How Can Real Estate Agents And Investors Work Together

How Can Real Estate Agents And Investors Work Together

Joe: Hey, it’s Joe Crump. I’ve got a question here. “How can real estate agents and investors work together?” I work with real estate agents. I’ve actually had a license for 30 years. I’ve got a broker’s license. I still continue that broker’s license, I continue my continuing education, I keep the license. I don’t have to hang it under anyone. I think it probably makes sense for every investor to get a license eventually. It gets rid of problems that sometimes arise because you don’t have a license. And it’s worth it. But I don’t think that you should start by going out and getting a license. I think it’s a lot of work and a lot of time and a lot of effort and a lot of money to maintain a license if you’re not actually going to use it as a real estate agent. I worked as a real estate agent for quite a few years. I was a top producer, had my own business.

Joe: But I realized before too long that I could do these deals with no money and no credit and I could put deals together and it was a lot easier as an investor to do real estate than it ever was to work as an agent. As an agent it literally took ten times as much effort to put together a deal because of all the inspections and the appraisals and the lenders and all these headaches and the other agents that you had to deal with.

Joe: If you work as an investor, you can work directly with the seller and it’s just you and the seller and the buyer. And nobody else gets involved. There’s no appraisal, there’s no formal inspections. There’s not all these other problems that you have as an agent you don’t have to worry about as an investor. You can create a sales disclosure that puts all that weight on the shoulders of the buyers and sellers, makes them aware of the value. Makes them responsible for the value. It makes them responsible for the condition. Makes them responsible for accepting that property and they’re not counting on you and they’re not counting on your expertise as an agent or not having a license to do that for them. And that gets you out of a lot of headaches and a lot of trouble. So, use that.

Joe: But there are places that it does make sense to have an agent. One of the places I do use an agent is selling properties when I’m trying to get cash for a property. I know that if I sell a property on terms or I sell it dramatically under market value, I can do that without the multiple listing service. I can do it without listing it with an agent or putting it on the market as a listing myself. Now, I don’t list my own properties because I don’t want to mess with it. But I could save money if I did it that way. And maybe it’s kind of stupid for me not to do that, but I also have people that I’ve worked with a long time and I think the other work that they’ve done for me, these are kind of bonuses when I have a property to sell that makes them some extra money and so I let that play out that way.

Joe: And I’m sure they appreciate it and it makes it easier for me to not have to worry about going through all those hoops dealing with other agents and all that stuff. I don’t really want to be an agent. But I do want to sell a property sometimes for cash that I want to get full price for. So, if I’m not selling it on terms, and I’m not selling it dramatically under market value (which I never do personally) then I want to sell it for cash. And I want to sell it for full price. And I want to get as much out of it as I possibly can, whatever the market will bear.

Joe: And so we put it on the MLS because we know that most properties on the MLS, if they’re priced properly will sell. Whereas if you try to do it For Sale By Owner, with trying to get full price for a property, we know that 85% to 95% of those do not succeed unless they’re on terms, unless they’re under market value.

Joe: So, that’s why I would use a real estate agent. And I would pay that agent because they’re usually friends or people who have worked with me for a long time. I usually give them a full commission. Now, if I wanted to negotiate, if you’re doing this once, you might want to negotiate. And the way you can do that is by hiring one of these “Help U Sell” type of companies where you pay a flat fee of $500 or $1,000 to list your property. And then all you have to do is pay the CO-OP fee.

Joe: The way agents work is if you’re in an area where they charge 7%, that’s the way it is here in Indiana, or 6%, in other places, but, so we know that 3.5% goes to the selling agent. And 3.5% goes to the listing agent. So, if I list it with a “Help U Sell” type of company where they charge me $500 I can pay $500, have it listed and put it on there as a 3.5% CO-OP fee to the selling agent, to whomever brings in that buyer. And then I’ll only have to pay 3.5% plus the $500 to sell that property rather than the 7% that I would have to pay if I paid a full commission to a regular agent which is how I do it. I do pay the full commissions, but you don’t have to if you don’t want to, if you don’t mind getting a little bit more involved in the process.

Joe: The listing agent doesn’t do that much for you. But they will help you negotiate a little bit as they go through the process and even some of these “Help U Sell” places will help you negotiate for that flat fee and go through that process. They may just not be very good at it. If you get a good agent that knows how to list a property and knows how to make you money, then it makes sense to give them a full commission. Because they can probably make you in the thousands of dollars extra that you’re going to pay them on top of what you would normally get and they’ll do all the work for you.

Joe: So, it’s probably not going to cost you more money to use a good agent. So, find somebody who understands that market, that area and understands how to get a property sold and how to negotiate a deal.

Joe: A lot of negotiation, I mean, for me, when I’m working with an agent, and I’ve been selling some properties in some different states recently, and I’ve been working with a few different agents in those areas, and I’ve run across some really good people doing that. People that when we get an offer coming in they’ll send it over to me, I’ll say, no, I don’t want to do this price, but I’ll do this and this, you know, let’s change these things. I know what to look for on a deal.

Joe: But some of these people who I’ve worked with also know what to look for in a deal. And I’ll say, well, what do you think we should go back at? And that’s my first question for them. And then I want to see if they want to come in higher than I would have come in. If they want to be more aggressive than I would have been. And a lot of them will be. And so I say, okay, let’s give it try and see what happens. And they’ll be aggressive and they’ll make the counter offer and then we’ll go back and forth until we come to an agreement with that particular buyer.

Joe: And working with an agent like that can be very nice. Because they can solve a lot of problems when you go through the inspection. I can say, look, I’m not going to pay for this, I’m not going to pay for that – I’m not going to do that. But I will do this, this, and this, because those are safety issues. But I’m not going to do these other things. So, see if you can solve that problem for me.

Joe: And they’ll go and they’ll try to solve the problem. And I think part of it is that I’m adamant about what I’m going to do and I’m also not in a stress. If these particular buyers don’t work out, I can put the property back on the market. I don’t want to do that, it’ll end up costing me a little bit of money, but if they’re going to cost me so much money to get the deal closed, or so much pain and aggravation to get the deal closed, I’d rather get rid of them and put it back on the market and sell it to somebody else anyway. And as long as you have an agent who will work with you and understands how you work and doesn’t mind doing those things, it really can be a valuable experience working with agents.

Joe: Now. As far as having agents working with you to help you find lease option tenants. That’s not something that I do. If I have somebody who’s trying to find me a property like that, typically you pay them one month’s rent because typically an agent expects to get a month’s rent when they fill a property with a tenant. And they’ll do the same thing with a lease option buyer. Which I think they’re cutting themselves a little thin by doing it that way, and if I were an agent I’d charge more than one month. I’d take the whole lease option fee. Or if I was working with an investor at least half of the lease option fee.

Joe: But, if you work with an agent you can probably find somebody who will do it for one month’s rent. They won’t be excited about it because it’s not a ton of money for them. And also you don’t have any guarantee that they’re going to be following up with the leads that you bring in. Because you’re going to want to be in charge of marketing and getting those leads coming in, or have your admin person or somebody else doing it for you. Those leads are going to come in and you’re going to want that agent to make those calls. But there’s really no way that you’re going to have control over that agent because they’re working on commission.

Joe: So, you’re not paying them hourly. If you would pay somebody hourly to do that work, it’s going to be a lot easier to control them. And you can have them make the calls through the Automarketer where those calls are recorded and you’ll be able to hear what they’re saying to people, you’ll be able to see how long they were on the phone, and then you can pay them by the hour that they’re on the phone.

Joe: And we typically will pay 150% of the time that a telemarketer or what I call the buyer finder works. So, if it takes them 10 hours of talking on the phone to sellers, I’ll pay them for 15 hours of work, and typically at $15 an hour is what we pay. You could probably pay less. And if you have somebody who’s been doing it for you for a while, you’re going to want to give them a raise eventually. You might want to give them a bonus every time a buyer comes together, you know, maybe give them a couple hundred dollars’ bonus.

Joe: But if you look at the cost, if it costs you $200 in hourly to have them find a buyer and it costs you another $200 in bonuses to find a buyer, you’ve got $400 from that buyer finder that you’re paying hourly. Now, if they don’t find a buyer or if that deal falls apart, you still have to pay them for the time that they’re on the phone. But still, even with that, if you have to pay somebody one month’s rent on a property that’s making $1,200 rent every month, that means that $1,200 goes to that instead of $400. So, three times the amount of expense. You can have a lot of deals fall apart before you pay the same amount of money to a realtor.

Joe: Plus, you can monitor the person who’s going hourly and you can’t monitor the person who’s doing it on commission. The beauty of having people on commission is you don’t have to pay them up front. So, you have to have a little bit of money to pay people up front, bi-weekly is what we typically do, whether or not they find a buyer.

Joe: So, it’s on your shoulders to make sure that you put a good deal together, that can be sold. And then you have an admin person who puts together a good ad that goes onto craigslist and onto Zillow and onto Facebook and out to your buyers list. And you use all the techniques to find your buyers or have other people do that work for you, to find your buyers, so that you have plenty of leads coming in so your buyer finder can make those calls, put the deal together, get people in the house and go through that process.

Joe: At the beginning you may want to negotiate your lease option fees yourself because you might be able to negotiate more than somebody who you hire to do that. But eventually they’re going to learn how to do that. Just have them on the phone while you’re doing it for the first few months and eventually they’ll learn how to negotiate more money for the down payment and maybe you give them a little bit of a higher bonus based on the amount that they’re able to negotiate.

Joe: So, if you say, look, I want to be able to get $5,000 in cash and $5,000 as a promissory note on this. If you can get more than that, I’ll give you 20% of anything above that that you can get in addition to your $200 bonus. So if they get you $7,000 in cash, and $3,000 in a note, I’ll give them 20% of that $3,000 as a bonus because they were able to negotiate more. So, work with your people to try to make those things work.

Joe: So, working with agents can be really nice. It can also bring you sellers. They can bring you deals. So you might want to also talk to your people who work with investors a lot. There’s a lot of agents out there who work almost primarily with investors and especially in urban areas or lower priced rural areas. And if you can find that person who’s selling properties that are in terrible condition and are working with investors and they’re selling them rental properties, they’ll be the first ones to come across these deals and they can give you a call and you can buy those properties.

Joe: Some of those people are going to be in touch with the Sheriff’s sale people. If you can get in touch with the Sheriff’s sale people and you can get on their list and have them call you whenever a new deal comes in, that’s also helpful because that’ll bring you some nice deals, although those will be cash deals. But you can get some really, you know, 10¢ on the dollar type of properties with that situation.

Joe: Anyway. So, that’s working with agents. There’s lots of good ways to do it. You don’t use them for every situation. And eventually you may want to get a license yourself just so that you have some more credibility with other agents. And if you ever have to deal with complaints or whatever from the Commission, you’ll have a license and it’ll be easier to deal with that stuff.

Joe: All right. I hope that helps. Subscribe to the channel. Hit the bell and it’ll send you an email every time I put out a new video. Also go to JoeCrumpBlog.com and sign up for my free newsletter. PushButtonAutomarketer.com is my automation system. And ZeroDownInvesting.com is my six month mentor program. All right. I hope that helps. Good Luck.