Smaller REO Agent JACKPOT!

Mike: Welcome back to the FlipNerd.com REI classroom, where experts from across the real estate investing 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! Jim Huntzicker again host of the REI classroom today, and today we’re going to cover working with the smaller REO agents in the MLS. This is an absolute gold mine. And it will be your most consistent stream of deals in the MLS if you listen to what I say right now.

Mike: This REI classroom real estate lesson is sponsored by uglyopportunities.com.

Jim: Now, we know a lot of people, a lot of my students are new to the MLS. I work with a lot of successful investors who come from the private seller market and they come in the MLS like, “How do you do this? And how do you know?” or, I work with brand new investors who have never done a deal. And this works for both of them by the way. But either way, this is one of the most consistent stream of deals in the MLS period.
How do I meet these guys? First of all, you could start submitting offers and you will meet them that way – legitimate offers, not just like OfferBot style offers. But I’ll give you a little tip, this is how if you’re new to the MLS, this is how you meet the smaller REO agents. You have your agent team member, because you need somebody with MLS access, so either you have MLS access, you have an agent team member, or you’re licensed or whatever.
The smaller REO agents, by the way, are agents that do no more than 15 or 20 deals a year. Every market, I’m in suburban Chicago, we have like three rock star REO agents that do like 600, 700 deals a year. They do most of the deals that happen in our market. But every market has smaller REO agents. They knew somebody at a bank, and they do 10, 12, 15 a year, that’s who you’re looking for. The larger REO agents, you’ll never even be able to get a hold of. That’s a whole different . . . there’s a strategy there for a different time, but there’s a whole different strategy for the larger REO agents too. But the smaller ones, the ones you can actually get on the phone, the ones you can email, you let them double on the deal, meaning you let them get both sides of the commission. They’re already the listing agents, so they’re already going to get paid from the bank, but usually that’s not a full commission because the bank really dips into that. But there’s usually 2.5% or 3% on the buy side. So here’s what you do, here’s how you meet ’em. You go see three or four of their properties, even ones you’re not interested in, like overpriced listings that just aren’t selling, this is ideal. And then when you get the email for feedback, you give them a phenomenal feedback. Take actual, good, copious notes when you’re at the properties. And you say, “Look, I love this house, I’d love to buy it, but you’re priced at $210,000. I actually wouldn’t be a buyer at more than $130,000 and here’s why. I understand it’s not possible, but here’s why. It needs $66,000 to rehab it. My holding costs . . .” and I give them legitimate good . . . because I’m not planning on buying that. All I’m doing is giving him really solid information so that he can take it back to his asset manager and potentially get a price reduction. Not for me to even buy it, I mean maybe I’ll able to buy it down the line, but that’s not what I’m doing here.
What am I doing here? I’m communicating with a guy I don’t know or a gal I don’t know, I’m building rapport. Because I just gave him really solid information to take back to his asset manager to get a price reduction so that he can potentially sell that. And maybe even to somebody else, not even to me. But the point, you do that three or four times, and I wait about a week, now I’ve done this about 10 times, and then I call them and say, “Hey! I saw a couple of your listings last week. I hope you got my feedback. None of those really worked, they were just overpriced for what I do, but obviously you list properties in the same market that I flip property in and maybe I can take you out to lunch or buy a cup of coffee and we’ll see if there’s a way for us to work together. I always let the REO agents I work with double on the deal so this might be an opportunity for both of us.”
And I’ve never had anybody say no to it, and the funny thing is I have a couple of buddies today, that’s how I met them originally. It’s like going back probably seven, eight years. And they don’t know I started teaching on this a couple of years ago. And it’s funny, now they know that’s how I met them. But anyway, the point is, it works. I mean, they’re going to like you already because you just did them a solid by giving them four bits of great information to potentially get a price reduction, right? So that’s how you meet them. And then, what do they do? Then you go meet them, or you start buying their properties, and they will bring you properties before they even hit the market because they’re going to double on the deal.
So here’s how it works, I have about five agents who do this with me, and they know what I buy, they know where I buy, so it doesn’t even happen every month, it might happen every six months I get a call from the one guy because he doesn’t have that many in my market. One guy calls me every week but he calls me with a bunch of crap usually that’s overpriced at the beginning so I can’t buy it, but once in a while though, they call me and it’s like, “Okay it’s Wednesday, and like we have to list this property by Friday, but I know you can pay a list price, it’s in decent condition. Jere’s a lock box code, go look at it today, and it’s Wednesday. I have to list it Friday at noon,” because they have to list all the properties.
“But I think you can pay list price, and this bank does not have a first look period. So if you want, we can, if you want to pay the $210,000 or whatever it’s listed for,” in my market, my average purchase price is around $225,000, that’s why I keep using those numbers, “but if you can pay the $210,000, then we can just put it under contract.” The bank will accept that like this, especially if you’re willing to close in two weeks and waive the inspection, which I always do. So they will bring you deals before they even hit the market. And even if they don’t bring you deals before they hit the market, like you know, once you build rapport with these guys, when they see the offer, or you go see their property, like you call them like, “Hey! I was just saw 123 Main Street. I want this house, I saw you listed it today,” you’re there two hours later, three hours later, whatever. “I can pay full price.” And you don’t even have to pay full price, and sometimes I even pay over, right. Or sometimes I offer less, it just depends. I’m not saying you have to pay the list price, but if it’s right, then pay it.
And there’s times I offer over, there’s time I offer less, there’s time I can’t pay anywhere near what they it listed for because its way overpriced. So it just depends on where it’s listed. But when they call me and they’re excited, that means usually the bank let them price it at a good point.
The problem we’re seeing today is that we see a lot of the banks, they get cocky. The market’s picked up a bit in the past couple of years, so they’re not listening to the BPOs anymore. I was told recently that the asset managers are going on Zillow, using the Zestimate. Really? But that’s true, so the prices aren’t always going to be fantastic.
You know how I get that information? How do I have the information that asset managers are not listening to BPOs and they are actually going to Zillow to get some assets? My one buddy said that he recommended $179,000 on a list price, $179,000, and they listed at $249,000. His recommendation, he though was a little high too at $179,000, so that’s what the banks are currently doing. So I don’t always offer, and they don’t always call me, because obviously he’s not calling me on a $249,000 when his recommended price was $179,000. I can’t pay that and he knows it.
When you build these rapport with these guys, you build relations with them, and they will bring you deals before they hit the market. The key is, giving them money. Giving them money. You’re gonna give them both sides of the deal, it’s totally legit, totally legal. About 5% of the banks do not let the agents double on the deal, they just don’t, they can’t do it. You just say, you just put yourself down as the agent then like, I’m licensed so I’m the one that goes down as the agent there. And the great part is, all you do is work that into the deal.
If you have, let’s just choose $200,000 because it’s easy, and the commission was $5,000. Well, if I could pay $200,000 and waive the commission, I could also pay $205,000, and get a commission, because you know what, it’s the same thing. Because all we do is take the $5,000 and put it back in the pot. I don’t keep any commissions as an agent, because that just goes into the pot for the deal. So now, I did actually buy it for $200,000 even if I bought it for $205,000. And if I waive the commission and buy it for $200,000, well then I buy it for $200,000, it’s the exact same thing. So anyway, I hope you found this information useful, we’ll see you next time. Bye for now!

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