the A listing agent, 2-3% to the B-C listing agent (which could be the A listing agent for double dipping purposes) and 3% to the C buyer's agent -- that's 7-9% already and this doesn't include taking care your buyer's agent who found the A listing agent. Not very practical.
Well I'm delighted that "Orange County agents" expect to make 20-50% of a 3% commission (obviously), this is true in other markets as well. BUT, there are agents who are not making money right now and if an investor presented a business model that consisted of making $500 phone calls to prospect listing agents with short sales, I'm sure there'd be some agents willing to do that -- even in the land of the County of Oranges. Hell there are agents fighting to do $50 BPOs so I know there are agents or non-agents who'd be willing to call short sale listings to let them know how we can make them more money. I’m being a bit of smart-a$$ about the whole OC thing, but I used to live in Rancho Santa Margarita and your response came across a little snooty.
I don't recall mentioning that I negotiate the short sales myself. And I certainly don't think having an "adept" agent negotiate for me makes much sense either. Sorry, and no offense intended here, but agents are real estate sales professionals...last time I checked, not negotiators. I actually believe in doing business systematically and having the right people for the right job, therefore it is my opinion that agents and investors alike may want to outsource the negotiations to experienced negotiators.
Yeah we’re all about allowing the listing agent to double dip – as I said in my response to Luckyone, it’s an incentive to get them to send us all of their listings. Our system is very straight-forward and a win-win proposition for all parties. It’s a win for the listing agent because we do offer them the ability to double dip in the deal, we negotiate with the lender, we stay in the deal as buyers even if it takes several months, and use creative methods to overcome the challenges associated with short sales, which in turn frees up the agent to do what they do best: find more listings. It’s a win for us investors because now we have agents who are generally very good at farming neighborhoods and finding short sales bringing us deals that we can purchase and we can continue to close on more deals which is good for the economy.
Best regards.
Moe
Am I missing something? What difference does the realtor commission make on the A-B side? Doesn't the lender pay this out anyway? Commission doesn't figure into the investor costs on A-B, the investor is only interested in their purchase price, right? I can see where an investor can use the lack of a commission towards their purchase price with the lender, but it isn't paid out by the investor on A-B, only B-C...
I agree with your post Moe I get the same type of objections from realtors that think it is illegal or shady. I guess they don't see the value of the service or just don't get it. If some one were to tell me how to double my income and not have to do anymore work I would be all for it.
Hi SunnyCA:
Good point on the lender contributing on the A-B commissions, assuming they're going to pay for this. When the lender gives an acceptance they stipulate what their minimum payoff is and it sometimes doesn't include commissions or closing costs or it's less than you hope, which then eats into the spread. Although we're going to try and justify getting 5-6% commissions, 2nd lien contribution, and seller concessions from the lender, but ultimately it's up to the lender and you still have to figure out the bottom line and work from there. This is also why the BPO is so critical because it is a major factor that the banks rely on in determining their net. So as investors our offers have to be low enough to accomodate for the fact that the lenders may or may not include convering certain costs.
We're working on a short sale now where the lender's acceptance doesn't include commissions, but there's enough spread to cover commissions so it still makes sense. We take the 1st lender's net, minus other liens (junior liens, tax liens, etc), minus commissions, minus closing costs, etc -- then we add in whatever concessions and commissions the lender is contributing and that's the number we work with to determine the spread.
Best regards.
Moe
I know the last post was a little while ago, but just wanted to answer some questions raised over the last few posts.
SunnyCA is correct, the lender pays commission, not the homeowner, so an investor pays nothing on that end. As far as the double dip, the numbers don't necessarly pan out to 7-9%. If you're offering an agent a double dip, you can most likely negotiate a lower commission on the B-C. I've seen investors offer a 1k flat to 1%, which are both highly acceptable for an agent considering that the sandwich structure cuts down on their time and efforts. Also, a good short listing agent already works with a buyer's agent, and can cut you a deal on the B-C end as well. Everything is always negotiable!
Moe, didn't mean to come across as snooty (believe me, I have some OC hangups myself), but I just wanted to state the reality of the market in my area for the benefit of others who are operating here. As far as negotiating your own short sales, I completely respect your choice to do them yourself. I was just remarking that the average investor, it is very time consuming if short saling isn't your specialization.
As far as agents/lender negotiators, I work with agents that have 10+ years experience in the mortgage industry and have key contacts with each lender. They ONLY negotiate short sales, have closed at least 20 lender transactions, get offers that take in less than 14 days, and close consistently within a 3-4 month window. If you consider the vast amount of effort it takes to close a short sale versus payoff, the holistic benefits of having a trustworthy negotiator do the dirty work for you can free your time up to find other deals. From an entrepreneurial perspective, trying to be the CPA, CTO, and COO for your company is just not very time efficient when you can be spending your time on more income generating activities and building a team that can shoulder the work for you.
Great post Moe. It's exactly mine and my partner story.We do it the same way. Either we are in FL we have also few agents partners in CA and all is done the same way and we are facing the exact same chalenges with agents what you mentioned.
Also in our case we spent and still spending a lot of time to build relationship with agents. Countless conversations with agents are part of this business but if you get aboard few active agents who get it you can get floaded with deals with no marketing cost.
Just want to confirm that we use the same sytem and face the same chalenges as Moe in his business but deals are out there and with right people in place it works.
Good luck and don't get discouraged by agents who don't get it. Just move on to the next one.