Best Negotiator Often Real Estate Agent
More than three centuries ago, Sir Francis Bacon wrote an essay, “Of Negotiating”, in which he advised: “It is generally better to deal by mediation of a third than by man’s self. Use bold men for expostulation, fair-spoken men for persuasion, crafty men for inquiry and observation, forward and obscure men for business that doth not well bear out itself — In all negotiations of difficulty, a man may not look to sow and reap at once. ”
BACONS WORDS HAVE NOT LOST VALUE
Negotiating to purchase real estate can be a downright intimidating experience for the weak-hearted, worse yet; the results can end up a total disaster with both parties wondering exactly what went wrong! What mostly goes wrong is that emotions get in the way. Pride of ownership becomes an issue and personalities will often clash, making it nearly impossible for either side to remain objective. For these reasons, a good third party real estate agent, who is knowledgeable about the deal, is worth his weight in gold-or in my particular situation, with agent Fred — “A reasonable commission”.
It took me nearly four years to train Fred how to gather the kind of information I need for my line of work. My line of work, of course, is real estate investing for profits. That’s a lot different than merely investing in real estate! That’s what many naive investors do, and unfortunately they acquire properties all right, but what they’re missing is profits. Let me say this before I move on — Fred is an excellent real estate agent. He has many outstanding achievements to his credit, but the simple truth is, I need Fred to be my detective as much as my real estate agent. That’s where my four years teaching Fred about my special requirements has paid big dividends for me. It’s also meant more commission checks for Fred.
SPECIAL TECHNIQUES HELP ACHIEVE CASH FLOW DEALS
An agent provides a middleman “buffer” between the buyer and seller. This is a valuable service to me or any real estate investor who owns multiple properties already. “Mom and Pop” real estate owners (the kind I buy most properties from) often feel intimidated negotiating with me one-an-one. They seem to feel that because I own so many properties and am successful, they’ll automatically end up on the short end of the stick! It’s a perception that’s hard to eliminate regardless of whether it’s true or not. Fred can generally dispel this problem for me in his capacity as a neutral third party. Sellers often – often feel that a licensed person will be more sensitive to their needs, as opposed to direct, face-to-face negotiating with a “ring-savvy” buyer.
Fred’s job is to qualify the property. Is the seller in any sort of financial trouble? Does he live out of town? Are they managed for him? Are the tenants causing the owner problems? Fred tries to determine if there are reasons for the seller to be motivated — Retirement, going broke, dying, etc. This is what Fred finds out. It’s detective work like Colombo does on TV.
TRAINING YOUR PERSONAL AGENT PAYS OFF
A good agent will do “weeding out” for you automatically once he or she becomes accustomed to what you really want. Fred always brings me everything I need for making an educated evaluation on each deal. The information provided is normally A PROPERTY PROFILE, copies of EXISTING PROMISSORY NOTES and either a filled out INCOME PROPERTY ANALYSIS FORM (the kind in my fixer house book), at least the necessary data to fill one out. He verifies rents, vacancies and liens. This is valuable “time saving” work for an investor, yet it’s needed before any intelligent buying decision can be made. All this stuff takes
time and it costs Fred money. The only way he gets paid back is if I buy the property.
Fred doesn’t make a lot of dry runs. He knows what I want and determines quickly if a property has the right stuff. How did Fred get so smart? How did he ever learn this detective business anyway? When Fred and I started, we spent a lot of time discussing what I wanted! Investors must be very clear about which properties they will buy when one comes along; otherwise agents will attempt to show them everything.
Agents won’t hang around you if you’re just a LOOKY-LOO. That’s a person who wants to see everything but nothing ever seems to meet his approval. ”No agent worth his salt can afford that nonsense! Fred works for me for one simple reason — It’s profitable!
He knows I can close fast if he does his job. Fred’s job is to know exactly what I will buy. He don’t call me about every property for sale in my town. A good agent will immediately qualify the property to determine if it has potential. Fred knows I don’t normally want deals where new bank financing is required. He also knows I want sellers who will carry paper and that I rank small “leper-type” properties, like 4 to 6 houses on a single lot or a bunch of ugly rundown duplexes at the top of my buying list. When he hears about these kinds of properties, he acts quickly!
DON’T FIDDLE WITH SELLERS WHO CAN’T OFFER YOU A GOOD DEAL
Fred often interviews sellers who have over-financed their- real estate by paying too much in the first place or by adding additional loans during their ownership. Regardless of the reason, it doesn’t matter much because these sellers are not in a position to make us a very good deal! The only way they could, would be to pay down the existing debt or to
pay me money to take their property! Obviously, these are not very attractive options for most sellers. The simple truth is, when too much money is already owed on a property, it can seldom be a good deal for me. Fred has learned from me not to waste his time, fiddling with deals that don’t show us a clear plan for making reasonable profits!
Properties that have been owned by the seller for a substantial period of time, 10-20 years or more, will offer you far greater opportunities for negotiating the selling price downward. The reason for this is because the existing mortgage debt has most likely been paid down over the years. It’s always to your advantage to negotiate a purchase price when only the seller’s equity is at stake!
INVESTIGATION STARTS YOU ON THE RIGHT FOOT
The very first thing we do when either of us hears about a property that becomes available, assuming I’m interested, is to begin what I call “detective work”! Fred usually gets to perform this task, remember it took him 4 years with my coaching before he became snoopy (skilled) enough to suit my taste! Brokers and sales agents typically don’t do the exhaustive research or “snooping around”, like I insist must be done.
The biggest difference between Fred and most other agents is that they accept the word of sellers as being mostly true! I convinced Fred to accept it as being mostly exaggerated and generally untrue! It’s never considered true until it’s proven to me. I’m not trying to be overly critical here, but you must never forget this important fact of investment
life.
ONCE THE ESCROW CLOSES AND EVERYBODY GETS PAID, IT’S YOU, ALONE, BY YOURSELF, WHO MUST LIVE WITH THE DEAL YOU SIGNED! IF SOMEHOW YOU’VE FAILED TO UNCOVER THE TRUE PROPERTY EXPENSES AND IT TURNS OUT THEY’RE CONSIDERABLY HIGHER THAN YOU WERE LED TO BELIEVE, GUESS WHAT? IT’S YOU ALONE WHO IS NOW THE STUCKEE!
That’s the reason I taught my agent to become a very snoopy house detective shortly after we met.
PERFORMING THE UNDERCOVER DETECTIVE WORK
The first thing we (Fred or myself) do is visit the local title company, where we do most of our business. We request a parcel map, the tax roll and copies of all the deeds or mortgages recorded on the property. Many title companies provide this service free for their repeat customers and to real estate agents. Some folks refer to this information as a PROPERTY PROFILE. It’s the best way to start your file on any property you have an interest in owning because these few documents will provide you with the following information:
A. A parcel map gives you lot size and often shows easements and right of-ways.
B. The tax roll shows who owns the property and where the current tax bill is being mailed each year. It will also show you how much the taxes are now and how much value the county assessor has appraised the land, improvements (buildings) and personal property for (dollar amounts).
C. Additionally, with the parcel map and tax roll you can also find out who owns the properties around the parcel you’re investigating.
D. Copies of trust deeds or mortgages will show the amount of debt against the property at the time of the last sale or transfer of title. It also shows who owes the debt (trustor) and who receives it (beneficiary). For trust deed states, the due-on-sale clauses normally show up on trust deeds also. Obviously deeds or mortgages show the chain of title with recording dates and notarized signatures.
E. The documentary transfer tax, which is a state tax on the sale of real property and is based on selling price or equity transferred.
is generally stamped on the grant deed. The current California tax is $1.10 per $1000 of property transferred. When you have a copy of the grant deed, you can easily determine what the current owner paid for the property. For example, if the documentary tax is $55.00, computed on the full value, then the purchase price would be $50,000 ($55.00. $1.10 = $50,000). Sometimes knowing what the owner paid can help you develop your offer to purchase. Seller’s dislike offers for less than what they paid, no matter how motivated they are. Always keep this in mind when negotiating your deals.
Motivated sellers are not generally “stupid idiots” like many “fly-by-night” seminar leaders might lead you to believe. Mostly they’re just people who have gotten themselves in a financial bind. Also, high on the list of motivated sellers are folks who for whatever reason, are lousy landlords. Their tenants are driving them “bonkers“. I’ve purchased, several properties from sellers who were actually afraid to drive me to their property for a showing. Their own renters frightened them! Having this kind of information is extremely helpful to me when I’m negotiating a purchase price.
HOW TO FIND AN AGENT THAT’S RIGHT FOR YOU
The best way to begin your search for Mr. or Mrs. Right is to visit the local real estate offices in the area where you plan to invest. Ask the receptionist if she knows which agent sells the most apartment buildings or income properties. Get yourself introduced and tell the agent exactly what you’re trying to accomplish. The interview will be your opportunity to learn what the agent thinks he can do for you! But remember, he must know exactly what you want done in order to respond in a meaningful way.
Just like a budding romance, the first thing that has to work is chemistry! It will do you no good in the long run to force yourself into working with an agent who disgusts you no matter how good you think he or she may be. Obnoxious agents are best left to service obnoxious house buyers since there’s no shortage or either one out there! I mention this because it’s very important to develop a relationship that can last a long time. Lasting together much easier when you like each other. I’ve had just two
agents in the last thirty years. The first one passed away.
Real estate agents are the EYES and EARS of the real estate business! 96% of all sales and trades involve licensed sales persons and their brokers. It would be very foolish indeed to harbor any serious notions about excluding them from your investment plans. The best thing you can do for yourself is to diligently begin searching for a good one.
