by Attorney William Bronchick
Real estate agents have a valuable source of potential deals for the real estate investor – the Multiple Listing Service. Unfortunately, real estate agents have a monopoly on this information in many parts of the country, so they may be a necessary part of an investor’s game plan.
Dealing with real estate agents can be difficult as an investor. Agents prefer home buyers with cash to put down, good credit and conventional buying power. Their interest is getting a commission with as little hassle as possible. Most agents have never done a creative real estate transaction with an investor, so they are not often receptive to unusual offers. Most agents equate a “nothing down” offer with a buyer who is not serious. If you are a newer investor, just starting out, having a trusted advisor or mentor can be a huge help!
Offer a Reasonable Earnest Money
You cannot present an offer with a $50 earnest money and expect an agent to take you seriously. You can expect to pay at least $500 as earnest money to get their attention. If you are presenting a solid cash offer, you should put up more money. If you are concerned with losing your earnest money, consider using a promissory note.
Offer a Short Closing Date
Another way to get an agent to take you seriously is to offer a fast closing. Nothing makes an agent salivate more than the thought of a commission check in ten days. If the agent has another offer presented to him, he will usually advise his client to take the offer with a larger earnest money and faster close than an offer which is higher in price.
Insist on Presenting Creative Offers in Person
If you present a creative offer to an agent, it will not be represented to the owner in the same enthusiastic fashion. As stated above, agents do not like creative offers – they like conventional offers from solid buyers. If you want the owner to hear all of the great benefits of your offer, insist on presenting the offer in person.
Appeal to the Agent’s Greed Factor
Let’s face it… real estate agents are in the game to make money, just like anyone else in any other business. If you can offer the agent an incentive to make money out of the transaction, you will get his cooperation. If you present an offer which does not permit enough cash to come out of the deal to pay the agent, why would he cooperate with you? If you present a lease/option offer on a listed property, how will the agent receive a commission? You need to find a way for the agent to get paid, even if you pay him out of your own pocket.
Do Your Own Comps
Sometimes you will get the opposite of an uncooperative agent – an overzealous agent. Be suspicious of an agent who tells you what a deal you are getting on a property. If it is such a good deal, why didn’t he buy it? Don’t take his word as to the value. Ask for a printout of comparable sales (not listed properties). Be aware that information contained in the MLS computer was entered by the listing broker and may be exaggerated. If a comparable sale shows the same square footage as the house you are looking at, take a drive by and see if it is accurate. Do your own assessment of value.
Fax Preliminary Offers First
Don’t waste your time filling out a contract offer until you have preliminary approval. Most agents are not this formal and will take any offer in writing to the seller. Simply summarize your offer in writing and fax it to the listing agent. Once you have an oral approval, then take the time to fill out a contract and an earnest money check. NEVER put up earnest money until the offer is accepted!
Don’t be Bullied by Uncooperative Agents
If you cannot finesse an agent, don’t be afraid to stand up to him. Some agents are unethical and will refuse to present your offer. Many times the agent will lie and tell you that your offer was rejected when, in fact, it was never presented. If this is the case, do not be afraid to go over his head to the listing broker. If the listing broker is uncooperative, deal directly with the seller (unless, of course, you are also an agent).
Having a marketing plan to acquire properties outside of the MLS can also be a smart strategy. Be forewarned, however, that when it comes time to sell, in many cases you will still need to use a real estate agent. Just find an agent that is investor friendly! Also, nothing beats having a trusted advisor or mentor that is familiar with real estate investing on your team!