Ralph R. Roberts - Flipping Houses For Dummies

A dream team is more than just a skilled workforce — it’s a combination of people who have your best interests at heart. They want you to succeed. Money alone can’t buy a dream team. You must nurture these relationships by rewarding the people who reward you through their expertise and hard work. Fair, timely payment, sincere compliments and thanks, positive referrals, and free food go a long way.

Real estate agents (or house hunters) who know the ropes and have the right contacts can assist you in managing the two transactions that are critical to your success — purchasing a house at less than market value and selling the rehabbed house quickly at a profit. In the following sections, I explain the beneficial services that agents can provide and give you guidance on finding the best agents for your flipping needs.

Although you may be able to handle one or both transactions (selling and buying) on your own in an attempt to trim costs and boost your bottom line, I strongly discourage it — especially when you’re flipping your first property. You’re about to invest tens or perhaps hundreds of thousands of dollars. A qualified agent can help you navigate the process and avoid common pitfalls that can turn a plump profit into a big, fat loss.

A good real estate agent is more than just a clerk who pushes paperwork through the system and juggles numbers. The right agent is more like the concierge at an upscale hotel — dedicated to serving your (real estate) needs, whatever they may be. Sure, a qualified real estate agent costs money — typically, a 6 to 8 percent commission — but when you consider the amount of money you’re investing, a single mistake can cost you tens of thousands more. A real estate agent who has plenty of experience working with investors can assist you with these tasks:

Helping you track down investors and other sources of cash. (See Chapter 4for more about financing your flips.)

Finding houses that meet your search criteria, even when those houses aren’t actively advertised as being on the market. (See Part 2of this book for more about finding properties to flip.)

Assisting in evaluating properties that you may want to purchase to avoid overpaying for a property. (See Chapters 9and 10for tips on evaluating specific properties for purchase.)

Ensuring that your offer has appropriate conditions in place to protect you. For example, you may want to make your offer contingent on the sale of another property you own, the property’s passing inspection, and the title company’s assurance that the title work is in order. (See Chapter 12for details on offers and negotiations for buying a home.)

Negotiating price, financing, terms, date of possession, and other sticky areas of a purchase agreement.

Expediting the closings (whenever you buy or sell a property) to ensure that nothing goes wrong at the last minute — and offering solutions when everything goes wrong at the last minute.

Helping you estimate the cost of repairs and renovations or putting you in touch with someone who can.

Referring you to reputable contractors, subcontractors, and other professionals (see “ Calling In Your Rehab Team,” later in this chapter).

Broadcasting your rehabbed home to every real estate agent in the neighborhood via the Multiple Listing Service (MLS) — a listing of homes for sale that goes out to all the real estate agents in your area — and helping you sell it in half the time (on average) it would take you to sell it yourself. (See Chapter 21for more about marketing your rehabbed home.)

Evaluating offers on the rehabbed home in a way that doesn’t compromise your position in the market. Some offers, for example, can tie up your home and leave you little compensation if the buyer backs out. (See Chapter 22for info on negotiating and closing the sale of your rehabbed home.)

Advising you on how much rent you can charge for a property if you want to hold on to it for a while and you need some cash flow.

A real estate agent is anyone who has a state license to negotiate the sale or purchase of a property and works for a real estate broker or brokerage company. A Realtor is a real estate agent who’s also a member of the National Association of Realtors (NAR). The United States has more than 2 million real estate agents, but only 1.5 million are Realtors.

What’s the difference? Because the qualifications for obtaining a real estate license vary from state to state, the quality of real estate agents varies much more than the quality of Realtors. NAR requires its members to complete additional training and testing to improve their knowledge and abilities and encourages members to follow a strict code of ethics. The association also provides its members with additional resources and tools to assist in finding and marketing properties effectively.

Of course, association membership doesn’t mean that a particular Realtor is more qualified than a given real estate agent, but the odds are pretty good that you’ll receive superior advice and service from a Realtor. To find a bona fide Realtor, look for the Realtor logo on business cards and stationery. Almost all Realtors make a point of proudly displaying this logo. You also can search for a Realtor in your area at www.realtor.com .

Talented, well-connected agents can help you locate excellent investment properties in a fraction of the time it would take you to do so and can help you purchase properties for thousands of dollars less than you would pay if you negotiated the purchase yourself. On average, you take twice as long selling a property yourself than you do when you work with a real estate agent.

Any licensed real estate agent can help you find, purchase, and sell a house, but you want someone whose experience and training are rooted in the business of flipping properties. Look for these qualities:

Specialty in your target area: The agent should know the market in which you want to invest and be well versed on property values, market conditions, and neighborhood news that may affect future property values.

Experience in other methods of finding homes to purchase: Shop for a real estate agent who specializes in your area of interest, such as these types of homes: For Sale By Owner (FSBO, pronounced “fizz-bo”), foreclosure, Housing and Urban Development (HUD), Veterans Affairs (VA), probate, or bankruptcy. With this approach, you become the fox in the henhouse with an inside connection. Consider choosing agents with different specialties. All agents are familiar with traditional sales marketed through the MLS, but some branch out into other areas, such as FSBO properties, sheriff’s sales, probate, bankruptcy, or real estate owned (REO) properties — repos owned by banks. When you have multiple agents who specialize in different areas, you broaden your selection of inventory. If an agent gets bank listings, buy from that agent because they receive both sides of the commission. When you flip the house, list it with the same agent. With the agent getting the listing and the selling commission (in my industry, it’s called a double dip ), the agent will be more motivated to help sell the home.