Negotiating prices without involving the realtor.

Wholesaling
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Negotiating prices without involving the realtor.

Ahmad Darensbourg
La Place, LA · Member since 2016 · 21 posts · 1 vote

If a home owner has a listed real estate agent, can I still bargain and negotiate directly with the home owner for a lower price? 

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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y

I did that a few years ago. I didn't cut the agent out of the commission, but we seemed to have communication problems and since I knew where the owner lived and had met him before, I just went to his house and we discussed why he wanted to sell the way he wanted to and what his motivation was etc and we came to an agreement, I wrote the offer through the agent and we closed.

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  • Account Closed
    Real Estate Investor · Shelton, WA · Member since 2013 · 369 posts · 639 votes
    9y

    @Ahmad Darensbourg Sure, If you want that agent to inform every other agent, title company, RE attorney etc in your market that you tried to circumvent their listing agreement with the seller. Whatever the deal might net you, it's not worth the reputational damage.

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    9y

    Your profile says you are 17 . You need to check in your state if you are even allowed to enter into contracts. 18 is a legal age in many states. 

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    2Reply
  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y

    I did that a few years ago. I didn't cut the agent out of the commission, but we seemed to have communication problems and since I knew where the owner lived and had met him before, I just went to his house and we discussed why he wanted to sell the way he wanted to and what his motivation was etc and we came to an agreement, I wrote the offer through the agent and we closed.

    4Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y
    Originally posted by @Michaela G.:

    I did that a few years ago. I didn't cut the agent out of the commission, but we seemed to have communication problems and since I knew where the owner lived and had met him before, I just went to his house and we discussed why he wanted to sell the way he wanted to and what his motivation was etc and we came to an agreement, I wrote the offer through the agent and we closed.

     What are the steps of writing the contract through the agent and closing if you don't mind explaining?

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  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y

    Come to an agreement with the seller and then go to the agent (I worked directly through the listing agent - no buyer's agent) and said that I want to make an offer of XYZ for this property. They wrote it up, presented it and we both signed. 

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  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y
    Originally posted by @Account Closed:

    @Ahmad Darensbourg Sure, If you want that agent to inform every other agent, title company, RE attorney etc in your market that you tried to circumvent their listing agreement with the seller. Whatever the deal might net you, it's not worth the reputational damage.

     Thanks for the warning. But, can you assist me on any tips with getting the realtor to work with me?

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  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y
    Originally posted by @Michaela G.:

    Come to an agreement with the seller and then go to the agent (I worked directly through the listing agent - no buyer's agent) and said that I want to make an offer of XYZ for this property. They wrote it up, presented it and we both signed. 

    So how does the percentages of the profit actually work out? And, what if the realtor doesn't agree? Is that deal out the window? 

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  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y
    There are two things to mention: the seller pays the sales commission to the listing agent. If a buyer agent is involved, the listing agent splits the commission with the buyer agent. So, there is no advantage to not using a buyer agent. Not having an agent puts a buyer at a disadvantage because the listing agent's fiduciary duty is to the owner. Two, many owners are now signing paperwork that says that all offers must go through the agent. So trying to circumvent the listing agent to cut a better deal is undermining the agent's agreement with the owner. At the end of the day, there is no issue with negotiating your own deal, but you need to know what you're doing...
    1Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y

    @Christopher Phillips 

    the part i am confused at, and this comes with lack of experience, is that if a buyer agent is not involved how is the contract written between me, the listing agent, and the home owner. Does the listing agent split the 6% with me or does the home owner set the terms. 

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    If you do not have a agent then you go directly to the sellers agent and sign a contract for him to represent both sides, buyer and seller. The agent has a responsibility to the seller to get the best deal but is generally more motivated to take lower offers to the seller just to get the deal done. A lower offer from the buyer has little impact on the agents commission since he gets the fill 6%.

    At least in Canada this is how it is done, I assume in the US agents may legally represent both sides.

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  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    I see the confusion. Commissions are only paid out to licensed individuals. As a buyer, unless you're a real estate agent, you are not entitled to a commission. If you go in without an agent, the seller is still obligated to pay the listing agent per their listing agreement. The commission has nothing to do with the buyer.

    The offer will simply be a written agreement that states the terms of the offer (offer price, earnest money (if customary to the area), deposit due at contract signing, remaining due at closing). If the offer is accepted, the seller's lawyer will draw up the contract and send it over to your lawyer for review and for you to sign. Then it goes back to the seller for them to sign.The listing agent will be paid by the seller at the closing. If the buyer has an agent, the listing agent will split the commission with the buyer's agent.

    You do not have to agree to dual agency. You can simply represent yourself. The agent still keeps all of the commission and it is called double ending the deal since they will get both sides but still have an obligation to the seller. If you want the listing agent to represent you and the seller, both parties have to agree to it, but it creates a conflict of interest when it comes to confidentiality. In the end, the listing agent still gets paid by the seller either way, so there is zero advantage to the buyer to go in by themselves.

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  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y

    A lot of you are assuming the OP is trying to skirt around the realtor and not pay commissions. I read this question as whether you can deal directly with the seller and then involve the realtor to finish the deal. I've never done it, but as @Michaela G. suggested, as long as you're keeping the realtor in the deal I think you're probably okay.

    I can understand the desire to speak directly with the seller as making offers with realtors can be a real pain. Still, just make absolutely sure you work with the realtor and get them their full commission. Do not go behind their back or you will ruin your reputation and could end up getting fined or even charged.

    1Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y

    @Christopher Phillips @Steven Leigh

    For example; there is a house listed at 35,000 by a listed agent. If I wanted to wholesale this house I could write up a contract for 37,500? The buyer who buys the contract will then deposit me 2,500, and the listed agent will receive commission from the remaining 35,000 right ?

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    If you are not represented but the seller is, they might run into some bumps.  It is worth finding a good agent and not making it into an issue in my opinion.

    0Reply
  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y
    Originally posted by :
    For example; there is a house listed at 35,000 by a listed agent. If I wanted to wholesale this house I could write up a contract for 37,500? The buyer who buys the contract will then deposit me 2,500, and the listed agent will receive commission from the remaining 35,000 right ?

    Technically yes, but properties on the MLS that are listed with a realtor are generally not good deals for wholesaling. Everyone can very easily find the properties on the MLS. Most of your wholesale deals should be properties that you have marketed to that only you have access to. That's what brings value as a wholesaler. If you send investors deals they just saw on the MLS marked up a few thousand they will laugh at you.

    2Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    I agree with @Steven Leigh. You are correct that the commission to the listing agent would be based on the $35,000, but like Steven mentioned, it doesn't make sense $ wise to find a house on the MLS and then try to increase the cost on a wholesale deal to another buyer. They would have just bought it at market price. Your best wholesale deal is going to come from people that haven't listed their homes yet and you can get it at a deep enough deal to cover your wholesaler mark-up to the buyer that takes your contract.

    2Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y

    @Christopher Phillips @Steven Leigh

    Thanks for that piece of knowledge because every house I have so far is listed as a MLS. Are there any tips on finding houses that are not MLS? What is your take on HUD homes or homes listed online 'For Sale by Owner' also forclosured homes? Are those three also waste of time to wholesale?

    0Reply
  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y

    Driving for Dollars is a great place to start. 

    https://www.biggerpockets.com/renewsblog/2013/05/0...

    Foreclosed homes are tricky because you need to get to the seller BEFORE it's foreclosed. Otherwise the bank gets it back and it's what is referred to as an REO. Those can be lucrative, but people sort of specialize in REOs because they can be difficult and take a long time. They often aren't the best for wholesaling either.

    Your best bet is to do things like driving for dollars or mail to high-equity lists in your area to find properties. Finding motivated sellers is kind of a vast ocean and there is a lot to explore and learn. It's a big question. 

    Check out this article and pick a few ideas you like and try them for a while. Don't spread yourself too thin, as it's better to really nail one marketing channel than to try to do a bunch half-heartedly. 

    http://retipster.com/50-quick-actions-you-can-do-t...

    0Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y

    @Steven Leigh 

    Do you by any chance know the normal time frame of getting to a house before it is officially foreclosed? Or does the time vary?

    0Reply
  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y

    To tell you the truth, foreclosures are not something I have really done, and I think some of it varies by city, county, or state. You could call some city or county offices and ask some questions and get more specific answers. You could make a separate post on Bigger Pockets on the subject too and probably get some good general answers. 

    My focus has mainly on mailing equity lists and my local tax delinquent list. If you can get a tax delinquent list in your county I can tell you that you'll get a good response. These are people who are in trouble and need help. 

    Good luck!

    0Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    Mechanically speaking, it's not easy to wholesale a foreclosure while it is still in process. At that stage, the owner is behind in payments and probably underwater on their loan. So they wouldn't be able to sell it to you without their lender's approval in shortsale, and most banks probably won't agree to a wholesaler undercutting the market value while they are trying to get their money back. You can wait until the foreclosure process is complete and the bank has bought back the home, but most foreclosures are overpriced.

    The easy bet would be to find someone with a home that has some condition issues but they still have equity in the property. They'll unload it to get rid of the headache. Similar to that, a non-owner occupied home like a rental that is also a headache and the owner might get rid of it for a bargain, especially if they can't get depreciation write-off anymore.

    0Reply
  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y

    @Christopher Phillips That is good info. Thanks for sharing. Question for you: Let's assume the homeowner is behind on payments but is NOT underwater on the loan. For example, let's say it's a $100k house, but they have 50,000 equity, but they are also at the beginning of the foreclosure process. If an investor or wholesaler wanted to purchase for more than 50k, wouldn't that be a possibility?

    0Reply
  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    Yes. That would be a case where they would have the proceeds to pay off their mortgage at the sale. So, in theory, that would work. 

    1Reply
  • Ahmad Darensbourg
    OP
    La Place, LA · Member since 2016 · 21 posts · 1 vote
    9y

    @Steven Leigh @Christopher Phillips

    Quick question: how do you get hold of a tax delinquent list? And what exactly is "mailing equity list"?

    0Reply
  • Steven Leigh
    Wholesaler · Dayton, OH · Member since 2016 · 252 posts · 227 votes
    9y

    @Ahmad Darensbourg The tax delinquent list is all the properties that have overdue taxes. Sometimes your county tax assessor site offers it as public record on their website. Otherwise you might have to call or visit and ask for it. They may tell you it doesn't exist or that they can't give it to you. You have to be persistent, friendly, and you might even have to file a freedom of information form. 

    An equity list is something you can get from a site like ListSource.com You will generally want to do a Last Sale Date of at least 5 years and choose an equity range of 40-100 or 60-100. You can choose owner occupied or absentee owner. I like both. 

    Here's an example:

    https://youtu.be/vhwy3BVYzpE

    Equity of 60% means they have paid off at least 60% of the mortgage so they owe about 40%. This means they could sell it for less than its worth to you if they choose to. If they only have 10% equity, for example, they can only sell if they pay off the mortgage, which means you couldn't get a low enough price for the house to make money on the deal. 

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