5 Essentials for Having a Good Relationship with Your Realtor
Last week, I shared an article on how to find reliable local contractors and add them to your team. This article focuses on another important team member: your Realtor. But it’s not enough to simply find a good Realtor—you need to work to build and maintain a strong relationship with them.
I’ve worked with my Realtor since 2004. My relationship with Chris is one of the best and longest business relationships I’ve ever had—which is a testament to the importance of taking care of your team members. Read on to learn about the five steps of a deal and how a good Realtor relationship improves the value of a deal.
Step 1: Locating Hot Deals
Chris plays an important role in helping me locate hot deals. How does he do it? First, Chris has me set up on an automated email campaign. I’ve provided specific search criteria for properties, and every day I get notifications for all new: bank-owned property listings, bank-owned property listings with a price reduction, short sale listings, and short sale listings with a price reduction. Since this is done on automatic, Chris doesn’t have to waste time searching. He has a program set up on his computer that filters and sends me properties.
In addition, Chris receives a daily “hot sheet,” which notifies him of all new listings in the multiple listing service (MLS). He reviews this hot sheet lets me know if there’s a significant spread between the current listing price of a property and the after-repair value (ARV). Because we’ve worked together for so long, Chris is able to estimate potential repair costs from his hot sheet, and know how much I’d be looking to profit from a particular deal.
Step 2: Market Comparisons
After Chris locates a potentially hot deal, we look further into it with a comparative market analysis (CMA). In order to calculate a reasonable CMA, your Realtor needs to know your exit strategy and how much will go into rehabbing the house, and compare that to other houses in your market.
You need to have a good relationship with your Realtor. If they know how you operate, they’ll know your exit strategies, which influence buying strategies. Your Realtor should also know how you rehab houses. Chris knows my goal for rehabbing houses is to have then Southern Living ready. My house doesn’t get listed until it’s good enough for a photographer to walk in and do a magazine-worthy photoshoot.
Step 3: Inspections, Inspections, Inspections
Never buy a property without either you or your team conducting an in-person inspection inside and out. Why do I say this? Because I’ve made that mistake before and I don’t want to do it again!
After Chris has sent me the ARV of a property, we go out there to inspect the house ourselves. If I’m out of town, I’ll still send Chris and my contractor to get a look at the property. There’s a good chance seeing the house in person will change Chris’ ARV estimate. Maybe there’s a junkie house next door he wasn’t aware of, or the contractor determines there’s more work to do than the listing suggested. Before I consider making an offer, I want Chris to have the opportunity to adjust his ARV.
If during the inspection we decide it’s a good deal, I tell Chris to make an offer to the seller. Assuming my offer is accepted, Chris will prepare the purchase contract and we move to the next step of the process.
Step 4: Going through Rehab
Your Realtor shouldn’t just disappear during the rehab process. While my team is working on the house, Chris frequently visits the property and suggests any tweaks or changes that could be made. Realtors know what buyers are looking for, so they know what needs to be done in order for a house to sell.
Once my contractor is finished, the house is clean, and my interior designers have fixed up the inside, I send Chris in one more time with a punch list. This list helps him look for anything the contractor or interior designers missed. Once I receive the punch list, I make sure everything has been taken care of before putting the house on the market.
Step 5: Compensation via a Listing Agreement
There are a few different ways I compensate Chris. First, when I’m purchasing a house in the MLS, I put all of my offers through Chris. In most cases, Chris isn’t the Realtor with that listing, so if I buy the house, he gets paid a commission by the seller.
If Chris finds a deal that’s not in the MLS, he can’t get paid a Realtor’s commission. In order to make sure Chris gets compensated for the time spent doing the research and finding the deal, Chris lists the house once it’s ready to go on the market. When the house sells, Chris gets his commission.
Most Realtors get a 6% commission for selling the house. Because of the volume and value of our business together, Chris is willing to take 5% commission. Our listing agreement also states that I have the right to sell the house to my rent-to-own buyers. When this happens, Chris takes the house off the market and is paid 2% of the selling price once my rent-to-own buyer qualifies for a mortgage.
In order to have a successful real estate investing business, you must have strong relationships with everyone on your team. Your Realtor is a member of that team, as are your contractor and your acquisitionist. This is why it’s important to find the right Realtor to work with and maintain a relationship that’s mutually profitable for both parties. After all, if you aren’t taking care of your Realtor, why should they want to take care of you?
There's one thing I stress in having your own real estate investing business: the importance of finding and keeping a strong team on your side. I don't even think I'd have a business without my team!
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