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and planned on picking it up herself, or letting a favored client buy it and re-
list with her after the rehab was complete. She may have wanted a family
member to buy it and make some cash, who knows. My offer for $5,000
over asking was probably never submitted. If the agent was trying to
hoodwink the seller, my high offer would probably make the seller wonder if
the house had been priced too low. If the buyer was the agent or a friend of
the agent, the agent may have been worried that a backup contract for
significantly more money than the first contract might tempt the seller to try
and back out of the first contract.
Whenever a deal does not work, I always take time to look at what
happened and think what I might have done differently. Steps I could have
taken would have been to have at least looked at the house. While I knew
that I was stealing the house at that price, a seller might think it strange for
me to want to buy a house that I haven t even seen inside. Since this time, I
have always looked at the house in detail before making the offer.
The other thing that might have hurt me here was going through my
agents with the offer. If the listing agent sells it herself, she can pocket the
full commission (less her broker s share). If my agent brings the buyer to
her, she ll just get half the commission (less her broker s share).
Unfortunately, it is true in this business that some unethical agents will push
their sellers to accept the offer that will get them the most commission.
Most agent s are ethical and submit all offers equally, but there are many
that do not.
While I was furious at the time, I had to realize that I have often been
on the right side of such deals. The following article appears on my site, and
is reprinted here because it really is important to understand. I have inserted
it in a different font if you have already read this article and want to skip
forward. It tells you how to get on the right side of such deals:
Advanced real estate training information at:
www.4RealEstateInvesting.com/members only
Pocket Listings--Be an insider and Profit
By David Whisnant
Attorney/Real Estate Investor
Author of the Magnetic Real Estate Deal Maker, Rehabber, and Motivational Workshop
One of the most frustrating things early in my real estate investing
career was to see a For Sale sign go up on a listed piece of property, call
the agent that same day, and hear that the property went under contract
the day before the sign was even put out. Furthermore, these deals were
often great ones that I would have snapped up given the chance.
What is really going on here is that the agent obtains a fixer-
upper listing. The agent then pockets the listing, offering it to a few
insider investor clients. One of these investors sweeps it up, and the deal
never hits the larger market. By the time you see the sign, it s too late. In
some areas, a surprisingly high percentage of the houses sold fall into this
category, with the agent selling the property before it is even on the
market. Agents love to sell a house this way because they make the whole
commission (no splitting with another selling agent), and they keep their
investor clients, who have listings to give them in the future, loyal to them.
This practice MAY be slightly unethical for the agent, as it is really
in the client s best interest to have the property out on the general market.
For example, if the agent advertises the property on the computer MLS
(Multiple Listing) system, and places a sign in the yard, numerous parties
may want to make an offer, potentially bringing in a higher price. On the
other hand, one might argue that the agent helps the client by getting a
quick sale, and that the client doesn t have to accept any offer that is not
high enough.
As an investor, we don t really care. We just want to be on the call-
list for this type of deal. We want to wrap these deals up before anyone
even knows they are out there. How do we do this? Here is our game
plan.
1) Select our agent:
When you have narrowed down the area you want to invest in, and you are
familiar with the market, you need to create ties to an agent. The agent
that you want to select is an agent that does a lot of business in our target
area. You can find this agent by simply driving the neighborhood and
seeing who has the most for sale signs up.
2) Send a letter to that agent with the following:
a) A statement that you are interested in buying investment property in
that neighborhood. You don t mind fixer uppers, and are looking to buy,
renovate, and resell properties. The agent will realize that you are going
to resell, and that you probably will need to list properties in the future.
This gives the agent two chances for profit: The first when you buy, the
second if you list with them when it is time to resell the property.
Include a business card with this letter. Optional: attach a magnet onto the
back side of the card. Magnets to stick on business cards are available at
Office Depot/Staples for a reasonable cost. Your cards can contain the
information on which neighborhoods you re looking for. (Example:
Interested in buying homes in xyz neighborhood to renovate and resell.)
b) Attach a letter from a mortgage broker showing that you are pre-
qualified to buy an investment home in the approximate price range of the
homes in the target area. In the alternative, get one saying that you have
met with the mortgage broker, and the mortgage broker will be handling
your financing needs for rental properties. Feel free to let the mortgage
broker include some PR about his firm in your packet. The mortgage
broker will bend over backwards for you in the future because he will see
that you are helping to build his business. This letter from the broker will
make you seem like a real player, i.e. someone who can close on the deal
and pay the agent. Mortgage brokers are happy to hand out letters like
these to anyone with a pulse. That s a big secret that most sellers don t
know, but now you do.
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