Advice Needed Quickly! Please!!
My real estate broker who sends me deals all the time, sent me, what I think to be a killer deal...if the numbers play out correctly. This house is listed on the MLS with a description of "Needs TLC, carpet, paint, and minor repairs". Not sure what the minor repairs are YET, but I plan on driving by later today.
This home goes to foreclosure sale on the 25th of this month, and the amount owed is 81k. It's listed on the MLS for 131k, so I know that there is at least 50k in equity BEFORE any repairs. How would I approach this owner and get the deed subject to without having to go through the listing agent? Also, since my broker sent me the listing, I would assume I would kick him a finder's fee and then let him know that I would in turn list with him when I'm ready to sell, correct?
My main question is, can I go around the listing agent and talk directly to the owner? If so, what should I tell the owner and/or agent if they become involved? Should I just have my broker do this for me?
Any help is greatly appreciated!
Junoti
Since I don't know CO customs, here's an answer based on my PA experience. If the property was listed in the MLS presumably because there is an exclusive right to sell listing contract between the seller and the listing agency, neither you nor your agent can "cut out" the listing agent's compensation by speaking directly with the seller.
Go to the door and offer cash for keys.
Not a grand or two, but substantial cash
in the double digits. Then purchase when you have good title and pay your agent! Sounds like you are on the way to building a good relationship with your
agent. Keep it that way!
Best Riches,
Jeff Adam
[addsig]
Junoti,
If you want to talk directly with the sellers because you think by doing that they won't have to pay their listing agency a commission, then I repeat what I said earlier:
if there is an exclusive right to sell listing contract between the sellers and the listing agency, the sellers are liable to the listing agency for commission regardless of whether you talk directly to the sellers or not. You can try to talk to the sellers directly but that's not going to accomplish your objective which, as I understand it, is to minimize the amount of commission owed by the sellers.
If your agent tries to circumvent the listing agent, that would probably be an ethics violation and maybe also a violation of the MLS rules.
Junoti,
I agree with JeffreyAdam. You can talk to the sellers directly. I have done it before. Actually they called me from my letters. They had already listed, but no potential buyers. When a seller is faced with foreclosure, it is not ETHICAL for the realtor to try and get FMV in a few weeks. Anyone knows for a quick sale the price has to be below the FMV. Several times the seller waited for the realtor to sell it and not cancel their agreement for me, because the realtor told them they would sell it before the sale date. They did not. The seller lost, the realtor lost and all because the realtor wanted a bigger commission, and was obviously not worried about the seller.
I do pay realtors commissions when they are deserved and appropriate. In your case I would talk directly to the sellers, offer them some money but they have to lose the realtor. They can probably cancel at anytime since a six month contract would have been ridiculous.
Good luck and let us know the results.
Thanks everyone for the great advice.
Nancy, my ultimate goal isn't to cut out the listing agent's commissions, but rather, not pay the listing price and try to take it subject to. I'm more than willing to give the listing agent some cash (maybe once I sell the property).
Thanks again for the advice.
Junoti
This is not directed at any particular person - just food for thought.
It's so odd how some feel totally justified in "cutting out the agents," and justifying it by implying that all agents are greedy - they just want their BIG (5-6%)commission. There is a CONTRACT. And assuming that the seller is over 18 and of good sound mind, they agreed to the contract. If you can circumvent the agent, good for you. But there's no need to make the agent seem like some sort of shyster con artist for wanting to get FMV for the seller and get a measly commission, when bottom-line, creative investors want to put the all the equity from FMV in their own pockets. Do the math. And then to claim creative investors are "rescuing the seller" by sending them off with less money than if they could sell at FMV - yeah, right, you're the "good guy." There's no foul in trying to get FMV for the seller. And there's nothing devious about an agent trying to do his/her job. True, creative investors can help a seller in a bad situation, but it does more harm than good to business relationships, to demean, denounce, and belittle agents.
makingaliving, it appears that you know or are a "good" agent. if so, congrats! however, this idea has been toggled back and forth for months if not longer, on this site. all agents are not out for the seller's best interest. you MUST know that. don't take offense to those kind of statements, i'm sure they're not personally directed.
i know from experience watching my X get slugged over the head by an agent, watching 85% of offers i make thru an agent, not even get submitted - and personally know quite a bit of them that simply want to stretch thier 6% to the max price possible. likewise, there'll be investors who aren't out for the true win/win either.
if someone is in a bad position, why not offer some of thier equity as opposed to their losing it all - good investor's idea. show all offers less than fmv for a quick sale, as opposed to waiting for full commission and getting no sale at all - good agent's idea.
EXACTLY, Jackman!
Why in HELL do re agents/realtors need an EXCLUSIVE contract to sell a house that's in dire straights? It should be up to the seller as to how they want to sell their home. If the AGENT has positively identified a buyer (with Personal Identification, so they can be tracked to/with that agent) with a FMV offer, then more power to them. But if someone NOT identified by the agent wants to make a less than FMV offer and the Seller wants to consider it, then so be it.
It's called a "Free-Market" economy when it's allowed to work. Those who hustle, make the deals.
1. If a deal/property is worth it, and attracts FMV offers, then agents will have the upper hand over investors who need more equity in the deal.
2. If a deal/property CANNOT attract FMV offers, or has other problems, then the INVESTORS can buy it.
There are more than enough properties for everyone! Plus, when the investor goes to SELL at FMV or higher, they can utilize an agent THEN! Happy days for all!
Quote:
On 2004-02-22 12:45, Junoti wrote:
Thanks everyone for the great advice.
Nancy, my ultimate goal isn't to cut out the listing agent's commissions, but rather, not pay the listing price and try to take it subject to. I'm more than willing to give the listing agent some cash (maybe once I sell the property).
Thanks again for the advice.
Junoti
Junoti,
It appeared from your initial post that you wanted to go around the listing agent to eliminate that listing commission expense (so that presumably the sellers would cut a better deal with you on price) and that you intended to pay your agent (who is not the listing agent) some fee for having brought the property to you.
My initial post was just to point out that your talking to the sellers directly may or may not relieve the sellers of having to pay commission to the listing agent, depending on the type of listing contract that was signed between sellers and listing agency. That is a matter to be worked out between the sellers and the listing agency.
Quote:
On 2004-02-22 14:30, 2 wrote:
EXACTLY, Jackman!
Why in HELL do re agents/realtors need an EXCLUSIVE contract to sell a house that's in dire straights? It should be up to the seller as to how they want to sell their home. If the AGENT has positively identified a buyer (with Personal Identification, so they can be tracked to/with that agent) with a FMV offer, then more power to them. But if someone NOT identified by the agent wants to make a less than FMV offer and the Seller wants to consider it, then so be it.
It's called a "Free-Market" economy when it's allowed to work. Those who hustle, make the deals.
1. If a deal/property is worth it, and attracts FMV offers, then agents will have the upper hand over investors who need more equity in the deal.
2. If a deal/property CANNOT attract FMV offers, or has other problems, then the INVESTORS can buy it.
There are more than enough properties for everyone! Plus, when the investor goes to SELL at FMV or higher, they can utilize an agent THEN! Happy days for all!
2:
The sellers and the listing agency agree on a type of contractual relationship they will have -- exclusive right to sell or whatever. The sellers agreed to whatever listing contract they agreed to and signed a contract.
In addition, it seems that several people are assuming that just because the list price is X$ that that's carved in stone. As was pointed out, the listing agent's job is to look out for the seller. If that means recommending a deal that pulls them out of a jam (instead of trying to hold out for full-price offers), then the listing agent should counsel the client accordingly.
As was also pointed out, not all agents and not all investors strive for win-win situations.
Quote:
On 2004-02-22 14:30, 2 wrote:
EXACTLY, Jackman!
Why in HELL do re agents/realtors need an EXCLUSIVE contract to sell a house that's in dire straights? It should be up to the seller as to how they want to sell their home. days for all!
Because that's the way it is. And it's legal. And the rules are set by state boards.
Often times, sellers come to a realtor BEFORE the foreclosure begins, hoping they can recoup as much equity as possible. It is not wrong for an agent to try to do that for a client. It is wrong for creative investors to think everyone should just step aside while they make their deals -- deals which might rescue a drowning seller, but do not necessarily give them any financial advantage. There are contracts. These contracts state the relationship between the broker and the seller. No one puts a gun to the seller's head to MAKE him/her sign the contract. If they don't want the services of a realtor, they don't sign. If they do sign, like any other contract -- including the ones YOU make with sellers -- they are bound to the terms.
Believe me, as an agent, I present ALL offers. I have had sellers, really needing to sell, tell me that they "aren't going to GIVE the house away," even as I sit there thinking this might be the best and last offer you'll ever get. Then if we agents try to sell them on the idea of selling low, guess who gets blamed at the closing table ? -- the agent. Can't win. I don't heavy hand my clients. I explain the offer as it is written. I show them an actual calculation of what it will cost them to sell at the offering price. If they ask what I think, I tell them. But the final decision is up to them. Oh...and I let my clients cancel our contract anytime for any reason. I don't have the time or inclination to work with people who don't want my services.
Do you know what happens to that 5-6% commission? Imagine this is $5-6 dollars. $3 goes to the selling agent, if they are the ones that bring the buyer. $1 goes to the brokerage firm. $1 goes to marketing. $1 goes in my pocket. Can I please have the $1 for all my time and effort trying to sell this house? And if I have to give up some of my commission to make the deal work, then my $1 is cut even more.
(sorry commissions are one reason I got back into buying investment properties)
And no, Jackman...I don't take personal offense. I just get weery of what I perceive are repeated attacks on real estate agents. So much blanket condemnation. Why is an agent considered so different from an investor? Everyone is trying to make a buck --- if anything the seller might be wise to watch out for allaus.
There is a lesson to be learned here for everyone above looking to avoid the agent. This is not necessarily directed toward the original poster.
My real estate broker who sends me deals all the time, sent me, what I think to be a killer deal...
Why would you want to cut both agents out of the deal when you have ~50k equity? He sent you the deal! Not only are they entitled to their cut via contract, but why punish someone for dumping ~42.5k in your lap? Toss them their 7.5k, consider it an assignment fee, make lots of money, and move on. Next time he finds a deal with tons of $$$ it will go strait to you (again)
Cheap people annoy me
-Chris
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Live long and be profitable![ Edited by c-brainard on Date 02/22/2004 ]
c-brainard,
My intentions are NOT to cut anyone out of money they deserve. My only intention of this post is to get advice on how I can talk to a seller in person, instead of having to go through a realtor who MAY not submit a really low ball offer. Now, since this home is going to auction in the next couple of days, the listing agent will most likely lose out anyways. If, after talking to the seller in person, I am able to work out a deal, by all means I would reimburse the listing agent for their marketing fees, etc. so that they don't walk away empty handed.
Now, as for my broker who brought me the deal, my original post did say that I would kick him a finder's fee, so that's a moot point.
My intentions are to provide a win/win/win/win solution (seller/me/listing agent/my broker).
Junoti
Jeez you guys! he just wanteed to know if he could talk to the owner.Which by the way you're allowed to talk to anyone you want to (at least i think we're still in america)
But if you do buy the house and the seller has a contract with the agent the seller is reponsible for paying him, so it's not your problem to pay the agent. that my friend is up to the seller. So it doesn't matter if you talk to the owner the agent or the next door dog to get the deal.
now you could be a nice guy and offer to pay the agent for the seller but YOU DON"T HAVE TO.
leave the ethic out of your advice people let the person asking advice use thier own judgement on thier own ethics.
[addsig]
Exactly Ray!
You don't know how many times I have seen listed houses that were days away from the Trustee Sale.
What has worked for me is knocking on the door, offerring a solution. If cash for keys is the solution. You can offer the realtor a small commission to get the grant deed recorded and title policy in line if you are getting one. Having been in this situation before, and knowing that a lot of realtors just merely "throw" houses in the MLS hoping for another agent to sell so they can make the 3% commission, this is my response to them.
"Mrs. Realtor, you have had your clients house listed now for 2 month's and have been unable to sell it. In two weeks they will lose their house, credit and be put out on the streets. I am offerring them a solution to at least save their credit, and enabling them to go out and get on with their life. I can pay you a small fee to help with this transaction and help them find another place to rent or lease. If you are not interested, then you should talk to your sellers about paying you a commission." Usually this works and
the realesate agent will back down.
Best Riches,
Jeff Adam
[addsig]
I'm not going to argue with you. Here is the bottom line...
1) The realtor will submit the offer, but may not recommend the seller accept. However, if the realtor has a choice between 3% of a lower offer vs. 0% or a reimbursement, I think he will recommend the seller accept it. With most people, their realtor's opinion of a deal carries a lot of weight. Mind you, the 6% does NOT come out of your pocket. Note: If the realtor does not submit the offer, they are in violation of their license agreement. Contact the realtor board for your state and make bad things happen.
2) You are going to give the selling realtor reimbursement for marketing fees, etc. I am positive you do not give them the 2%-3% outlined in the contract. It also doesn't sound like you are going to provide your buyers broker his 2%-3% either. Any way you look at it, you are asking both realtors to take a (drastically) lower commission. They need to eat too...
IMHO you are being a little greedy. I am well aware how expensive RE agents are, but I wouldn't short change mine on any day. They are an important tool for any investor to use and I think your approach is unethical. In the long run, it is going to catch up with you. To answer your original question, yes you can contact the seller directly. I’ve done this before when their RE agent wasn’t being helpful. However, this does not alleviate the seller from his obligation of 4%-6% or whatever he agreed to provide for the sale of his house.
-Chris
[addsig]