Real estate investors often avoid dealing with listing agents to obtain deals. Most of the time, this is because investors don’t know how to deal with them. Simply put, Realtors are taught to do things a certain way and investors are taught to do things another way. This inherent difference often leads to friction in their dealings. However, investors must learn how to deal with listing agents effectively since they can be a great source of deals. The following is a list of eight ways in which you can improve your interactions with listing agents. If you would like to learn more about this, please -see this here.
1) Present professional looking offers
Realtors are often required to use contracts which are approved by their local associations. Don’t expect to be able to use a pro-buyer contract that you purchased from a real estate guru. Familiarize yourself with the “customary” contracts that Realtors in your area use and submit your offers on them. These contracts tend to be neutral, meaning there are clauses and terms that benefit both buyers and sellers.
2) Offer sufficient earnest money
In a private sale situation, you can get away with offering a seller $10.00 in earnest money. However, when a property is listed, listing agents will rarely allow their seller to accept such a small amount of earnest money. Depending on the price of the property you are pursuing, you will generally need to offer between $500 and $3,000. This does not mean you must present a new check every time you make an offer on a listed property. In fact, most customary Realtor contracts contain a clause in which earnest money must only be presented upon the acceptance of the offer. If your customary contract does not include a similar type of clause, simply write it into an addendum.
3) Avoid weasel clauses
Weasel clauses are “easy escape clauses” and are taught by many gurus as a means to get out of a deal if you cannot close on it. For example, it may state; “This purchase is subject to approval by buyer’s partner.” In reality, your partner may be your brother in law who has no involvement in real estate. You should avoid using weasel clauses for several reasons. First, you should strive to close on every deal you sign. Second, using weasel clauses will give you a bad reputation in the business. Third, most competent Realtors recognize a bogus clause when they see one anyway, so it will greatly reduce your chances of getting good deals signed.
4) Offer a reasonable closing date
Listing agents prefer closings to occur 15 to 45 days from your offer date. If you offer a longer closing date, not only does the seller have to wait a long time to get their money, but so does the listing agent. While testing different closing dates is a viable way to negotiate a deal, you should generally offer short closings to entice sellers and listing agents to agree to your price and terms.
5) Take the time to write up full offers whenever possible
There are certain situations in which sending listing agents a “letter of intent” makes sense. In some cases, it may even make sense to run a potential offer past a listing agent verbally. However, in a vast majority of cases, it’s more prudent to take the time to write up a full detailed offer. When you make verbal offers or send letters of intent, a listing agent and their seller may not view it as a serious offer. However, when you write up a full detailed offer, not only does your offer appear more serious, the listing agent is required to present it.
6) Don’t be afraid to ask questions about the seller’s motivation
When you talk to listing agents, ask lots of questions. This will help you determine; the seller’s motivation, what terms may be important to them, and the experience level of the listing agent (for negotiating purposes). Asking questions and finding out the facts is a critical part of the negotiating process. While listing agents are not supposed to share details about the seller’s situation with you (without the seller’s permission), in reality many of them will share these details with you – if you ask.
7) Don’t be afraid to make low offers
Novice investors are often afraid of making “low” offers on listed properties. They worry about offending the seller. This is one of the hurdles new investors must learn to overcome. Generally speaking, 95% of your offers will get rejected, and you will offend many sellers, but that is part of the business. It’s a numbers game. Remember, the only response that matters is an acceptance.
8) Leave cordially
Since most of your offers will get turned down, learn how to leave negotiations appropriately. For example, when deals don’t go your way, avoid offending the other party by slamming the phone or leaving unkind remarks. Instead, leave cordially. If the seller’s original deal doesn’t work out (which is common), you leave the door open for them to contact you again. When you master this one skill, it will yield you many deals over the life of your career as a real estate investor.