Friday, December 1, 2017

First Steps for the Newbie

As StepStone grows and our reputation as an excellent brokerage for Licensed Real Estate Investors spreads we start to attract not only folks already in the REI world but those wanting to get into it. We’ve had many brand new agents come on board who see the advantage to having the skill sets of both traditional agents and creative investors to provide them the most likely chance of turning leads into deals and succeeding in the world of real estate.

However, as “greenhorns”, knowing exactly where to start can be daunting. On one hand there is so much information out there that it can be overwhelming and yet on the other hand there is no set curriculum or guide on exactly how to start that you can feel stuck. I’ve chatted with several of these agents over the last few weeks and as a result we are working on creating a Getting Started guide to help our newest agent/investors get off to a good start.

In the meantime, though, if you are one of these agent/investors, there are some active steps you can take to get started in the world of both retail and creative real estate. Make no mistake… breaking into this field takes time and commitment. Determination and willingness to put yourself out there is a requirement. If you are willing to take these first steps you are putting yourself on a path for success.

STEP ONE: EDUCATE YOURSELF

As many of you know, the pre-licensing education you received didn’t exactly prepare you for the day to day activities of a licensee. While StepStone provides various training opportunities through our recorded webinars, MasterMind meetings and Workshops, there are still many gaps to fill.

First, check out the class schedules at your local Board of Realtors office. Every board offers inexpensive classes, many of them with Continuing Education credit, including how to use the MLS systems and other technologies, marketing, understanding various loan products as well as more sophisticated topics such as understanding 1031 exchanges.

Second, check out the offerings from local title companies. A quick check of their websites will yield great How-To and explanatory videos as well as classes that will help you build your business and presentations on current market trends and other topics. Feeling hungry? Reach out to the business development team of your favorite title companies. They will likely treat you to lunch and add you to their email list so you will always be in the know of what offerings they have each month.

Third, if you haven’t already, check out BiggerPockets.com for a wealth of knowledge provided via blogs, podcasts and discussion groups.


STEP TWO: NETWORK

You’ve all heard it: Your Network is your Networth.  Getting to know others, and them getting to know you,  inside and outside your industry is paramount to your success in this business.  You might be surprised at how many deals and partnerships are formed between folks who met networking.

Feeling shy or out of your league? It can be hard when you first start but make a commitment to yourself to do it and be consistent and before long you will find it an enjoyable exercise. The more you go the more people you will recognize and will recognize you, the more connections you will make and the more comfortable you will become.

Not only will you make some valuable connections but the more people see your face the more credibility you will gain. I once had an agent tell me he attends 3-5 network events a week. As a result, he got in on a million dollar listing because they assumed he must be a mover and a shaker because he knew everyone and everyone knew him.

Not sure where to start? www.MeetUp.com. Also, watch our monthly newsletter to find out what meetings StepStone is a vendor for and you will be sure to see at least one friendly face in the crowd!

STEP THREE: TELL EVERYONE WHAT YOU DO

I’ve had some agents tell me that they hesitate to tell friends or family that they are a real estate investor because they haven’t done any deals yet. Don’t let that stop you! Even if you don’t have the skills or the knowledge to do a deal on your own yet you do have a team of agents and investors behind you that do have the ability and can help you. Working your “sphere of influence” is the cheapest and easiest way to get a deal.

How to do this? Post on Facebook! Let everyone know that you are an investor and agent. Walk your neighborhood and introduce yourself. Put flyers on their doors if they don’t answer. Go to neighborhood events like Neighborhood Night Out or Neighborhood Watch meetings. Download and join the Nextdoor app.

I’ve helped a family member do a short sale on their house, helped a friend get a new lease, helped another friend buy an owner finance house, helped an uncle sell two houses, bought a distressed house from a neighbor, helped my pastor buy and sell a house and another pastor’s son buy a house. I did not have to market for this business… I just had to make it known that I was an Agent and Investor.

No one will ask you to help them if they don’t know what you do! So, be loud and proud and let the business come to you!  

The New Year is upon us. It’s the perfect time to make the decision to take the bull by the horns and just do it. Now, go get ‘em!

Wednesday, November 1, 2017

Technical Talk: Accepting Back Up Offers


So, what does that MLS status PB really mean? This status indicates that the property is under contract aka PENDING but that the seller is open to receiving and considering BACKUPS. How does this process work?

If a property is under contract, the seller has the option to review and accept a Back Up Offer with the use of an ADDENDUM FOR “BACKUP” CONTRACT. There are two primary blanks to complete on the Back Up Addendum.  Section A will identify the First contract by inserting the executed date of that contract in this blank. Section B will identify the date the Back Up offer will terminate.

If a seller wishes to accept a Back Up Offer with this Addendum in place the Back Up Offer will be executed and earnest and option money shall be deposited. If the First offer terminates on or before the date set out in Section B of the Back Up Addendum then the Back Up offer moves to the primary position.

At the time that the Back Up Offer moves into the primary position the executed date shall be amended to the date the back up buyer receives notice that the first contract has terminated. I recommend the agents execute an amendment reflecting the new effective date so no conflicts arise later as to when the option or financing periods began and end.

The seller and listing agent should understand that by accepting a BACK UP offer, that contract is binding and they may not later change their mind about its acceptance.

Why would a seller want to accept a Back Up Offer? Leverage. When negotiating repairs and concessions during an option period with the First Contract the seller can feel more confident and perhaps negotiate more aggressively knowing they have a Back Up Offer they can move on to if they are unable to come to terms with the First Contract. If the Back Up Offer is better than the First Contract the seller will be unlikely to make any further concessions beyond what they already agreed.

Why would a buyer want to place a Back Up Offer? In a hot seller’s market, this is a way to ensure that the buyer gets first dibs if the First Contract falls through. The seller would never have the option to place the property back to Active on the MLS.  It will require some patience by the buyer but they do have some control over the timing with Section B of the Addendum indicating the date when the Back Up Addendum & Contract expires.


I have found that Back Up Offers are not very common but they can be a good tool for both buyer and seller if all parties understand how to use them.

Monday, October 2, 2017

The Devil is in the Details

As the broker of over 150 agents, it is I who gets to hear about it when things go sideways on a transaction. I recently had an interesting one… a buyer wanted to terminate a contract based on the third party financing addendum. The first thing I do when there is a conflict is review the contract. In this particular contract, the portion that indicated how many days the buyer had to give notice of non-approval was left blank. Easy! I thought! Their agent made an error by not filling in that blank so now they have no days to give notice and the seller is entitled to the earnest money. Right?

The buyer’s agent saw it in a very different light. Her argument was that since it was blank the buyer had INFINITY days to give notice of non-approval. Hmmmm. Unfortunately, in this case, there is no right or wrong answer. The buyer and the seller now have to agree to the terms of the earnest money release or no one gets it.  Both of the agents let their clients down. That contract should have never been executed without all the blanks filled in.

I know it’s easy to get in a rush to get a contract executed or you get the impression that a transaction is going to go perfectly smoothly so you don’t get hung up in the details. But, as I’ll tell you time and again, the Devil is in the Details. And it’s not only on contracts.

Last month one agent had a transaction fall apart because the buyer discovered right before closing that the square footage of the home he was planning on buying was actually almost 200 square feet smaller than advertised on the MLS.  After some research, it was found that there were several different square footages reported for this property: the builder floor plan said one thing, the tax record said another and yet a previous MLS listing reported yet another. Furthermore, the listing agent had represented the seller’s in their purchase 3 short years earlier so surely there was an appraisal floating around with the correct square footage reported. Yet, the listing agent cut corners and instead of researching to verify the square footage she COPIED an older listing from another agent that had the square footage incorrect. Needless to say, the deal died and all the parties of the contract are unhappy and likely headed to mediation.

You should never rely on the data provided by a previous listing agent. If there is a question about an item take your time to do the research. I’m sure it was a very uncomfortable situation for the listing agent to explain to her seller’s why the contract busted and could have been avoided if she had done more due diligence.

This scenario above is a good example of how the buyer’s agent took the time to discover the facts for his client and avoided an even bigger problem if they had closed on the house. We had that happen too…

We represented a buyer who purchased a residential lot to build his dream home upon. After closing, he discovered that the city would not issue building permits because the property was in a flood zone. The listing agent clearly advertised the property as a residential lot and with few restrictions. The seller did not disclose the flood zone even though it was later discovered that they knew about it. Clearly, the seller was deceptive and litigation is likely in this case. It is a good example to show that you should take the time to verify the facts of your listing every time!


While I know that even the most diligent agent can miss something occassionally, which is why we carry Errors & Omissions Insurance, being thoughtful with details and taking care to make sure your contracts are completely filled in can go a long way to avoid a major headache and potential lawsuit, later. Let these scenarios be a lesson to always be vigilant because the Devil really is in the Details.

Tuesday, September 5, 2017

14 Reasons to Get Your License

I talk to a lot of investors at various networking meetings around the state of Texas (and beyond).  Often when I ask if they have considered getting licensed, I’m met with a sneer or sour look on their face. 

“No!” they will say, “I’ve heard that is a bad idea”.

This is not a surprise since a quick google search of “should I be licensed as a real estate investor” quickly pulls up every top X list of reasons to NOT get licensed.  Most of which are myths about what that means.

Well here’s my Top 14 Reasons TO be licensed!

14.  Be Your Own Boss:  I often read in those “reasons to not be licensed” lists that if you get licensed, you will have to “work” for the broker and go to sales meetings, or have desk duty.  Nothing could be further from the truth.  Brokerages come in all flavors and many don’t have any requirements or quotas.  Simply choose the right broker and you can use your license in a way that is best for YOU!
 
13.  Help Other Investors Buy Houses:  If you choose to, you can always help another investor purchase a home.  Then collect a commission!  But, you certainly do not have to.  Many, though, will find that it’s smart to take the money wherever it may present itself.

12.  Auctions:  As an investor without a license, it can be difficult to make money by convincing a home owner that their best option is to auction the property.  As an investor, you would also need to lock it up under contract and convince the homeowner that the increase in price the auction might create should all belong to you… not an easy sale.  But as a licensed agent, you would be entitled to 3% on top of what is charged by the auctioneer!

11.  Net Listings:  Investors often pass on low-end property… or property that is too rural or unique to get adequate comparables.  Those properties can also be difficult to wholesale to another investor.  But a net listing allows you to list the property on the MLS with a price given to the seller and anything higher belonging to you.  Essentially you are wholesaling a property on the retail market to retail buyers getting retail loans!

10.  Commissions on MLS Purchases.  Buying a homestead or find a great deal on the MLS?  Well you can get a commission or “cash back” on your transaction, even if you are getting a loan on the property! 

9.  Access to more Tools:  Filling out contracts is easier with ZipForms.  RPR (Realtors Property Resource) is a great tool for looking at sold prices wherever you are on your phone.  This and many other tools available only to agents will help make investing easier!

8.  Make Money on Short Sales:  Particularly in down markets, it seems over half of the motivated seller leads don’t offer opportunities to investors but should be listed as a short-sale.  Unfortunately, the days of getting steep discounts or wholesaling short sale properties are over (with a few exceptions).  But you can still make money on these leads… list as a short-sale!  And if your broker (like StepStone Realty) offers short sale processing, you won’t find an easier listing!

7.  Access to Properties:  Being an agent allows you to enter property for sale on the open market.  There is no better way to see your competition before you do a rehab on a property!  Find out if everyone else is putting in granite or quartz countertops before you spend the extra money.

6.  MLS Access:  Comps!  Available properties!  I see way too many investors asking agents for an ARV.  Since they are promising a future listing on that property for the comps, the agent has every incentive (consciously or unconsciously) to fudge that number up.  It’s always best to comp the property yourself!

5.  Referral Fees (the legal way):  If you do not want to list a property yourself, you can always refer it.  Investors do this as well, but receiving fees for this is not legal, unless you are licensed!

4.  Credibility:  I always chuckle when I read someone’s list of reasons to NOT be licensed and it includes, “You will have to disclose you’re an agent”.  First, I’ve never seen a seller reject an offer or even an appointment to see the home because of a license.  The truth is, you only have to disclose at the time you present a written offer, but you would be better off telling a seller right away.  They tend to distrust investors and trust agents, so letting them know you are licensed actually increases your credibility and enhances your ability to get a deal.

3.  Listing your own properties for lease:  Why pay half of your first month’s rent just to get a tenant when you can list it yourself?

2.  List your own properties for sale:  On a $200,000.00 house, that is like a $6,000 increase in price!


1.  Monetize More Leads.  Leads are expensive!  With a license, you ALWAYS have something to offer a seller and a way to make money.  Who doesn’t like making more money!?