For Realtors that have listings that are in pre-foreclosure, or headed that direction, find agents or investors that understand how to use an option contract to facilitate a short sale transaction. Get the properties under an option contract with an investor that intends to buy them. This person also should be an expert at negotiating deals, or have a strong team supporting him or her. I always request to see HUDs for those individuals who say they close short sale transactions – this is true for both investors and Realtors.
While the investor is working with the bank to get the deal approved, you as the Realtor advertise the property. If the investor’s offer is declined, the investor should still work to negotiate the number down to one where you, as the Realtor, can sell.
The investor negotiates, you find a buyer. If the investor is unable to purchase to hold, he or she will close the first transaction on a back-to-back closing using funds from an escrow that is separate from the second closing (this means the investor either has the funds to close, or is using hard money - none of this smoke and mirrors stuff of using money for the second transaction to pay the first). The investor then sells to the end buyer that the Realtor found. The investor makes a small spread for his or her time; the Realtor gets paid a commission that they otherwise not receive. If there’s not enough room for the investor, then he or she steps out.
This is what we teach to realtors and investors in over 35 states. It’s also what we use for our own investment companies.
I am a local realtor here in the Lexington, KY area. If someone is looking to find a realtor in this area and they want to work closely with then I am willing to work with anyone on finding the deals and structing them as well with the banks. I am also a property manager as well so if you are interesed in showing the ropes to a beginner investor and realtor then get in touch with me and will be more than glad to help you find what you are looking for.
Working with real estate agents can be a challenge if the agent you’ve selected isn’t aware of your needs in acquiring property. They’re accustomed to selling at retail and any deviation from what they consider normal can jeopardize what could otherwise be a great working relationship. The good news is that you have the power to provide the education – if you’re willing to take the time. Here’s how you can do your part.
If you’re trying to work with a real estate agent that has never seen – much less worked with – a real estate investor, the first thing you need to do is have a sit-down meeting to explain your goals, your investing strategy, and your needs.
But don’t forget that your real estate agent also has needs.
The good news is that today’s market conditions make this a good time to forge what could be a mutually satisfying long-term relationship. Unless you’ve been living under a rock you’re pretty well aware that retail buyers have disappeared. Because of this – and low prices – real estate investors are on a buying spree. You can work together and turn incredible profits with the help of a real estate agent that “gets it”.
You may be an investor that typically avoids real estate agents whenever possible because you don’t want to deal with real estate commissions. That’s fine and dandy, but in some locations you may not have a choice.
More and more states are enacting rules designed to protect consumers from those who would take advantage of them. As a result, states like Oregon have passed laws requiring that real estate agents be involved in any deal that causes homeowner equity to be transferred to another party. Other states such as California could follow suit.
Instead of arguing the merits of the rules, accept them and move on. You can also use a real estate agent effectively as a negotiation tool when working short sales. If you’re new to short sales or are working with a lender with whom you’ve never worked before, you may not be aware of the specific steps involved. In addition, some lender loss mitigation departments have their own rules, policies, and procedures. If you violate protocol your offer will be delayed – or rejected.
A real estate agent is a known commodity to the friendly banker. Banks work closely with real estate agents on traditional purchases, so there’s an institutional bias that favors the real estate agent.
The bank is more likely to consider an offer that makes sense if it’s presented by someone who speaks their language. Here’s another thought to consider: If a good real estate agent can help grease the wheels and get your offer in front of a lender, you can get an answer more quickly, and potentially close more deals.
There can also be other perks to working with a real estate agent: research. Once you establish a solid working relationship, a real estate agent will be willing to share information with you that would take much longer for you to do yourself. Comps and other MLS data is available through a real estate agent; however, you don’t want to abuse the relationship.
Solid relationships with a real estate agent will open doors for you that may have been securely closed in the past. It makes sense to build relationships that will further your goals, enhance your career, and add real value to your bottom line. A real estate agent can help you as much as you can help them with repeat business and providing the means to keep earning money despite the fact that the retail residential real estate market has almost completely dried up.
I have been doing back-to-back closings with end buyers who are financing the deal and I haven’t run into any problems yet. I usually have the sellers put the home in a land trust at the same time I have them fill out the short sale package. Even if I don’t record it at that time I have found they are using the transfer date and not the recording date. I have had some lenders bring up the seasoning issue and I show them the home was already transfered more than 90 days ago. Just because we didn’t record it until later doesn’t change anything. So far it has been working.
I agree with PeterV - As a Realtor, I love working with investors. While the work requires more research upfront for my clients, it is always a great learning experience. When I run in to something special, I have my radar tuned to what my clients are looking for so they can act quickly, and the simpatico is that they are faithful clients to me.
Short Sales, Foreclosures, and preforeclosures have changed the way our industry works, and we all will have to learn to deal with them (or get out of the market) :cool. If you find an agent who is willing to step out of their comfort zone, you may be able to both gain education from one another. There are always great deals out there to be had and lots of pocket listings that the public is unaware exist.
Another great reason to use an agent is simply that we have the knowledge of the laws, (and the myriad of changes to them), the insurance required to carry our license, and the connections to both the information and professionals that can make your transaction successful. So, I highly recommend that you find a motivated Realtor in your market - we love to make connections, and you never know how beneficial that relationship might become for both of you. Good Luck! :smile
One of the best places to find an informed licensed realtor is at your local rei clubs. Less coaching is required. Many realtors who attend rei clubs understand what most investors are attempting to achieve. I have been a licensed realtor for many years and the beginning of last year I joined two rei clubs in my area to become abreast of the directions the change indicators were moving. Needless to say I capitalized on that segment of the market undiscovered by many realtors.
I now primarily focus on short sales for investors. I currently have 30 active investors from my rei clubs that mt team and I work with on negotiating short sales for them, on average they bring the deals I negotiate for them they find their end buyer(s). I get my commision they get their spread and everyone is happy.
The relationships work both ways, if I have a lucrative deal that I negotiated, I will send it to one of my investor/partners first before populating it to potential buyers. It has been great so far.