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!?

Tuesday, August 1, 2017

Getting Started: What Puzzle Piece Are You?

I get a lot of questions from new agents and investors asking how can they get started with investing.  This can be a tough business to get off the ground and it’s hard to know where to start.

I have told my agents the same thing over and over again… every deal needs three things: Time, Money and Expertise. And, no one has all three. No one. Figure out what piece of the puzzle you can solve and you will make your first step in getting started.

About 13 years ago, Dan put our first potential flip under contract. And, it took time! We drove for hours putting out bandit signs, answered each and every call that came in, spent time looking at dead ends, chased down homeowner information, wrote letters and cards. We spent our time on any and everything we could to get a lead that would turn into a deal. At that time in our career we had lots of time but no money or expertise. So, we put in our time and then partnered with another investor who had the money and expertise to see us through to the end.

Do you have the time? Are you a full time Agent/Investor? Available to take calls during the day, take seller meetings in the evenings, able to take numerous calls and build rapport with a slippery seller? Seek out the fellow investor still working 9 to 5. Or, the investor who now has too many projects to stay on top of marketing efforts. These people need you and your time!

Or, are you a new investor not yet ready to give up the full time job? Perhaps your strategy to get your foot in the door is to provide the money. If you have money saved up for investing or a Self Directed IRA then you are in a great position to get involved in deals by helping provide the funds.  Even the most experienced investors turn to others for funds. We have one agent who’s time is fairly limited due to her day job but she has gotten experience and earned money by helping to fund projects.  

Or, consider partnering with someone who has time to follow leads but not the money to put into marketing. Your marketing dollars will be much more effective if you have someone to answer the phone on the first ring and the ability to meet a seller on short notice.  

While it may take you some time to get the expertise, if you have money or time, you have something valuable to contribute. Identify the piece of the puzzle you can provide and seek out those who need you. Let it be known that you have time or you have money. Make an effort to network and connect.

And one small reminder… each piece of the puzzle is valuable. You cannot expect to get a person’s share of time, money or expertise for free nor should you give yours away for free.  You must be willing to partner and share the wealth with the other players. 

Now, go find out who’s puzzle you can help complete.