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.

Monday, July 3, 2017

Clarifying SB 2212: TREC’s new Rule on Wholesaling

Last week, the social media boards were a flurry of discussion as a result of an email sent out by TREC to licensed agents regarding a new bill recently signed by the governor directly related to wholesaling. While titled “Sale of Equitable Interests in Real Estate Clarified” it seemed to do more to create confusion and concern than clarify the new TREC rule.

Here is what the body of the email said:
SB 2212 amends Chapter 1101 to codify the clarifying changes to TREC rules regarding sale of certain equitable interests in real property. 
Just like the rule, this statutory change clarifies that a person selling or offering to sell an option or assigning an interest in a contract to purchase real property must accurately disclose to potential buyers the nature of the interest offered. If a person offers a property for sale when the person does not own the property, that person is engaged in brokerage and must be licensed to do so. This is the current law. 
If a person offers to sell an option or assign an interest in a contract on a property, the person must accurately describe the interest being offered.  The same requirement for accuracy is added in the Property Code. The practice of “wholesaling” remains legal if these “truth in advertising” rules are adhered to. 
They further discussed the new rule in their Legislative Update: https://www.trec.texas.gov/article/2017-legislative-update-trec

One person thought that your profit had to be disclosed and another wondered if a double closing would mean they could avoid the requirement. Also, if an investor wholesales a property does that mean he is improperly practicing real estate brokerage?

I decided to call the TAR Legal Hotline to get clarification from their attorneys. Here’s what I found out:

·      The rule requires that a person advertising or offering to sale an equitable or contractual interest in the party must disclose this to the buyer.
·      TREC’s main concern is that the end buyer be aware that it is a wholesale transaction.
·      Disclosure to the homeowner/seller is NOT required.
·      There is no limit to how many transactions a wholesaler can perform as long as the disclosure is made to the end buyer.
·      There is no guidance on preferred language or placement of the disclosure. The TAR attorney agreed that Special Provisions would likely be the most appropriate place.
·      Contract language “and/or assigns” is still not required as the contract is still assignable unless it specifically states that it is not assignable.
·      A licensed agent may still act as a principle and wholesale properties as long as the proper disclosures (agency status and contractual interest) are made.

As we chatted, an interesting line of conversation began. In seeking clarifications on how the new rule would impact Agents/Brokers the TAR attorney stated that an agent CAN represent a wholesaler in the sale of their equitable/contractual interest as long as the same disclosure is made to the end buyer. He further stated that, under TREC rules, there is nothing indicating that an agent cannot advertise the offering on the MLS.  This got my attention and I inquired further. He stated that a listing agreement would need to be made between the seller of the interest and the broker and that, if it would be advertised on the MLS, permission would need to be given by the current homeowner to do so.

Previously, my understanding from the boards is that they do not allow the placement of wholesales on the MLS because their rules require a listing agreement between the homeowner and the Broker in order for a property to be listed on the MLS.  I decided to give ABOR a call to confirm that was still the case. After utterly confusing the first person who answered my call and being connected to the MLS supervisor I asked again. I then had to educate the MLS supervisor on what is “wholesaling”.  What a perfect example of how out of touch the traditional Realtor world is with creative and investment real estate!

Once he understood the question he stated that no, it is not allowable to place wholesale properties on the MLS. I further inquired based on what? Was it stated in ABOR rules and regulations or other written policies? He answered that it was based on “general business practice” but could not tell me where the rule was written.

He later emailed: MLS Rule 2.2 states that the MLS is not required to accept every type of listing. Most listings are an exclusive right to sell which contains a warranty that the seller has title to the property. Therefore, under rule 2.8 Right to Reject, we have historically rejected listings that only have an option to purchase the property.

I will continue the conversation with ABOR and Stan about this.

In the meantime, here is the final take away: Beginning September 1st, if you are wholesaling, be sure to disclose that you are selling a contractual interest in a property.