Many investors make the costly mistake of considering real estate agents as competitors. They incorrectly see themselves out in the market competing for a limited number of deals-fighting it out with local agents and brokers to make money. This costs them time, and it costs them thousands of dollars from lost deals. The truth is that as an investor one of the most profitable relationships you can ever develop is with a real estate agent. Think about it for a moment. As an investor your market is motivated sellers who don't need all cash at closing (and are willing to be flexible on the terms of sale) or who are willing to deeply discount the price of their properties for an immediate sale.
But the majority of sellers you talk with as you do your lead generation are NOT motivated sellers. As many as 90% of the sellers you talk with are not motivated enough to be flexible on price and terms like you need them to be. Most investors toss these sellers into the round file, and this mistake costs them dearly. Instead, pass those sellers you cannot help onto your real estate agent ally. He will be able to turn these sellers into a steady stream of commissions as he lists, then sells their homes.
Remember: most agents spend tremendous amounts of time and money to find the very people you turn up in such great numbers-homeowners looking to sell for all cash and who have the time to wait for a top dollar offer. If you can help your agent friend get just one more listing a month you are adding tens of thousands of dollars to his annual income! So what's your payoff? Actually, you don't just get one payoff, you get five!
Payday Number One: Expired Listings
A listing is an exclusive agreement a seller signs with an agent giving them the right to sell the home for the seller. This agreement is typically for 3 to 6 months and many times an agent is unable to sell the house within that time period. Have your agent ally search the MLS (Multiple Listing Service-a database of properties for sale that only real estate agents have access to) looking for properties that didn't sell and whose listing has expired. These owners are far more likely to have grown motivated and are ripe for you the investor to call and put a deal together on their house.
In many cases the expired listings will not have a phone number for you to contact the owner. That's good! If it were too easy then another investor would have beat you to the prize. Simply take the information and do your own research. You can use the street address and a reverse directory to look up the phone number. (One such directory is called the Cole's Directory and is probably available for you to use for free at your local library.) Once you find the phone number, give the owner a call and see if they are flexible enough for you to buy their property.
Payday Number Two: Listings Search
Have your agent friend do a search of the MLS for key words that indicate motivated sellers. The agent simply searches the comments field for words like: “lease-option,” “flexible terms,” “owc,” “moving,” “transferred,” “estate sale,” or “contract for deed.” If a listing has these words in it chances are pretty good the seller is worth a phone call. Then you contact these owners and see if you can put a deal together.
Payday Number Three: Straight Referrals
Just like you are out there sorting through sellers, so too is your real estate friend. And when he finds an owner he can't help but who shows signs of being motivated, your agent can refer the seller to you. Better yet, ask your agent friend to pass along the owners name and phone number and give the owner a call yourself. This is a great source of deals that no other investors will know about! Best of all, when you get this third party referral you are getting a huge boost to your credibility. In essence the real estate agent is recommending you to the seller. This makes things much easier for you to put a deal together than if you were just coming in cold.
Payday Number Four: Fast and Free Access to Property Information
When you're out there putting together deals, wouldn't it be valuable to be able to call up your real estate contact and ask him for information like sales comparables, market rents, and rates of appreciation? If you're passing on several good leads a month to your real estate friend you will be amazed at how fast he will get back to you with this information he simply pulls up from the MLS. After all, if he isn't fast, there are many agents out there who are dying for your leads who will be much faster. The most important thing to remember when you are putting together this relationship to begin with is to always be willing to give value first. This means pass leads on to your agent friend for a short while BEFORE you ever call them up asking you for a favor. This will help you build trust into the relationship and cement your agent to working with you.
Over time this relationship will payoff handsomely for you. When you get the relationship going strongly you've just added a helper who is working with you to help you make more money. One of my students used this idea of networking with real estate agents to find a six year lease option on a $200,000 property with nothing down! If he can do it, so can you.