Profitable MLS Deals When Inventory is Low

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Jim: Hey, everybody. I’m Jim Huntzicker, Founder of Real Estate Investor Academy, and I’ll be your host for today’s REI Classroom. Now, today’s topic, we’re going to go over getting deals out of the MLS in a market with low inventory.

Mike: This show was sponsored by passiverental.com.

Jim: I see people all the time that . . . because I teach how to use the MLS to get deals to flip up. I’ve been doing it for eight years. I’m a licensed agent here in Illinois. People, whenever they find out that I use the MLS to get most of my rehab deals, I hear two things all the time. Either there are no good deals in the MLS or the MLS is too competitive. Now, you think it’s too competitive for all those non-deals? All that tells me is they just lack the education it takes to get the best deals. I wasn’t always a master at using the MLS to get properties.

I started out as an agent. I started working with investors, realized I was on the wrong side of the transaction, and then I started becoming an investor myself. The reason I have such a good understanding of the MLS is because I was an agent first. And more importantly, I knew how to talk to the agents. And that’s probably the biggest thing here in why I still have so much success. I’ve been doing this since 2008 so all the way through the downturn, all the way back to when the market picked up again. This stuff works in any kind of market so if there’s a lot of inventory, low inventory like we’re experiencing now, there are still plenty of ways to get deals out of the MLS.

In markets right now, it’s more challenging when we see low inventory levels. It’s more of a seller’s market. There are still plenty of deals in the MLS. In fact, I got three deals in just over a week last month. Either way, the biggest keys to success in the MLS in a low inventory market are two things. Speed is probably the most important, but communication is also very important. What you say to the agents on the deals, how you position yourself as an experienced investor, making sure they understand that you’re not going to back out if it’s a brand new deal and has three or four offers.

Sometimes the highest dollar amount is not always the most important thing, especially to estate sales. They’re worried about they just want this thing to close. It’s their family house or their mother or father that just passed away, and they don’t want to keep this house on the market for a long time. They don’t want people trampling through their house. So don’t assume that the highest cash amount is what they want. They want no trouble after they’ve accepted an offer more importantly than the highest amount.

I will tell you half the time, literally half the time on estate sales on brand new listings, I am not the highest cash offer and I get them to accept my offer over others. It’s just because I’m educating the agent. What I’m doing there is giving the agent some dialog as to what to bring back to the seller because again, in the MLS, you don’t get to talk to the sellers. You only get to talk to the agent.

Now, I’m an agent so I get to say this: most agent suck, frankly. The average agent in the National Association of Realtors only does three deals a year. Three. That is a fact. So knowing this is very important because they are experts. Somebody hired them and they’re paying them lots of money to sell this house, but they don’t really know what to say to them.

I don’t talk to them in a condescending way, but I give them all the dialog and I plant all the seeds so they can look like a rock star coming back to their client saying, “Hey, we got three offers, but this guy, Jim, has got this offer. He’s not the highest one, but here’s the thing. He’s waived the inspection and the other two offers that are higher didn’t waive the inspection, and what he said is that he’s been doing this for a long time and he’ll schedule the closing after you accept his offer.”

What a lot of these offers do, the ones that might offer you list price or over, once they’ve got you in your contract, and I’m sure they didn’t waive the inspection period, which they never do, now what they’ll do is they’ll ask you for a 20, 30, or $40,000 inspection credit. That’s how they get the price down, but you’re already under contract. Often times, people will settle in the middle and take a $20,000 reduction just to be done with it.

If you call me back within two weeks after that happens, my offer might not be goo anymore because I don’t have unlimited money. I might go buy another listing, which I’m going to do as soon as we hang the phone up if I get the feeling that you guys aren’t going to accept my offer. Or if you come back to me in two weeks, maybe I do still have the money available, but I realized I can’t pay this price. Now I actually have to pay 20,000 less too. But today, I can guarantee the price that’s on that contract right now and I can close two weeks from today with absolutely no trouble. We can just give the contract to the attorneys. Well, in Illinois, we’re an attorney state, but literally, you accept the offer and we can just schedule the closing literally 10 days, 14 days, whatever you want.

Having those dialogs to give to the agent . . . and it’s true, by the way. So that makes the agent . . . it’s your job in any kind of market, especially when inventory levels are low, to give information to the agent that he can take back to the seller and say, “Hey, this is the offer we should take.” The agent, all he or she wants to do is to get paid. They want your offer to close. They don’t want to go through accepting an offer that starts giving them trouble in two weeks and they’ve got to back out and find another offer, and now their commission is two or three, or four weeks out, maybe a month, month and a half from what they thought it was. So it’s in their best interest to take the offer that’s actually going to close too.

This process is really just education. That’s the communication that’s very important there, but also speed. Two of the deals that I mentioned that I got, that I got three deals in just over a week, two of them were brand new listings. In fact, they were only about a mile away from each other. Funny thing, I got back to my office from looking at the one, evaluating the one, I called my assistant, saying, “Hey, put this offer in.” I literally get back to my office and I’m starting work, and another new listing came literally a mile away just in the time that I came back from the other one. So I jumped in my car and went back and saw it immediately because these listings . . . and that one was way underpriced, very rare in today’s market, but it was. It was an estate sale, same thing.

Again, you just have to have the proper dialog. But speed, and not just speed of getting the property . . . that’s extremely important because the best sales in the MLS will go in hours, literally hours. My favorite, most profitable deals are gone in hours after thy list. Sometimes they might be presold if they were an REO or a foreclosure listing, but estate sales are not presold. Estate sales, it’s a very emotional sale. They just want it to be done so if they get a decent offer that’s cash that will close in two weeks with no hang-ups, that will waive the inspection and you’re not giving them any trouble that’s very, very powerful stuff.

So again, don’t assume that the people want the highest cash offer. In fact, in estate sales, that’s usually not the case. They just want a clean, fast closing from somebody that’s not going to give them trouble and beat up on their family house that could’ve been in the family for 50, 60, 70 years if their parents were the original owners, which I’ve experienced that several times.

Speed also. You have to be able to evaluate them quickly. In fact, you get the offer in quickly. Call the agent quickly. You never should ever, ever submit an offer in the MLS without calling the agent first. Never. I don’t care how low it is. People always ask me because my record is actually 32% so people always ask me how do I get my lowball offers accepted when I do submit offers that are lower than the list price. It’s very simple. There’s a mindset here and you just have to change it real quick and it will be very easy for you.

I have never submitted a lowball offer in my life. The reason that I’m able to call the agent so confidently when I do, before I do submit an offer that’s lower than the list price, is because my offer is congruent with the current condition of the property. Just because they have it over-listed doesn’t mean I have to pay overprice for it. Again, that’s another part of the education process.

In any kind of market, it’s important that you have speed and proper communication to get the best deals and the most profitable deals in the MLS, nut even more critically important in a market where inventory levels are low. When the market gets up and the market starts picking up, a lot more investors jump into the market. This is actually the wrong time for them to do that. However, that’s what always happens.

Here we are and we have low inventory but you can still get deals. You just have to have speed and proper communication. I hope you enjoyed this training in the REI Classroom. We’ll see you in the next training. For more information from me, you can always see me at www.realestateinvestoracademy.com.

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