We tackle a listener question on today's show. "My partner and I are looking into writing offers and hope to write many as that's how we will eventually secure deals, but I wanted to ask, when you started out did you prefer having an agent (I know in the past you would mention having your agent write up a deal) or did you present most offers without an agent?"
We chat about:
- Networking
- Interview and meet agents
- MLS offers vs direct to seller
- Defining your "profitable offers"
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Follow Josh Koth and Jack Hoss on their journey towards financial freedom using the power of Real Estate through the REI Rookies Podcast (Real Estate Investing Rookies Podcast). We share our experiences as we acquire rental properties, build net worth, and work towards financial freedom. We are focused on creating wealth through conventional and creative real estate investing while improving our financial education. If you are a fan of Rich Dad Poor Dad by Robert Kiyosaki and Millionaire Real Estate Investor by Gary Keller or are looking for an alternative to the Dave Ramsey, Jim Cramer, Motley Fool or Suze Orman shows we invite you to subscribe today!
Transcription:
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we're rollin welcome to the RDI rookies
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podcast the real estate investing
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rookies podcast episode number 96 are we
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inviting you to follow us on our journey
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towards financial freedom using the
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power of real estate
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I'm Josh code and I'm Jack Haas and here
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at rei rookies we believe in a couple of
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key principles number one the best way
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to retain information is by teaching it
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to others and number two a rising tide
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lifts all boats we're not competitors or
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were a community so let's get into some
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real estate investing so we got a
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listener question this week from Eric
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Trimble so thanks Eric for sending us
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this quick question but he was asking
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about when he should and shouldn't use a
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realtor in their in his new real estate
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transactions yeah he was basically
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asking do we typically present the offer
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ourselves or do we use a real estate
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agent and I guess that really depends on
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where you find the property where is
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this property listed where did you see
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the property the main differentiator
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would be if it's on the MLS the Multiple
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Listing Service then if you're not a
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real to yourself I believe you have to
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have a real estate agent submit an offer
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on your behalf to the listing agent now
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I don't know could you technically call
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those thing agent yourself and they
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could represent both sides you know
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that's an option too but either way an
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agents going to be involved whether it's
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just the listing agent or reaching out
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directly but remember the listing agent
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represents the seller right so they're
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not going to necessarily advocate in
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your behalf so that's something you have
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to consider some people can do both
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sides of the transaction I think that's
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called dual agency or something like
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that but just they have to disclose that
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they're representing both sides but just
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remember that they're probably not going
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to advocate for you and protect your
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interests but if you know what your
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price is and you know your top maximum
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allowable offer or you know what that is
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I mean you know you could technically
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have the listing agent write it up so
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that's one option right yeah most people
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are gonna start with making offers on
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the
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I mean that's the low-hanging fruit
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that's easy properties in which to
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identify especially if you're not doing
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any marketing or anything else that's
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where else you're gonna find properties
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to make offers on how to even know
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they're for sale or might be for sale so
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when we're dealing with MLS your you've
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got to know that you're gonna have to
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make a lot of offers
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I know typically people who have listed
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it on the MLS are looking for top dollar
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so if you're gonna make profitable
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offers you're going to have to do some
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due diligence and find some Realtors
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that are willing to play ball so a great
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way to do that is to start networking
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finding those Realtors asking and
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actually interviewing them to make sure
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it's a good fit for you and them yeah
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you got to ask a few questions you know
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are you comfortable submitting offers on
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an investor's behalf because if a
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realtor has only sold and bought and
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sold or represented people looking for a
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home to live in or sold homes you know
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for people that we're living in them and
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just dealt with offers that are real
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close to asking price
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you know retail price they may not be
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comfortable submitting what we call a
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profitable offer which they may call a
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lowball and some people will go as far
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as to say I'm not gonna do that
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it hurts my reputation I'm not gonna be
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known as that person that type of agent
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they see it they take it real personal
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or they feel that the sellers or the
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listing agents will take the offer
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as a personal insult you know so you
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have to find an agent that is
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comfortable writing those types of
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offers and can frame them in a way that
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they are ecstatic mind hey these are
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investors I know this isn't what you're
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expecting for an offer but just don't
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please consider it in you do have some
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things to offer as an investor hopefully
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you're doing you know minimal
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contingencies so there are some
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advantages to your offer
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hopefully they'll think okay you know
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the price is not as good as I may get
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but I'm more likely to actually close
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the deal if I if I accept this this
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lower cash
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for and you don't have to have the
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ability to write a cash offer also
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that's something to consider yeah and
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it's great to be able to find and pair
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up with a realtor that can really soften
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the blow you you might have to have a
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situation where those Realtors have to
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be able to talk to communicate with each
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other so that they know the situation
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that this this offers coming from an
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investor it's not a retail buyer that
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they're traditionally used to so it's
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good to have a realtor that is able and
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comfortable to have those conversations
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yeah even better if the in vet the
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realtor is an investor or deals with
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investors themselves and kind of
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understands how the numbers work because
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it's interesting when you've you're
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talking to someone that's only sold you
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know retail owner occupied houses for
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families they're shocked at some of the
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prices or offers that they we may come
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up with you know and they're if they're
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not confident in the offer or they don't
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see why it's it makes sense they're not
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going to present it in a confident way
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and that's really going to hurt your
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your chances so you need somebody that
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can say that the number with confidence
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and it doesn't stammer and you know be
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nervous presenting that number they need
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to be confident in that so you need to
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make sure that they're someone who's
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capable of that and one of the things
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that I think we really found out pretty
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quickly is that when you say profitable
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offer or use the term lowball you're
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definition and the realtors are going to
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be completely separate most realtors
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when you say lowball offer they might
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think it's a 10% discount when in fact
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you as an investor they're looking at
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like closer to a forty or fifty percent
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discount yeah they might think oh it's
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some crazy lowball oh yeah if it's
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listed for a hundred we're gonna offer
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90mm try sixty yeah it might be might be
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shocking and that's something when I've
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met with realtors in the past what I do
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is I kind of give them an example I say
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okay here's one we bought it was listed
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for X we offered X we settled on X you
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know giving them actual numbers of a
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true deal or I'll bring up one that's on
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the MLS currently and I say okay let's
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look at this one look at the pictures
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here's our way estimate for rehab
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here's what we need for profit we'd
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probably back into X amount for an offer
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and then you look on their face and you
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can kind of see the holy crap look and
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you realize that that's kind of shocking
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to them but if you explain to them how
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you got there you know they can do
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simple math hopefully and realize that
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that's where you need to be and if they
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are ok with that or not that's you know
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what's going to determine whether you
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feel comfortable them representing you
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in the transaction well why don't we
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move over to did we cover everything
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with the realtor what do you do and then
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if you're the first-timer and we have to
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present the offer directly to the seller
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yeah that boy that's a whole nother can
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of worms right again it all comes down
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to confidence so you need to be
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confident in your numbers you need to
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know what the most you're gonna pay for
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the house is if you're going to leave
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negotiating buffer where you're going to
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initially start but you have to be
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confident and you can't sound like you
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know it's going to shock the person or
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it's a shocking number to the seller
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either it has to be something you can
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say with confidence and get off your
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tongue without you know basically
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telling them this is horrible and and
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you shouldn't do this you know it's kind
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of sound like this is a perfectly
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reasonable number and you don't really
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care one way or the other if they accept
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it or not you'll just move on to the
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next house if they don't and and that's
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fine yeah so you got to get comfortable
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with the uncomfortable those
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conversations can get pretty
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uncomfortable especially if their
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expectations is full retail price yeah
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so you you kind of have to be a
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therapist in a way so that they
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understand that what you're offering
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might actually be their best alternative
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but you in in a way we're kind of going
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to the sales tactics here but you got to
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get them to see it for themselves that
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this is their one of their best options
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so this is where Josh and I typically
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will use if it's a written
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we'll use three options giving them
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choices and as we're climbing up in our
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choices we can get closer to their
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asking price all right and one might be
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a lowball just straight cash off or one
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might be interest only and one might be
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principal only and you can increase your
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purchase price because the terms are
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more advantageous to you and
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sequentially in each one of those offers
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so you know that's something you can
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consider as well and we all know that a
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confused mind doesn't make a decision
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and if you just ask somebody yes-or-no
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question to a low cash price a lot of
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times you're just going to get a no but
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if you give them three options and you
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say which one of these do you like
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better
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they might actually pick one they still
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might remember there's a fourth option
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which is get out of my house but you
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know typically the year your chances are
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will go up slightly another thing to
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remember too is when you're making
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offers directly to a seller if they're
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in pursuit of retail price well that's
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95 percent of the real estate
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transactions that occur yearly there's
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people that don't need to sell at a
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discount and will never consider your
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your offer is a good one so you need to
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act like no big deal
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been there done that you know and this
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gets into the NFL right I don't I like
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when people get in the endzone and they
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just drop the ball they act like they've
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been there before right they don't over
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celebrate that just irritates me right
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so I think when you're dealing with a
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seller you have to act like you've done
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this before is something you do all day
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your offer that you know they take it or
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leave it no big deal you just move on to
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the next house you're not you know
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desperately hanging on this one
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transaction and hoping that that you buy
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their house because they can kind of
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smell that on you so you need to know
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that hey I could easily move on to the
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next place no no big deal and you know
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it removes a lot of the pressure on them
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and gives you absurd chances that they
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might consider it and the intent that's
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desired so you know don't agonize over
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any of this documentation I know that
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that's one of those analysis paralysis
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that we see
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where were you're getting a lot of
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paperwork and contingencies and
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everything involved you want to make it
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very simple straightforward and deliver
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on what you're saying but you could
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simply you know we've seen everything
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from and we've received everything from
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rocket rocket lawyer LegalZoom to to
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actual local lawyers drawing up purchase
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agreements and these type of documents
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yeah I don't get hung up on the on the
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verbiage you know your title company can
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straighten things out and you know you
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get between you and as long as the
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intent is there and everybody's
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transparent and agree on the major terms
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you know that's what's important
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yeah we've used everything from one-page
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purchase agreements all the way up to
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you know many pages and everything in
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between
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yeah so that's that's really a good and
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an important thing to remember is that
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your title company is going to do the
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heavy lifting it's it's really anybody
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in the end could probably get out of a
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purchase agreement or letter of intent
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or what have you the the title company
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is going to be the one that does the
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heavy lifting there and gets a
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transaction complete for you the main
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thing is you want to have your
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negotiation take place in such a way
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that all parties want it to go through
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all parties want it to close if that's
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the case if you know you don't want to
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feel like you've bullied anyone into
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anything or pressured anyone into
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anything and have any buyer's remorse if
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everyone is agreement on the terms the
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price the closing date it almost doesn't
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matter if it's written on a bar napkin
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you know you can fix it all later if
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everyone's in agreement and pushing
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forward and wants the deal to happen you
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can straighten all the verbage out you
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know so where you get into trouble is if
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you try to sneak things in or leave
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things out of a contract and everyone's
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not you know or you may be bullied
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someone or convinced them that they
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should take this deal then they're not
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going to everyone's not in an alignment
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but when we've been in situations where
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everyone was pushing for the same thing
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you know the Tenno company might call
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and say oh they're not comfortable with
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this clause we need to change this okay
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whatever
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are we going to close yes okay great
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cross Adela or add to it or whatever it
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almost doesn't matter becomes a kind of
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irrelevant at that point so don't
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agonize too much over the the contract
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the documentation the verbage just make
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sure that everyone is agreement
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everybody wants the deal to happen
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everyone's happy with what's going on
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and when you have that you know your
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chances of being at the closing table
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successfully really go up so just to set
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some expectations here especially if
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this is your first time around doing
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this type of thing is that if you're
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going to start making offers off the MLS
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it does take a lot of offers so you know
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I would even I don't know Josh what do
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you think forty to one yeah and every of
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course is very market specific but yeah
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I mean are typically in our market you
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know it might take forty offers to get
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one deal yeah so it is does take a lot
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of offers so that's another that's
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another important point when you're
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finding an agent too they need to
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understand that they might have to write
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forty offers in your behalf before they
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get a successful deal so that's
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something they have to be willing to do
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a lot of agents were are not willing to
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put that kind of time in so consider
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that and your closing rate when you're
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dealing directly to the seller might be
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quite a bit higher just because they're
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calling you for a reason and they know
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what you do they've raised their hand
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they are self selected so so you might
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cut your your closing rate in half in
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that in that regard you're not going to
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get all of those either no but and
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you'll be able to eventually verbally
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exclude or just jettison some of these
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people because it's just not a good fit
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you can tell that just by the the
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interview yeah you can recognize it
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pretty quickly so anything else that we
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need to add anything that we've
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forgotten no I just might like it every
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other thing in real estate it's a
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numbers game you gotta talk to a lot of
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agents go talk to a lot of sellers you
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gotta write a lot of offers
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whether it's on the MLS or direct to
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sellers you just got to keep out there
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putting
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consistent actions in in to play to get
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any results so so the answer again is
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network networking networking networking
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you need to find those agents if you're
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going to go that route yeah whether
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00:15:43,170 --> 00:15:47,550
you're talking to agents sellers any
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anything it's it's the more people you
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talk to the more successful you're gonna
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00:15:49,740 --> 00:15:55,440
be so with that I hope Eric you've found
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a lot of value in that and actually if
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you shoot me your your full address I'll
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probably put something in the mail for
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you so with that we would always like to
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remind you that we put a lot of time and
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effort into this show and we ask you to
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give us a little support by going to
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00:16:10,680 --> 00:16:16,710
patreon and find us at rei rookies also
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shoot us an e-mail info at rei rookies
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comm if you have a topic suggestion or
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00:16:19,020 --> 00:16:23,520
any questions hit us up on Facebook
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Instagram and Twitter at rei rookies and
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remember get off the bench and get into
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00:16:26,430 --> 00:16:33,240
the game we'll see you next time I don't
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00:16:32,040 --> 00:16:34,680
like to tell a man what to do it is
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money but if you ain't investing in
422
00:16:34,680 --> 00:16:40,140
Barberie then you're dumber than a dummy
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00:16:36,330 --> 00:16:42,350
oh my smart well my property that's my
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advice
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you