Jim Huntzicker, Creator of MLS Domination, joins today to share how to buy deals off the MLS. Many are shocked at what Jim is able to do – sourcing deals off the MLS…but the proof is in the pudding! Check out this show – and learn how you too can find deals (or more deals) by working the MLS, working with agents and brokers, and so much more!
Mike: This is the FlipNerd.com Expert Real Estate Investing Show, the show for real estate investors, whether you’re a veteran or brand new. I’m your host, Mike Hambright, and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility and taking control of your life and financial destiny, you’re in the right place.
This is Episode #311 and my guest today is Jim Huntzicker. Jim is the founder of the Real Estate Investor Academy and the creator of MLS Domination. And Jim is an expert at finding and buying deals off the MLS. He truly has turned into a craft that has worked for him to buy a lot of houses in both up and down markets. And he’s here today to share some of his best tips, his best secrets, with listeners of FlipNerd about how to successfully find deals and buy deals off the MLS.
Now, if you’re one of those that believe that this won’t work in my market, you really need to listen in today. Jim’s got some great information to share. Jim even shares access to a free and awesome resource that he’s going to share with members of FlipNerd that is really a free guide on the fundamentals of how to work the MLS to find real estate deals. It’s an exciting show. You’re in for a real treat today. Please help me welcome Jim Huntzicker to the show. Jim, welcome to the show, my friend.
Jim: Hey, thank you, Mike. Thanks for having me.
Mike: Good to see you. Good to see you. So I’ve bought hundreds of houses and I personally have not bought a lot off the MLS, but I know there are people that have systems to do it. I know you do. And so I’m always excited to talk about this because when a market is getting hot like it is now in the retail space, you need all the lead sources and ways to buy houses that you can. So I’m excited to talk about it today.
Jim: Yeah, no, for sure. You know what, it’s funny see, the way you learned to become a real estate investor was you learned all the private selling and marketing, which is the way a lot of people learned it because when they start investigating how to become a real estate investor and how to find deals, that’s what everybody teaches on.
And I did learn that stuff eventually. But, see, when I started out, I was a real estate agent. And so, my father was an agent, which is why I became one. And I thought, “Oh, man, this is going to be easy, all these big commission checks.” And the only problem was what they teach you to do at the first class, once you get into your brokerage is call all your friends, all your family. Well, the good part there for me, or the bad part, rather, is that my father, all of my friends and family already used my father. Now, there were a few . . .
Mike: They were covered.
Jim: Yeah. A few exceptions to that rule, of course.
But still, I was like, “Man.” I had nothing. I was like, “Ugh.” So my father was not getting out of the business anytime soon. This was 11, almost 12 years ago now. And so I had to figure out my own way. And that’s how I found real estate investors.
And I just kind of stumbled on it. And now for about a year, a year and a half, I was helping real estate investors buy their properties off the MLS, they’d fix them, I’d sell them, they’d make $30,000, I’d make a little commission. And so it didn’t take me very long to realize I was on the wrong side of that coin.
So my start as a real estate investor, all I knew of a deal source was the MLS because that’s all I did. I just helped other people do it. And so once I once I decided to become a real estate investor myself, and let me say, be very clear about, I thought I knew a ton of stuff because I was helping these guys for a little over a year. I saw how they were running their business and how they were getting deals. I was getting their deals for them. I was selling them for them. I mean, heck, I was doing the hard part. And little did I know about how much stuff actually went into the middle, even though I saw what they were doing, I saw the before, the after.
My first deal, I had no education at all from a real estate investor standpoint and I picked the wrong partner, the wrong, wrong, wrong . . . everything went wrong. And I was going to lose money on my first deal. I wasn’t sure how much. I just knew I was. And I didn’t have any money at the time at all, let alone money to lose. And this was part of the stuff that I saw was possible in the MLS.
And so there was a property. I’ll never forget. It was in my hometown of Schaumburg, Illinois, on Sand Pebble. It was listed for $440,000. I showed it to a client. He wasn’t interested. The long story short was it was updated, but it was the ugliest update you ever saw in your life. This nice old lady lived there, super, super nice, was always home when I went there. But I’ll spare you all the details. It was listed for $440,000, originally $540,000. It was down to $440,000, but I bought it for $300,000.
So I was, that’s 31% off the list price. And that showed me what was possible in the MLS. Now, 32% is actually my record. It was listed for $400,000, I bought it for $273,000. And there’s a dance that goes into how to get those deals and so it’s not by mistake that I got that kind of a discount. I intentionally went after it. Now, the first one I did stumble on and the dance that I’ve now created that I call the dance of how to get that deal, I did the dance and didn’t even realize I was doing it.
I actually went to the house four times because I didn’t know my numbers. I’m like, “Oh, I’ve got to, I’ve got to, I’ve got to look again. How can I pay?” And the funny thing with the first deal, I put down $5000 earnest money, I put down $300,000 purchase price. I did not have a proof of funds. I didn’t have a proof of funds because I didn’t have any money. I didn’t have the $5000 earnest money. Now, I am not encouraging or recommending anybody does that. In fact, I think you should not. But I was desperate because I was about to lose money on my first deal, which ended up being $36 grand.
But if there’s a will, there’s a way. So I put this offer out there expecting them to reject it. Like I was desperate. I’m like, “Ugh.” So they came down, $20,000 increments. $440,000, 20, 400, 380, 60. I could’ve paid $320,000 for this house, but they kept coming down so I’m like, “I’m just going to keep staying.”
And they did come down to $300,000. It was as big of a surprise to the agent as it was to me. And now I had to find the $5000 to put down for earnest money because they had accepted my offer and I had to find the rest of the money too because I needed to buy the house now. And if you find a deal that’s that good, it was not very difficult to find the money to buy it.
And so that’s how I got my start and that’s why the MLS has been my primary deal source for my entire investing career for the last eight years. And I now buy from wholesalers. I do some direct mail myself. But I don’t do a ton of business as a rehabber. I do big rehabs. my average one’s about $75 grand.
And so this year, if I do 30, that’s a lot. My focus is more about lifestyle these days than it is about money. But every time I go into the MLS to get deals, I can find them. In fact, I was kind of focused on hanging out with my kids the last few months and, all of a sudden, I sold a couple of my rehabs in the same week. And I’m like, “Crap, I don’t have anything in my private seller pipeline. I don’t have any more rehabs right now, no new ones.”
So I was like, “Crap, I’ve got to stop what I’m doing,” because I was focusing on some other projects that I’m doing right now and in a six-day span, I bought three properties. That was good. That’s all I needed right then. And so it took me six days to find three properties in an MLS with very limited inventory right now.
So it’s just a matter of knowing how to work the deal. That’s it. There are always deals out there. The MLS, two things I always hear. It’s either too competitive, or there are no good deals. But it can’t be both. Is it too competitive in there for all the non-deals? I mean, come on.
Mike: Obviously, there’s a lot of art to it. I know we’re not going to get to all this during today, but I hope to knock some of it out because I know you’ve got a lot of great information. I know you’ve got a product that you’re launching right now as we speak, as well.
But we’ll come back and talk about that in a little bit. But I want to talk about I think probably most people, myself included, would assume that you can’t get that much off of a seller’s price, which is why when you look at the MLS and you’re like, “Yeah, it’s priced $20 grand below market, but if it needs any repairs, it’s not it’s not even worth it.”
So back in that example, obviously, you said the updates were bad, so they had to discount it. But what were some of the keys in maybe not just that example, but other things that you see, that cause people to take quite a bit less than what they have it listed for?
Jim: Well, being an agent, I’ve realized that people, sellers specifically, are not very honest with their agent, even an agent they trust because it’s the one they hire. Or I should say they might trust them, but there’s a level of trust, if you will. And so what I mean by that is an agent never knows what a seller’s bottom line is because with the sellers think is if they told them their real bottom line, they’re going to go out there and tell all their realtor friends and bring them a low offer because that’s the only they’re going to get is from the agents this guy knows. And so they always hold what they’re willing to do. They play their cards, they hold them very tight.
So knowing that, when I know there’s equity and that there’s market time and there’s equity, those are two factors that are, for me, I’m going after it. And so the one, my best deal ever, which was the one I told you, the first deal I just got that I told you about, that one took a couple days to get together. But my best deals, oddly, it was listed for $400,000, I bought it for $273,000 so it’s 32% off. That was a 10-minute phone call. When I called, I gave the I gave the offers and I hung up and 10 minutes later, they called and she’s like, “I can’t believe they accepted it.”
Well, here’s the funny thing about that is they were originally priced at $550,000, down to $440,000, 360 days on the market, so almost a full year. So this was an estate sale. It was completely paid off. And the kids that were the heirs of the estate all had money of their own and they were actually okay at $300,000. But the agent, the real estate professional they hired told them the house was worth $550,000 and that’s where they should list it. So, well, who in their right minds would say, “No, you know what? You don’t know what you’re talking about. List it for $300,000.”
Of course. So they were willing to take $300,000 the whole time. And so it’s just a matter of that was a deal that was on the market for a long time. But a lot of the deals, I just did a deal last year now priced at $299,000 and I bought it for $245,000. And I used the agent on that sale, I used the agent as my agent, so he double ended the deal. He was a listing agent and a buyer’s agent. Now, I’m a licensed agent in Illinois, but I rarely act as my own agent on deals that I’m buying as a real estate investor. Only when I’m forced to.
So he was even my agent and so he was making the commission. And when I told him the most I could pay was $245,000, “Oh, that’ll never work. It’s never coming together. They just listed for $299,000.” Whose offer did they accept? Mine. $245,000. And this guy was even making more money than other . . . the other offers that he said were going to come higher were with other agents, he still did not feel like my offer . . . I was wasting his time.
So the takeaway from this is you never listen to what the listing agent says. They never know what the seller’s bottom line is. But you’ve got to always be super cool. You’ve got to be confident without being cocky and just got to know your stuff. You will get people, agents, that will drop the F-bomb. You’re wasting their time and they get really mad about this.
You’ve always got to keep your cool because if I didn’t, I would buy a lot fewer houses. And I’m a typical guy that can kind of have a little bit of a hot head from time to time. But, I also like to make money more than I like to get angry at people. And so my anger levels, the older I get, the less I get angry because it’s a lot easier just to be to be nice. But the point is, for me, back when I started, it took a lot for me to kind of, like . . . keeping calm, being cool, I got deals over and over and over.
These are from agents that told me it would never work. One of the examples I give is $199,000, it listed for and, in three days, I bought it for $134,000. So people always think that they just listed it, there’s no way for it to work. And so if it’s in a neighborhood I want, I’m going to go after it. But with the MLS, you’ll get about 10% of the detailed, structured offers you put out.
So the MLS stuff I teach is the opposite of an offer bot. People ask me a lot about offer bots, do you send out emails like a robot? Absolutely not. Will that work? I’m sure it would. Nothing I’d ever waste my time on because I don’t want to burn my reputation in my MLS with an offer bot system. You’ll get about 10% of the detailed, structured offers you put out using the methods that I teach. But again, going back to direct mail, what do you get on direct mail? Three percent is good. That’s a phenomenal . . .
Mike: That’d be awesome, yeah. That’d be really awesome.
Jim: That’s a response rate. That’s not a purchase rate. You might buy 10% of those, maybe, if you’re lucky. So the MLS is no different. Maybe 5%, 3%, maybe 1% of the deals in the MLS are good deals to real estate investors. You’ve just got to know how to navigate through the system to find them, that’s all.
Mike: Yeah, yeah. Well, let’s talk about kind of access to the MLS because I know that’s a big problem a lot of people have. A lot of investors are not agents. And then, of course, a lot of agents that are investors, especially you’re different. My wife got her license when we started investing, but she was never a traditional agent. And so people that became an agent to facilitate their investing business are usually a different class. I’m not going to throw any agents under the bus here because we’ve got a lot of agents listening to us.
But if you were an agent first and you learned the business being an agent, a lot of times you just don’t understand the investing side. Or you think you do, but it’s just a different mindset. But I think a lot of times, it’s probably difficult for people to transition in if they started as an agent for some period of time and then became an investor because they believe a lot of the things that you just said don’t happen. They think, “Well, yeah, they’re asking this. Why would they accept 30% less?” But anyway, I had a question up at the beginning here was . . .
Jim: That’s . . .
Mike: What about just getting access to the MLS?
Jim: No . . .
Mike: Because a lot of investors aren’t even, aren’t even licensed?
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Jim: That’s . . .
Mike: What about just getting access to the MLS?
Jim: No . . .
Mike: Because a lot of investors aren’t even licensed?
Jim: But that all ties together, it all ties together here. So the MLS for realtors, real estate agents, the MLS stands for the Multiple Listing Service. The Multiple Listing Service is what agents use. It’s their primary source for broker-to-broker marketing. That’s how they let everybody know about it. When I was growing up, my dad was an agent. It was map book. It was this thick and had pages, four per page. I can’t even imagine it. I couldn’t even do it. If it was me, I couldn’t have been an agent if that was still the case.
Looking at the MLS as an agent and a real estate investor is night and day. So as an agent, Multiple Listing Service is where they list the properties. For a real estate investor, it’s the motivated list of sellers. MLS, Motivated List of Sellers. It’s the largest list of motivated sellers you will ever find, I guarantee you that. And they’re all right there for you.
So once you have access to it, the listings just keep coming to you. So it’s also an extremely cost-effective marketing source for deals for you because once you’re in, that’s it. You don’t have to pay for it. You’ve just got to find them. You’ve got to know how to set up the searches. You’ve got to know how to find the right agents. And it’s all just about how to navigate through the system.
So, access. First of all, I didn’t used to even teach on this because I thought everybody knew it and they don’t. So if you get a real estate license for your state, you can get access to their MLS, period. It’s that easy. So, you have to pay for your license, whatever it is for your state, $400, $500 these days, 90 hours. Everybody becomes a broker now. There are no sales. There used to be just a sales agent. No more of that. Everybody, you’re either a broker, or you’re a managing broker now and you can get access. And there are fees that come for the MLS, too. But that takes time now because it’s 90 hours.
So you could also become an assistant to an agent. And I say “assistant” with air quotes because I have an assistant in my business that has access to my entire MLS portal. She has her own login, her own password. It’s her. It’s her MLS and she can do anything or see anything that I can see. However, I could restrict her because I’m the agent. I could say I only want her to see this, this, and this, where she can’t see my listings, she can’t see my client list, she can’t see whatever. I can control what she can see.
All you need the ability to do is run and save searches. That’s it. You’ve got to be able to run a search to comp properties and you’ve got to be able to save searches so you can set up your keyword search list. And primarily how we search, but we’ll get to that in a second. And that’s all you need to do. So you could become an assistant to an agent. So you’ve got to find the right agent for that. Every agency allows assistants and you can have as many assistants as you want. There is no limit to it. And so you’ve got to find an agent that’s willing to do it.
So a couple of my buddies that are wholesalers in my market that do not want real estate licenses, they just don’t want them, it doesn’t fit their business model. These guys can make some pretty big money wholesaling. So one guy pays $1000 to the agent, plus the MLS fee. And the MLS fee is $350 a year. So it costs him $1350 a year and he’s got full access to everything he needs. The other guy pays $1500, so he actually pays $1850 a year.
And this is how they make their money. Both these guys are full-time wholesalers. Both of these guys make over $500,000 a year wholesaling. So it’s a cost of doing business and it’s well worth it to them. So the assistant role is how you do it. Now, they pay because they don’t want to use agents at all because they’re wholesalers. But there’s also using field agents, having agents that bring you deals.
Now some of the ways I teach were when I said I don’t act as my own agent, I let the other agent double-end the deal. So I also have used field agents in my business. And so once you have a field agent, usually there’s a relationship there. You can get MLS access that way.
Also, if you’re going to become a serious real estate investor, you should have a licensed agent on your team. And on my team, it’s me. But somebody who does not profit from commission. If I do have to go down, which I do, on my investment deals as the agent in the front end, I don’t keep that commission. It just goes right into the pool. I do take it at the moment because people always ask me, “Well, what do you mean? Doesn’t it get paid to you?” Yes, it gets paid to me. But we account for that. And so, say my portion of that, this profit was $30,000 and my commission was $5000. Guess what? I only get $25,000 at the end because I already got the $5000 upfront. It just becomes part of the deal.
If your agent is only focused on the commission and not the profit and the back end, you’re not going to have an agent that’s keeping their eye on the ball for what you guys are doing. So an agent on your team is very important. Now, a field agent is different. That’s just an agent that brings you deals. But you have to teach them what we’re looking for, how to use the property repair estimate sheet, just so they have an idea of what we’re looking for, and you’ve got to teach them what a deal is.
But either get your license, or you should have a real estate agent on your team that’s not concerned with profiting from commission that will profit in the back end of the deal with you. If there is profit. That’s part of the deal is you’ve got to buy it right, you’ve got to fix it right, and you’ve got to sell it right, all things to make the profit. So if an agent is not tied to the back-end profit, they don’t really care what happens there, so . . .
Mike: Yeah, they don’t really care if you’re profitable or not, right?
Jim: Exactly. It doesn’t matter because they made their money in the front end already, anyway.
Mike: So I don’t want to miss this part because we talked about searches saving searches, how you structure your searches to get deals that you think are deals, are potential deals to bubble up. Can you maybe talk for a couple minutes on how you do that?
Jim: Yeah, it’s very simple. I mean, the search is all run by the same thing. It is run by the remarks. And so it depends on what kind of search I’m doing. Am I looking for REOs? Which REO stands for real estate owned. So if you ever see REO, all it means is foreclosure. That’s the same thing. REO, foreclosure, same thing.
So you have to do a foreclosure search, an estate sales search, there’s short sale search, or a regular sale search. There are different keywords we use for that specific stuff. And so . . .
Mike: Stuff that kind of makes you understand that there’s probably some stress here and they might be more motivated, I guess. Motivation [inaudible 00:19:26].
Jim: Yeah, exactly. You could find look through any MLS and read the remarks. Those are the remarks that are customer facing. That’s what I’m talking about. So you see stuff like an estate sale, as-is, handyman special, needs work. Those types of things. I mean, I can go on and on with all the keywords. But it’s very specific keywords that we see in all of them.
Actually, I added to my estate sale one because I actually saw this. I added “desperate” a couple years ago. “Desperate,” because it said, “Desperate seller.” The agent put that in the comments. Are you kidding me? But I saw it so it’s now one of my keywords that I use because I saw it. I’ve never seen it since and I hope I never see it again because they were not looking out for the best interest of that particular client. But that’s what they said. And, I mean, what happens there? You’re going to get low offers because they’re desperate. We know they’re desperate because you told us. I can’t even believe it. But anyway, so it’s all the keywords you see.
And for foreclosures, it’s different. It says foreclosure a lot of times, or REO. It’ll say corporate owned, which is the same thing as REO to us. But sometimes, banks own it. But a hedge fund, if they buy a pool of loans, which go for $1 billion, if one of those loans forecloses, well, now a corporation owns it and not a bank because the corporation’s the one that bought that pool of loans. That’s the only difference.
The buying process is really the same. But if you see corporate owned, foreclosure, really the same thing. But there are keywords in there, as-is. And my area, we, they always say “100% taxes.” They say, “100% tax proration,” because our taxes are paid in arrears here.
So just look, you look in your state, look at the REOs, write down keywords you keep seeing. And that’s what we did. That is what we use. And beyond that, we have all the remarks searches. That’s it. And then the rest of it is geographic, meaning, do I pick the town in general? Do I pick a price point within that town? Do I draw a map search around a specific area or neighborhood I want? And then, what price point in that neighborhood? Nothing over $200,000? I’m in suburban Chicago. Our prices are a little higher than most markets here.
Or do we put do you put just, “Show me everything?” You get stuff that won’t fit what we do. And so I don’t usually use price because I will buy anything that makes sense.
But it’s keywords and then geographic, that’s it. I either pick by town, zip code, county. Depending on how dense your market is, you can use any of those. And a lot of times, for townhomes, I usually only buy detached single-family houses. I have bought some multi-family this way too that I’ve kept in my own portfolio and I do buy some townhomes, but only in markets that I know the area very well, that I know there’s no chance of this particular townhome development going into the non-FHA-approved status. Because a lot of the people that are buying townhomes need it to be FHA-approved.
And so if it falls delinquent on the multi-payments, which is usually how it does go delinquent, if they end up falling 15% behind, that 15% of the entire association has not paid their dues by the 15th, it goes delinquent. The FHA cannot lend in there until they can prove that they’ve brought that below 15%. So there’s too much stuff out of your control, which is why I only buy in a few townhome markets that I know very well because they sell very well.
Mike: Okay, okay. Hey, Jim, I have this on my list of questions, too, something like this, asking about where does this work and where does it not work and things like that. But I have a specific question we want to ask you that somebody asked us on Facebook and it was a question from Shane Umstead, who, his question, it’s kind of a long question, so stick with me here.
What performance indicators are you tracking that will identify . . . he’s kind of saying in certain markets with an upside, ones that are kind of flat-lining, or there’s not a lot of opportunity, and ones that are kind of downturning, where there’s not as much opportunity. So what kind of performance indicators do you look at to see if a market has opportunity or not, essentially?
Jim: Well, to be perfectly honest, I learned this business in a declining economy and I like that better than the increasing economy. So it doesn’t really matter. People are always looking for a reason to have a problem, the reason it doesn’t work for them. And you said Shane was his name, right?
Shane, I’m not saying, Shane, this is you. I’m just saying in general because it’s difficult. What we do is not easy and a lot of people teach that it is easy or it should be easy. And, in fact, we want to keep it hard. And when I teach that, a lot of people are like, “Well, why would you want it to be hard?” It’s because we cash big checks. If it were easy, we wouldn’t be able to cash big checks because everybody would do it.
So first of all, we want it to be difficult. And second of all, the when the market was going down, all I did was if the house is worth $300,000 today and the market was on its way down, like it was the entire first three years of my career, really four, probably, as a real estate investor, well, if it’s worth $300,000 today, the after repaired value, I’m just running my numbers at $280,000 and then I take that off of that. So I plan on selling it in three months at $280,000 and I’m fine. When I list it at $280,000, it sells because I was able to price it with the market downturn.
Well, the market when the market goes up, it’s the same thing. It’s worth $300,000 today, well, maybe it’s worth $305,000. I mean, in three months, it’s not going to be worth a lot more.
In a decline, it was worth a lot less. But I also put that pad of 10% or whatever I was using underneath it because I needed protection. But guess what? There was so much inventory then, it didn’t even matter. It was like I could run it and I could get as many deals as I wanted. And so now that the market’s on its way up, it’s the same thing, but there’s more competition, fewer deals. But still, that doesn’t make a difference.
Mike: So let’s focus on that. So more competition and fewer deals and less inventory, right? So that all makes it feel more competitive. There’s no doubt it’s more competitive, but you’re still doing deals and you’re still doing it largely the way you have before. So just the mindset of a seller, let’s talk about how that changes in a buyer’s market versus a seller’s market. Talk about that for a little bit.
Jim: Well, the seller’s people always ask me about the lowball offers that I get submitted. My record’s 32%. It was listed for $400,000, I bought it for $273,000. And as soon as I tell people that story, they say one thing to me. They say, “How do you get your lowball offers submitted?” And I tell them I’ve never submitted a lowball offer in my life. And they always look at me like, “What do you mean? How have you never, but you just told me you did.”
Well, no, I didn’t. That house was way overpriced. It’s not my fault they had it priced way above what anybody could pay for it. That’s why it wasn’t selling. This particular house was on the market for 300 days. But sellers have on their mind that they will not share with the agent that they hire what their true bottom line is because they think the agent is going to tell everybody they know to sell the house as fast as possible and make a commission and get out of there real quick. Which, sadly, is probably true in some cases.
The average agent in the National Association of Realtors does three deals a year. Three. It’s a fact. And so if you only did three of what you do a year, how good would you actually be at that? Not very good. So most agents, they’ll do whatever it takes to get it sold quickly. And I’m saying that’s what the sellers feel like they’re going to do because of that. And maybe that’s true, maybe it’s not. Either way, you can never listen to what the listing agent tells you. And so, for instance, calling about a house . . .
Mike: And an agent, too, just to clarify, an agent, again, I don’t want it to sound like I’m throwing agents under the bus here.
Jim: Hey, I am a licensed agent, so we can do it.
Mike: I will say this my wife’s an agent, so, I know . . .
Jim: Go ahead.
Mike: My wife is an agent, so it’s okay if I say these things. But, so anyway, but my point is agents have a tendency to promise the seller more than they can probably get because they want to get the listing, too, right?
The seller may be willing to accept less than they listed it for, but like you said, if you think of a house as worth, just make it up, $300,000, and the seller says, “I think we should list it at $400,000,” you’re like, “Wow, okay. Let’s do it.” And without thinking, “Nobody’s going to pay that.” They’re not thinking that because they don’t know. They’re just hearing the agent say it and the agent’s trying to make it sound as good as possible so that they can get the listing, right?
Jim: Exactly. That happens. It’s called buying the listing. That’s what we call that in the industry, from an agent, it’s called buying the listing. You’re saying you would sell it for more than it’s worth, than any other agent would. If they interviewed three agents, every agent’s going to say $300,000, $300,000, $300,000, and this guy says $500,000, $400,000, whatever.
But it’s funny you use that example because the $273,000 house I bought for 32% under, it was listed for $400,000, it was originally priced at $550,000, believe it or not. And it was 360 days on the market. It was down to $400,000. It was paid off.
And so the reason you never listen to the seller’s agent is because they never truly know what the seller’s going to take. And frankly, they’re embarrassed now at this point. It’s been on the market for a year. Whatever they told them, we don’t know. However they sold them, we don’t know. All we know is that now they finally get an offer, if this is their first one, and maybe they had other offers. Who knows?
But either way, the point is that, say somebody’s willing to take $300,000 the whole time, but you call a professional in, and maybe you only call one because 78% of people only call one agent. That’s it, 78% only call one. They never interview more. So if you call in a real estate professional that knows your market and they tell you this thing’s worth $550,000, are you going to say, “No, just no, list it for $300,000. I don’t want more money. List it for $300,000. We don’t care”? Of course, they’re not. But still, they’re willing to take $300,000 the whole time because it was free money because the house was paid off.
So now, that’s an extreme example, but it’s exactly what happened to me on that house. So I had to do a dance to get this deal. I go see it once, but they think I see it three or four times. And I call and schedule a showing the other times. And I always call for feedback. I call and give them feedback as if I went.
But what happens every time you have a house, especially a house that’s on the market for 360 days, you get a showing, and I call and give really good feedback. Actually, my wife, pre-kids, used to be in the car with me very often during this kind of thing. She would call it my acting debut because I would call the agent and I’d be like, “Oh, I love this house. I mean, I can’t believe it’s been on the market so long. I mean, you guys are overpriced, but I’m going to try to offer you as much as I can. I’m going to go run my numbers and see what I can do.”
And then I wait two days and I don’t do anything because I already know what I can pay them. It’s way less than they want or way less than it’s listed for. I schedule another showing and after the showing . . . I don’t go to this one. I already know what I can pay. But they need to think I went. And so then. the agent, what happens then? The agent’s going to call, “Oh, hey, that guy Jim, he’s going back, he’s going, remember, that’s the guy that really wants it.”
And then I call again and say, “Oh, man, do I like this house. I’m going to give you everything I can. I’m going to give it my best shot.” I’m fishing for her to ask me for an offer, or the agent, in this case, female. So this particular time, it took me four times. And I only went once and people always ask me when I tell the story, if they’re an agent, they’re like, “Well, what if it was an electronic lock box?” I say, well, that’s great and everything, but nobody ever checks them, ever, to see if you actually use them. You schedule a showing, they don’t follow up and see if you went.
However, that did happen to me one time and so I will give you a tip in case you have to do this in the future for yourself. I’m better off the cuff anyway so the agent threw me off. I’m like, “Oh, well, the front door was open. I locked it when I left so don’t worry about it. But somebody who saw it before must have left . . .” it was closed. It wasn’t open-open. “It was just unlocked so I was able to get in without a lock box, but I did lock it on my way out. Don’t worry about that. “And so that’s what I said.
But either way, they, I’ve only been called on it one time. But that’s your answer if you get called on it. Either way, by the fourth time, she’s like, “Just give me an offer. We’ll put this thing together.” Because I kept saying, “I’m going to be closer to $300,000 than I am $400,000 and I don’t want to insult you or your client.” And so then the offer was $273,000 and she did MF me, literally. She was super nice until this point, too, and it took me back a bit, but . . .
Mike: The claws came out.
Jim: It did. So my first deal that I got 31%, that took a couple days. This one, I call, I submit, well, I call first, I tell her the offer. She swears at me on the phone. And I submit the offer because I always call. I’ve submitted thousands of offers at this point in my career. I have not submitted one offer, not one, without calling the agent first. I don’t care how low it is. I don’t care if it’s an REO. I don’t care if it’s a property that’s selling for $40,000. It’s like, who cares about it? I don’t care what the deal is. No matter what, I’ve always called to talk to the agent first because you need to build rapport with them.
I’m not calling to tell them about the offer. I’m calling to make sure they like me before I give them a crappy offer they’re not going to like. In their opinion. I don’t feel like it’s a crappy offer. I feel like it’s perfect for the condition. But you need to build rapport with them and that’s what I’m doing. I’m getting them to like me. So that’s what those phone calls do.
Anyway, point being, this one, my best deal ever, I present the offer, she swears at me, 10 minutes, she calls me back. “They accepted. I can’t believe it. Oh my God.” And she, 10 minutes prior, was swearing at me, telling me I’m wasting everybody’s time, they will never take this low an offer, oh my God.
Now, that’s an extreme example of an agent, but that’s the point, is the agents never, ever, ever know what the seller’s bottom line is, what their motivation now is. It’s been a year. Do they care about it? So just always be super cool, always be confident without being cocky and you will get a lot . . . and building rapport with these agents is a huge part of it. Especially with estate sales.
Mike: Yeah, yeah. Well, I want to talk just for a couple minutes here and we’re going to talk maybe about some tactics. I know you train people on this so you’ve obviously done this a lot of times yourself. What makes people more willing to accept your offer? Is it the ability to kind of move fast? Is it some of the things you’ve already talked about, building rapport with the agent? Maybe just kind of at a high level give us the top kind of three or four things that would make somebody look at yours, or consider it. I know you also said a little bit ago that people have accepted your offer when they maybe have higher offers, but there’s some reason that they see that’s not necessarily money, but something else.
Jim: Once you have MLS access or you have your way of buying MLS deals, the biggest contributor to your success in there will be speed, how quickly you can get to the deal. And the best deals, REOs, foreclosures, estate sales, regular sales, quartered sales, whatever, are gone in hours, the best ones, always. And some REOs and foreclosures are pre-sold and that is one method. But speed, no matter what, it is always very, very important.
Estate sales, which are my favorite sale in the MLS, that’s what we’re talking about as far as sales that, on estate sales where somebody’s died, either you’re dealing with, the seller is the widow or the widower, or you’re dealing with the heirs of the estate, which are usually the kids. The one I just bought was from the two nieces. The guy didn’t have any kids. They kind of felt like they didn’t even deserve the money. I think they were going to give it to charity because they both were like, “I can’t believe he gave it to me,” kind of thing. And so they don’t even care about it. They want as much money as possible because why wouldn’t they? But they’re just going to give it away, I think.
But either way, the point is that when you’re presenting the offer, or even on an estate sale, I know the best ones go in hours. And you say, “Well, why wouldn’t they wait for the weekend to see how many offers come through,” or whatever? Well, an estate sale in most cases the one I just explained was a deal I put under contract last week, so that’s a little rare, where they’re not tied to the money or they’re not really tied to the house because they didn’t grow up there.
But usually the heirs of the estate have grown up in the house, they did live there, their parents lived there for 30, 40, 50, 60 years, in some cases/ And so the money is not the most important thing. They want the money, don’t get me wrong, but the most amount of money is not the thing. They want to know the house is going to be cared for by a real estate investor that knows his stuff. Is not going to trash their house, is not going to beat them up on the price, that is going to sell it to a nice, young couple or nice, young family who’s going to live there for 30 or 40 or 50 years, just like their parents did, those emotional triggers. This is an emotional sale.
Mike: How do they know that about you or your offer, though? I mean are you putting that into your offer that you’re going to do that? Or how do they know that?
Jim: So as soon as an estate sale lists and I’m on my way, or if I’m sending somebody out, I call the agent immediately just to build the rapport. Hey, I try to find out as much as I can. Agents will usually tell you more than they should. Just keep asking questions. If you have a good agent, they’ll shut you down, no problem. But just be respectful. I go, “Okay, yeah.” I kind of joke if I’m asking something about offers and, “Oh, any good ones?” And kind of feel that stuff out. So I call . . .
Mike: Now, when you call an agent, as an agent, are you telling them that you are the buyer, or you’re, do you kind of . . .
Jim: Yeah. No.
Mike: . . . make them believe you’re representing somebody else? Okay.
Jim: No, no. I always tell them it’s me. I say I’m the agent. I’m also the buyer. I’m a cash buyer. I’m a real estate investor, my primary business these days. And so there is a cover letter that goes with the offer. But everything that’s contained in the cover letter, I’ve already conveyed to the agent over the phone. I just don’t know if they conveyed it properly to the seller. So when I scan the entire offer, or my assistant scans the entire offer, they’ll see the cover letter that says the same thing. “We’re a residential redevelopment company, we have roots in the community. I live in the community.” All the good stuff that’s true.
And then, my houses sell for full retail value. So the people that buy houses for full retail value are young couples and young families, in my market, at least, and I think that’s most markets around the country. So I can confidently say that’s who I’m going to sell it to. Plus, I say that I would be happy to invite them back to the property so they can see the work I do. I encourage them to go to my website to see other finished rehab projects that I’ve done. And the part about them being able to come back, they always love that.
So once I present the offer, I present it as the best offer I can. I say, “I understand that you are you want every penny out of this because there are three or four or five heirs,” or whatever, “and I understand it. I’m going to come, I’m going to give you my best shot. I can close in two weeks. I’ve already had my . . .” the guy I send through is usually my project manager, or I will send I’ll send the project manager with the contractor we’re going to use to look.
All I care about is structural stuff. That’s it. Structural. And I need to know if there’s mold in the attic. And I don’t care about that, either, but I need to know it’s there because it costs me money to fix. And structural stuff, which structural stuff, depending on what it is, I may or may not buy it. But, point being, if there’s not a structural, it’s just cosmetic, it’s easy. It’s an easy to estimate that, especially once you’ve been doing it for a while.
So I tell them, I waive the inspection. I mean, literally, if you accept my offer, we can just schedule the closing. Two weeks, less, as fast as your attorney can pull the title, we need this thing closed. So there is the ease of no trouble because of my offer.
And I also highlight. I’ll give you an example of what I did shortly ago. I bought it for $160,000. It was listed at $169,900. I did the whole thing I just told you and they wanted to come back and see the house. They liked that. They liked me already. They wanted to sell me the house. So they said, “Hey, Jim, we like you. We want you to buy the house. We think you’re the guy to do it. However, we have two more offers at, one at $170,000 and one at $175,000, both cash.” And they said, “If you meet the $170,000, we’ll sell it to you.”
And I said, “I appreciate that, and thank you, but like I told you, I gave you my best shot. And I cannot pay a penny more than $160,000.” And I’ll tell you that I get my work done for as cheap as anybody because I’m a professional rehabber. I’ve been doing this a long time. But let’s assume the guys at $170,000, $175,000 are the same way. Let’s assume that they get their work done as cheap as I do. I cannot pay more than $160,000 and make this deal work.
So do you think there’s a chance that they might . . . especially the guy at $175,000, that his plan might be to get you under contract because I’m sure they didn’t waive the inspection, which they never do. So you can kind of say that I’m sure they didn’t waive the inspection. And then they’re going to ask you for a $20,000 inspection credit, which puts their $175,000 at $155,000. And I’m at $160,000 today, right now, and I can close in two weeks with no problem.
But if you call me back in two weeks when this guy starts jerking around with the home inspection, now all of a sudden that I might have spent that money on something else because I don’t have unlimited funds. I’m going to go tie up another property. So you might call me and I can’t even buy it. Or in two weeks, I might be like, “you know what? That guy’s right. I’m actually at $150,000 myself now because I kind of misjudged a little something.”
Mike: Yeah. They might discover something in that inspection that they need to disclose, yeah.
Jim: And so I say I can close at $160,000 today, but in two weeks, if you call me, I can’t guarantee any of that. And so that’s how I get my offer accepted when I’m not the highest offer. And by the way, all of that is true. That happens all the time with these sellers. So all I’m doing is educating them on what’s going on in the process because they don’t do it for a living. I tell them what to expect. And I can’t tell you how many times they don’t accept my offer and they call me back in two weeks and they’re, “Oh my God, you were right. We feel like idiots.” Because they were $50,000, one time, they were asking for an inspection credit. This is outrageous. And is your offer still good?”
Sometimes it is and sometimes it isn’t. It just depends. I mean, if the deal’s right, I will always find the money, even if I most of my private funds are tied up, I’ll always come up with more. I’ll use hard money to buy it. But the point is that that is a part of the urgency and the takeaway that you need to get them to accept your offer. And literally, half the time on estate sales, I am not the highest cash offer. And that’s how it’s done, is just with proper communication, really. And saying the right stuff to the agent to make sure that they like you because you don’t get to talk to the seller in this case. So it’s the . . .
Mike: Did you . . .
Mike: Do you do much with kind of off-market listings or pocket listings, or things like that as part of your program that you teach and part of what you obviously practice yourself? I know you talk a lot about the MLS, but I know there are a lot of people that buy stuff before it ever even hits the MLS.
Jim: Well, like . . .
Mike: So is that a part of your system as well?
Jim: Yes. Well well, so I don’t know if you’re talking about deals that come into the MLS because that’s what that’s primarily what I’m teaching here. But for the REO stuff, the foreclosure, specifically the smaller foreclosure agents, those guys, now, when I say smaller, the guys do 15 foreclosure deals or less a year. That is your target for a small REO agent, maybe up to 25. But beyond that, they’re probably doing volume on other stuff. They’re a good agent at that point and they’re not going to care. There are agents in my market that I’ve bought 20 houses from who do 600 deals a year because he’s the biggest guy in our market for REO stuff. He does most of the ones we see. That guy will never double-end a deal because he could care less about it. He has such a high volume it doesn’t even matter.
And I used to try to get that guy on the phone until I realized that you can’t ever get him on the phone. I don’t even know if he’s still alive, but his office runs very, very well without him, or without him answering the phone ever.
But the smaller guy, now, you can get him on the phone, and you can get him, and when you tell him that, “Hey, I’m a real estate investor,” me, I’m an agent, so I say, “even though I’m a licensed agent, I don’t ever take a commission. You can always double-end the deal.” Double end means they can take both sides of the commission. So obviously, they’re going to make a lot of money. And on a foreclosure agent, the payout to the buyer side is usually 2.5 or 3%. The payout on the seller side, we don’t really know on REOs, but I have a lot of friends that are REO agents and they make usually, after their expenses and their everything, they make less than 1% on their side.
Now, if they’re doing it at volume, it all adds up. And so the bank is not paying full commission. But if you’re giving them 2.5 or 3%, they’re literally doubling or tripling their income on that one deal, so of course there’s going to be . . .
So when you see those foreclosure deals that sell an hour after it went on the market, that was pre-sold. Because I had calls from my agent buddies that say, “Hey, I got this property, 123 Main Street, I’ve got to list it Friday at noon. Here’s the combo. Go see it Wednesday. Let me know if you can put the offer. I think you can pay list price. Based on what you do with these houses, I think list price is fair. They’re letting me price it well. I think you’d pay it. If you can pay the list price, we can lock it up right away.” That happens to me all the time and it could happen to you, too.
It’s just a matter of setting yourself up for that. And you’ve got to close on deals. Especially with REO agents, you cannot back out. After you put it under a contract, you cannot back out of that deal. If you ever back out of a deal, you will never hear from that agent again and they’ll tell the banks that you get on a blacklist. And it’s no joke. You will be blacklisted. So don’t put it under contract if you don’t think you’d buy it. Don’t offer more than you’re comfortable with. And you can never back out because that’ll be the end of you and that agent.
Mike: We have a blacklist. We’ve maintained a blacklist for a long time, like . . .
Jim: No, they do. No, they do too.
Mike: . . . agents we won’t work with, lenders we won’t work with, or if they’re involved, no, we’re not interested in working with you.
Jim: No, no, and I’m telling you, this is not a joke. The REO agents, they share it. They know because it makes them look bad to the asset manager, who might dump them as a client, meaning they will stop giving them deals if they feel like they’re not properly marketing them, or they’re accepting the offers, or telling the bank to accept offers from people who back out. So it makes them look bad and it might actually dig into their income and they might lose that account altogether. That is why it’s such a big deal.
Mike: Well, Jim, hey, we’re running long on time here and I want to talk about . . . we talked beforehand and I want to talk a little bit about your MLS Domination product that you’re launching right now. But I know you’re going to give everybody on FlipNerd here a workbook. I think you said it’s called the fundamentals of how to work the MLS, is essentially what it is.
Jim: Yeah, right. It’s just all the basics. We touched on some of the stuff today. But, what I hear the most when I tell them I get 75% of my deals out of the MLS as a real estate investor, they say there are no good deals in the MLS or it’s too competitive.
And all that means to me is they don’t have the education because it is a lot of work. And the reason I’m so good at it is because I was an agent first. I knew the ins and the outs of the MLS as an agent really, really good. I knew how to work it all. And so once I became a real estate investor, the only transition was there, I had to start looking at it in a different way.
And that one deal, the only reason I got that one on Sand Pebble that I mentioned at the beginning of this interview, was because I was desperate. I didn’t have the money. You know what I didn’t finish about that, too? Crazy. I lost $36 grand on Friday. Friday. A Friday. Let’s just call it Friday. So I owned that property for over a year. It was a nightmare. And the day before, the day before, Thursday, I closed and we made $75,000, which half of that was mine. So I actually never lost money for real. It was kind of a wash. And I never looked back. But that’s a true story. That really happened.
So anyway, the fundamentals, what it covers is all the basic stuff. I go over more keyword stuff. There’s keyword stuff in the handbook as far as the keywords that I use, which you can use those in your MLS searches. You can search through your own MLS and you’ll see the keywords that come up, that come up, that come up.
And beyond that, I also teach people that they should be looking at the MLS, if you’re a serious real estate investor, three times a day. If you need to buy properties manually, whatever your sweet spots are, if it’s where you grew up, like me and Schaumberg. I can tell a property in Schaumberg value like this and lots of the surrounding areas, too. So I look at everything there.
So it teaches every little way. I mean, this has been a lifetime, or it feels like it, eight years of learning the MLS as a real estate investor. And it’s everything that works. I mean, I can show you guys 250 things that don’t work, but you probably don’t want to see that. I’ve just got to focus on the stuff that does work and that’s what MLS Domination is.
So the keyword stuff, well, if they click on the link, they’ll get the keyword stuff that I’m talking about, too. So they’ll get everything they need. I mean, the course here, the three content videos that they all have access to now are . . . click on it and look at the remarks below those videos. Those are real people that have been going through the videos saying, “Oh, my.” I mean, just the content on there is unreal. So I was just trying to over-deliver for everybody and you’ll see that that happened.
Mike: Awesome. So I’ll add a link down below the video here. For those of you that are listening, if you’re listening on iTunes or somewhere else, we’ll set up . . . it actually is FlipNerd.com/MLSDomination. So no spaces or anything. FlipNerd.com/MLSDomination. And you’re going to get a copy of Jim’s free workbook on fundamentals of how to work the MLS and he has some other training videos there as well. So make sure you check that out down below here.
So, Jim, anything we missed today? I know we missed a lot of stuff. Obviously, we can’t fit it all into . . . we’ve been on for about 45 minutes now. But any kind of final words of wisdom you want to share with us that we didn’t cover yet today?
Jim: Yeah, it always goes back to people wanting the easy button. There is no easy button for anything that’s worth doing. On my goal wall here at my office that I’m looking at right now, I have a bunch of a bunch of quotes that keep me motivated. And two of the ones that are on here that have helped me get through an . . . one’s from Tony Robbins. You know, it says, “Success is buried on the other side of frustration.” “Success is buried on the other side of frustration.”
I think about that constantly in my life. I’m an entrepreneur. I’m always doing something different, something new, and guess what? Things are constantly frustrating when you’re trying new things that are difficult and you’re learning how to do it. And it’s helped me get through a ton. So just remember that if it were easy, everybody would do it and we want it to be difficult because we like to cash big checks. So keep that in mind.
But then, also, there’s actually one from Wayne Gretzky that I always . . . and Wayne Gretzky, hockey, I’m not a big sports guy. But he says he has the, if you look at his stats, he has the most goals by . . . I think he has 200 plus and he played 100 games less than guys that are in second place. It’s crazy how the stats are skewed. But he’s made more goals and missed more goals than anybody else. And he said, “You’ll miss 100% of the shots you don’t take.”
Mike: Yeah. I remember that one.
Jim: And I have used that as my business motto since I got into business 11 years ago and it has served me very well. So don’t be afraid to take some risks. It’s going to take some work so make sure you have the time to do it. But as long as you’ve got the time to do it and the time to set aside, it doesn’t take a lot of time either. This is hours a week and you get this stuff done and really learn a lot. So just don’t get too frustrated because it is a frustrating process, learning something new. But real estate investing, if it were easy, we wouldn’t have big checks to cash so we want it to be hard.
Mike: And particularly with MLS type deals, you might as well make a lot of offers. You want to do your homework and you don’t want to have to back out of anything. But generally, until you have a signed contract that is executed, it’s not a real deal. So worst-case scenario, they say yes and then you’re like, “Oh, shit, let me double check those numbers.”
Jim: Yeah, I know, right. No, just don’t put an offer out that you can’t . . . even on the deals I don’t go see. I don’t go see every deal anymore. But for the first four years I did this, I did go see every deal or somebody from my team did. But now we will submit some offers because if I assume it’s a gut rehab, if it’s a 3000-square-foot house and I’ve got to do roof, windows, siding, and an interior gut, plumbing, and electric, I know what that’s going to cost me in my market. So I can put some offers out where if they if they accept it, I’ll go see it right away and be fine with it.
But still, just put your offer out. It’s a numbers game. Even still, even the detailed, structured offers I put out, I get 10% of. If I need to buy one property, I’ve got to put out 10 offers. I just bought three properties in the last week and I bought them in six days and I got lucky. I only put out about 20 offers total to buy those three properties.
So I didn’t have to go quite to 10%. I’m a little better on that. But I got lucky because we have limited inventory. And that was all speed, by the way. Every one of those deals was speed, speed, speed. It was how quickly I got to them, how quickly I called the agent, the quick closing, the waiving the inspection. There are all these little things that factor in and that’s it.
Sometimes, if you hear that they’ve already rejected three offers, that gets me excited. You don’t let that get you discouraged. Sometimes, it’s all timing. The first three offers might be the exact same as yours, but now they see it and it’s finally, “Okay. Are you crazy?” Meaning this is the fourth offer that’s the same price. If you think you’re going to get any higher than this, you’re crazy. And so now it’s time to accept the offer. So sometimes it happens on the third, sometimes it’s the fifth if they reject, reject, reject. But just because an agent tells you that they’ve rejected three or four offers, don’t take that as a negative. I take that as a positive and I hope that I’m now there at the right time. So I’ll leave you guys with that tip.
Mike: Breaking them down.
Jim: Yeah, exactly. It just takes some time. And so again, it’s about timing. Just like direct mail.
Mike: Awesome. Well, hey, Jim, really thanks for spending a lot of time with us today and good luck with your launch here, your MLS domination launch. And everybody, I know that Jim puts a lot into all of his products and his training and stuff like this. He’s really passionate about those. So please check out FlipNerd.com/MLSDomination to get a copy of Jim’s free book, the fundamentals of really how to work the MLS and how to get more deals off the MLS. And if you joined us today, I definitely appreciate you being here. We’ll see you on an upcoming show. Jim, thanks one more time for being with us, my friend.
Jim: All right. Thank you, Mike. I appreciate it. Bye, everybody.
Mike: Have a great day. All right. Bye-bye.