5 Key Factors that Will Help You Understand the Importance of a Buyer’s Agent

Every new real estate investor soon comes to grip with the realization that the purchase of a property can be a daunting and sometimes complicated process.  Does everything start with the actual offer on the property?  Sadly, the answer really starts much sooner.  Before you ever purchase a property, you need to be able to determine if the property in question is the best property and if the price you are willing to pay is the best price.  Assuming that it is the right property, the price then becomes even more important.

It’s entirely possible that you have heard of a “buyer’s agent” and been a little confused.  Many new real estate investors mistakenly believe that if you automatically call the number on a listing sign, you will have an agent that will work in your behalf.  Nothing could be further from the truth.  That agent has signed a contract to work for the seller and to do everything in his or her power to represent the seller.  Nowhere in such listing contract does it say that the listing agent will work to represent the purchaser of the property.

It’s time to understand just how important a good, well-qualified, and knowledgeable buyer’s agent can be.  The term “agent” comes from the concept of “agency” which generally means an action or intervention to accomplish a certain result.  Thus, a buyer’s agent refers to the action of purchasing a property for the benefit of the buyer.  When you engage a buyer’s agent you are engaging someone who is going to work for you, negotiate for you, and stand in your best interest.

As a real estate investor, you should ask yourself if you really need a buyer’s agent.  In order to answer that question, step back a moment and ask yourself these three questions:

  • Do you want to lower the purchase price of the subject property?
  • Are you confident that you can negotiate the best purchase price possible?
  • Do you know who is representing you in the transaction?

Once you answer those questions, you will probably come to the conclusion that you might need additional help to secure the best deal.  That help can come through a well-qualified buyer’s agent.  If you are ready to become a better real estate professional who secures the best deals, you need to consider the following factors about a real estate buyer’s agent.

 

Key Factor #1 – Understand the Benefits of Using a Buyer’s Agent

There are major benefits a real estate investor can receive when using a knowledgeable and well qualified buyer’s agent.  The only real negatives generally appear when an investor has chosen an agent who is not knowledgeable or qualified.  With that caveat in mind, let’s look at several ways a buyer’s agent can benefit you, the purchaser of the property.

  1. Locating the best property. The first thing you need to do is to decide what type of property or real estate strategy you are going to pursue.  Are you going to search for “fix up property”, “potential rental property”, “raw land”, or some other type of property?  You need to determine exactly what type of property you are searching for.  Once you have done this, you will need to pass on this information in specific detail to your selected buyer’s agent. (Later in this article, we’ll discuss how to find and identify a good buyer’s agent.)

Your buyer’s agent needs to be able to distinguish between your wants and needs.  You should let the agent know exactly what you are trying to accomplish.  When you do this, your buyer’s agent will schedule appointments to view the properties and should be able to provide you with advance information regarding both the properties preliminarily selected along with critical facts about the neighborhoods.

  1. Negotiate the offer. This is a major benefit for you, the purchaser of the property.  The buyer’s agent will act as a third party and eliminate uncomfortable situations between yourself and the seller.  Keep in mind the fact that the listing agent of the property is contractually bound to represent the seller of the property.

The buyer’s agent can suggest appropriate starting offers and terms that might be acceptable to the seller.  In all likelihood, these terms might not be the price and terms that the listing agent is offering.  A good buyer’s agent will have researched other sales in the neighborhood and be prepared to have reasons for the price and terms you are offering.  This negotiation is generally made directly between your buyer’s agent and the listing agent.  Once the offer is accepted, the buyer’s agent can help and assist in drafting up the final closing documents.

  1. Recommend and find other real estate professionals. Depending upon the exact strategy that you will be employing, it is very possible that you might need the help of a well recommended contractor, mortgage broker, real estate attorney, appraiser, property inspector, mover, or other professional.  Your buyer’s agent should be knowledgeable about these individuals and be able to provide resources to help close and finalize the purchase of the property.  Having this information in a timely fashion will help you overcome obstacles that often appear when purchasing property.  It may be something in the home inspector’s report, be an appraisal problem, or some other setback.  When you have knowledgeable experts at hand, you are in a position overcome setbacks or obstacles that derail your investment strategy.

SEE ARTICLE: How to Convert Stumbling Blocks into Stepping Stones

 

Key Factor #2 – Understand the Difference Between a Buyer’s Agent and a Seller’s Agent

You must not believe that the buyer’s agent and the seller’s agent are one and the same.  They are not. When you use the seller’s agent (the listing agent) to negotiate on your behalf, you are positioning yourself in an untenable situation.  The buyer’s agent is working for the purchaser of the property, while the seller’s agent (the listing agent) is working for the seller.  Yes, you want to buy the property and yes, the seller wants to sell the property.  The difference is that you want to purchase the property at a price and terms that make sense for you, while the seller is trying to maximize the sales price on the same property.  In most cases, these goals are not the same.  The seller’s agent is bound by fiduciary responsibility to represent the seller, and not you.

Who do you want representing you?  Do you want the seller to know the absolute highest price you will pay before you even present the offer?  If you elect to use the seller’s listing agent to negotiate for you, you have already lost the negotiation issue.  Let’s take an example from the real world.  If you owned a rental property and your tenant was injured while repairing his motorcycle in your garage and sued you because your garage didn’t provide enough safety equipment, would you want the tenant’s lawyer representing you as well as your tenant?  I’m sure the answer would be a resounding “no”.  The same thing is true when negotiating with a seller.  You don’t want someone bound to and reporting to the seller to be representing you, the buyer.

 

Key Factor #3 – Determine How to Find a Good, or Even Great, Buyer’s Agent

Before you look for a good buyer’s agent, you must decide if you want to use one.  Once you make this decision, you must become very selective in the process.  What you don’t want to do is to choose someone who is not qualified or knowledgeable.  You want to find someone who understands the role he or she will play in the property purchase.

The first thing we recommend is that you immediately disregard the listing agent as a potential buyer’s agent.  The listing agent is legally bound and responsible to the seller of the property.  With this being the case, how can that individual represent you as a buyer’s agent?  You can be choosy when selecting the buyer’s agent.  You may receive recommendations to use your sister’s uncle or some family relative.  While it is difficult to say no to these type of recommendations, it is usually wise to do so.

What you are looking for is someone who truly understands the role of a buyer’s agent and is prepared to fulfill the responsibilities that come with this opportunity.  You can search online for “buyer’s agents” in your specific locality.  It is also possible to get recommendations from other friends who have purchased property using a buyer’s agent.  We suggest that you get several recommendations and then interview these individuals and find out how knowledgeable they are.  During the interview process, try asking these questions of each individual:

  1. Do you accept listings? If the agent does accept listings, this means that he or she is automatically working for the sellers of those properties.  Great buyer’s agents specialize in working with buyers and don’t accept listings from sellers, thus avoiding conflicts of interest.  If the agent accepts regular real estate listings, the agent is basically saying that he or she is working as a dual agent.  Does this sound like what you want?

A final note about agents who work as “dual agents”.  It is not illegal to have an agent work on your behalf as well as for the seller of the property, but when you do, you are competing against yourself.  When an agent agrees to show you a property where he or she is the listing agent, that is exactly what you are doing.  Many real estate professionals have found it more profitable to contract with a buyer’s agent and have that agent contact the listing agent.

  1. What type of properties do you specialize in? In order to increase your success in real estate, you need to find a buyer’s agent who both understands your specific real estate strategy and has had experience in finding these properties.  When your buyer’s agent has past experience, the learning curve will be shortened.
  2. What neighborhoods do you specialize in? You want to find an agent who is familiar not only with the type of property you are interested in, but, knows the area very well.  Hopefully, you will find an agent who has both the experience as a buyer’s agent, but also has experience on a personal basis.
  3. Are you working part or full-time? You need to understand from the beginning how much time the individual will have to devote to scheduling and showing you properties.  If the agent is working only part-time, ask very specific questions as to the availability he or she will have to working with you on your schedule.
  4. What references can you provide? You would be well-served to have references from other real estate purchasers who have used the agent.  You might also ask for references from other professionals like appraisers, mortgage brokers, or home inspectors.  Once you get a list of references, follow through and talk to each of them and ask their professional opinion of the agent.

 

Key Factor #4 – Understand How the Buyer’s Agent Gets Paid

The first question that often comes to mind is “Who pays the buyer’s agent?”  In most cases the fee paid to the buyer’s agent comes from the actual sale of the property.  When the property owner lists the property, he agrees to pay a real estate commission of 5 to 6 percent of the purchase price of the property.  The fee is paid through the listing broker and is generally split 50/50 between the listing broker and the buyer’s agent broker.

Most people say that the seller is paying for the buyer’s agent because the money for the buyer’s compensation comes from the sale of the property.  When you analyze the situation more closely, you recognize that the actual money comes from the payment made by the purchaser of the property to the seller.  Yes, it comes from the seller, but only after the buyer has actually paid the money to the seller.

Professional buyer’s agents have a contract they sign with you, the purchaser, of the property.  This is done when you engage the professional buyer’s agent and is called and Exclusive Buyer Agency Agreement.  The contract between yourself and the agent specifies what he or she will do on your behalf.  Before you sign such an agreement, make sure that you are satisfied with the agent.  The buyer’s agent will work for you.  You must be satisfied that he or she is just what you want.

The agreement is generally for three to six months and can be cancelled by yourself if you are not satisfied with the agent.  Many of these agreements have a clause that states you will pay a minimum amount (often $2,500) from any purchase arranged and negotiated through the buyer’s agent.  This fee comes from the listing commission paid through the seller of the property.  In the case of properties offered “For Sale By Owner”, the fee could be paid separately, or the buyer’s agent may get the seller of the property to pay the fee.

 

Key Factor #5 – Understand the Role of a Credible Professional Buyer Agent

There is an organization that is known as “The National Association of Exclusive Buyer Agents” and is known as (NAEBA).  This organization is a membership organization of buyer agents.  The organization selects agents who don’t accept listing contracts with sellers as the listing contract makes them responsible to the owner and creates an immediate conflict of interest.

You can search for the best buyer’s agents in your specific area by using a search engine and searching for the terms:

  • Real Estate Buyer’s Agents
  • Buyer’s Agents
  • Professional Buyer’s Agents

Try matching the terms with your specific locality and you will find buyer’s agents in your area.

A final word to the wise.  There are always two parties to a real estate transaction – the buyer and the seller.  As a buyer, you want the best price possible on the best property available, according to the best terms you can negotiate.  Consider strongly searching out a knowledgeable and professional buyer’s agent to accomplish your goals.

5 Key Factors that Will Help You Understand the Importance of a Buyer’s Agent

Every new real estate investor soon comes to grip with the realization that the purchase of a property can be a daunting and sometimes complicated process.  Does everything start with the actual offer on the property?  Sadly, the answer really starts much sooner.  Before you ever purchase a property, you need to be able to determine if the property in question is the best property and if the price you are willing to pay is the best price.  Assuming that it is the right property, the price then becomes even more important.

It’s entirely possible that you have heard of a “buyer’s agent” and been a little confused.  Many new real estate investors mistakenly believe that if you automatically call the number on a listing sign, you will have an agent that will work in your behalf.  Nothing could be further from the truth.  That agent has signed a contract to work for the seller and to do everything in his or her power to represent the seller.  Nowhere in such listing contract does it say that the listing agent will work to represent the purchaser of the property.

It’s time to understand just how important a good, well-qualified, and knowledgeable buyer’s agent can be.  The term “agent” comes from the concept of “agency” which generally means an action or intervention to accomplish a certain result.  Thus, a buyer’s agent refers to the action of purchasing a property for the benefit of the buyer.  When you engage a buyer’s agent you are engaging someone who is going to work for you, negotiate for you, and stand in your best interest.

As a real estate investor, you should ask yourself if you really need a buyer’s agent.  In order to answer that question, step back a moment and ask yourself these three questions:

  • Do you want to lower the purchase price of the subject property?
  • Are you confident that you can negotiate the best purchase price possible?
  • Do you know who is representing you in the transaction?

Once you answer those questions, you will probably come to the conclusion that you might need additional help to secure the best deal.  That help can come through a well-qualified buyer’s agent.  If you are ready to become a better real estate professional who secures the best deals, you need to consider the following factors about a real estate buyer’s agent.

 

 

Key Factor #1 – Understand the Benefits of Using a Buyer’s Agent

There are major benefits a real estate investor can receive when using a knowledgeable and well qualified buyer’s agent.  The only real negatives generally appear when an investor has chosen an agent who is not knowledgeable or qualified.  With that caveat in mind, let’s look at several ways a buyer’s agent can benefit you, the purchaser of the property.

  1. Locating the best property. The first thing you need to do is to decide what type of property or real estate strategy you are going to pursue.  Are you going to search for “fix up property”, “potential rental property”, “raw land”, or some other type of property?  You need to determine exactly what type of property you are searching for.  Once you have done this, you will need to pass on this information in specific detail to your selected buyer’s agent. (Later in this article, we’ll discuss how to find and identify a good buyer’s agent.)

Your buyer’s agent needs to be able to distinguish between your wants and needs.  You should let the agent know exactly what you are trying to accomplish.  When you do this, your buyer’s agent will schedule appointments to view the properties and should be able to provide you with advance information regarding both the properties preliminarily selected along with critical facts about the neighborhoods.

  1. Negotiate the offer. This is a major benefit for you, the purchaser of the property.  The buyer’s agent will act as a third party and eliminate uncomfortable situations between yourself and the seller.  Keep in mind the fact that the listing agent of the property is contractually bound to represent the seller of the property.

The buyer’s agent can suggest appropriate starting offers and terms that might be acceptable to the seller.  In all likelihood, these terms might not be the price and terms that the listing agent is offering.  A good buyer’s agent will have researched other sales in the neighborhood and be prepared to have reasons for the price and terms you are offering.  This negotiation is generally made directly between your buyer’s agent and the listing agent.  Once the offer is accepted, the buyer’s agent can help and assist in drafting up the final closing documents.

  1. Recommend and find other real estate professionals. Depending upon the exact strategy that you will be employing, it is very possible that you might need the help of a well recommended contractor, mortgage broker, real estate attorney, appraiser, property inspector, mover, or other professional.  Your buyer’s agent should be knowledgeable about these individuals and be able to provide resources to help close and finalize the purchase of the property.  Having this information in a timely fashion will help you overcome obstacles that often appear when purchasing property.  It may be something in the home inspector’s report, be an appraisal problem, or some other setback.  When you have knowledgeable experts at hand, you are in a position overcome setbacks or obstacles that derail your investment strategy.

SEE ARTICLE: How to Convert Stumbling Blocks into Stepping Stones

 

Key Factor #2 – Understand the Difference Between a Buyer’s Agent and a Seller’s Agent

You must not believe that the buyer’s agent and the seller’s agent are one and the same.  They are not. When you use the seller’s agent (the listing agent) to negotiate on your behalf, you are positioning yourself in an untenable situation.  The buyer’s agent is working for the purchaser of the property, while the seller’s agent (the listing agent) is working for the seller.  Yes, you want to buy the property and yes, the seller wants to sell the property.  The difference is that you want to purchase the property at a price and terms that make sense for you, while the seller is trying to maximize the sales price on the same property.  In most cases, these goals are not the same.  The seller’s agent is bound by fiduciary responsibility to represent the seller, and not you.

Who do you want representing you?  Do you want the seller to know the absolute highest price you will pay before you even present the offer?  If you elect to use the seller’s listing agent to negotiate for you, you have already lost the negotiation issue.  Let’s take an example from the real world.  If you owned a rental property and your tenant was injured while repairing his motorcycle in your garage and sued you because your garage didn’t provide enough safety equipment, would you want the tenant’s lawyer representing you as well as your tenant?  I’m sure the answer would be a resounding “no”.  The same thing is true when negotiating with a seller.  You don’t want someone bound to and reporting to the seller to be representing you, the buyer.

 

Key Factor #3 – Determine How to Find a Good, or Even Great, Buyer’s Agent

Before you look for a good buyer’s agent, you must decide if you want to use one.  Once you make this decision, you must become very selective in the process.  What you don’t want to do is to choose someone who is not qualified or knowledgeable.  You want to find someone who understands the role he or she will play in the property purchase.

The first thing we recommend is that you immediately disregard the listing agent as a potential buyer’s agent.  The listing agent is legally bound and responsible to the seller of the property.  With this being the case, how can that individual represent you as a buyer’s agent?  You can be choosy when selecting the buyer’s agent.  You may receive recommendations to use your sister’s uncle or some family relative.  While it is difficult to say no to these type of recommendations, it is usually wise to do so.

What you are looking for is someone who truly understands the role of a buyer’s agent and is prepared to fulfill the responsibilities that come with this opportunity.  You can search online for “buyer’s agents” in your specific locality.  It is also possible to get recommendations from other friends who have purchased property using a buyer’s agent.  We suggest that you get several recommendations and then interview these individuals and find out how knowledgeable they are.  During the interview process, try asking these questions of each individual:

  1. Do you accept listings? If the agent does accept listings, this means that he or she is automatically working for the sellers of those properties.  Great buyer’s agents specialize in working with buyers and don’t accept listings from sellers, thus avoiding conflicts of interest.  If the agent accepts regular real estate listings, the agent is basically saying that he or she is working as a dual agent.  Does this sound like what you want?

A final note about agents who work as “dual agents”.  It is not illegal to have an agent work on your behalf as well as for the seller of the property, but when you do, you are competing against yourself.  When an agent agrees to show you a property where he or she is the listing agent, that is exactly what you are doing.  Many real estate professionals have found it more profitable to contract with a buyer’s agent and have that agent contact the listing agent.

  1. What type of properties do you specialize in? In order to increase your success in real estate, you need to find a buyer’s agent who both understands your specific real estate strategy and has had experience in finding these properties.  When your buyer’s agent has past experience, the learning curve will be shortened.
  2. What neighborhoods do you specialize in? You want to find an agent who is familiar not only with the type of property you are interested in, but, knows the area very well.  Hopefully, you will find an agent who has both the experience as a buyer’s agent, but also has experience on a personal basis.
  3. Are you working part or full-time? You need to understand from the beginning how much time the individual will have to devote to scheduling and showing you properties.  If the agent is working only part-time, ask very specific questions as to the availability he or she will have to working with you on your schedule.
  4. What references can you provide? You would be well-served to have references from other real estate purchasers who have used the agent.  You might also ask for references from other professionals like appraisers, mortgage brokers, or home inspectors.  Once you get a list of references, follow through and talk to each of them and ask their professional opinion of the agent.

 

Key Factor #4 – Understand How the Buyer’s Agent Gets Paid

The first question that often comes to mind is “Who pays the buyer’s agent?”  In most cases the fee paid to the buyer’s agent comes from the actual sale of the property.  When the property owner lists the property, he agrees to pay a real estate commission of 5 to 6 percent of the purchase price of the property.  The fee is paid through the listing broker and is generally split 50/50 between the listing broker and the buyer’s agent broker.

Most people say that the seller is paying for the buyer’s agent because the money for the buyer’s compensation comes from the sale of the property.  When you analyze the situation more closely, you recognize that the actual money comes from the payment made by the purchaser of the property to the seller.  Yes, it comes from the seller, but only after the buyer has actually paid the money to the seller.

Professional buyer’s agents have a contract they sign with you, the purchaser, of the property.  This is done when you engage the professional buyer’s agent and is called and Exclusive Buyer Agency Agreement.  The contract between yourself and the agent specifies what he or she will do on your behalf.  Before you sign such an agreement, make sure that you are satisfied with the agent.  The buyer’s agent will work for you.  You must be satisfied that he or she is just what you want.

The agreement is generally for three to six months and can be cancelled by yourself if you are not satisfied with the agent.  Many of these agreements have a clause that states you will pay a minimum amount (often $2,500) from any purchase arranged and negotiated through the buyer’s agent.  This fee comes from the listing commission paid through the seller of the property.  In the case of properties offered “For Sale By Owner”, the fee could be paid separately, or the buyer’s agent may get the seller of the property to pay the fee.

 

Key Factor #5 – Understand the Role of a Credible Professional Buyer Agent

There is an organization that is known as “The National Association of Exclusive Buyer Agents” and is known as (NAEBA).  This organization is a membership organization of buyer agents.  The organization selects agents who don’t accept listing contracts with sellers as the listing contract makes them responsible to the owner and creates an immediate conflict of interest.

You can search for the best buyer’s agents in your specific area by using a search engine and searching for the terms:

  • Real Estate Buyer’s Agents
  • Buyer’s Agents
  • Professional Buyer’s Agents

Try matching the terms with your specific locality and you will find buyer’s agents in your area.

A final word to the wise.  There are always two parties to a real estate transaction – the buyer and the seller.  As a buyer, you want the best price possible on the best property available, according to the best terms you can negotiate.  Consider strongly searching out a knowledgeable and professional buyer’s agent to accomplish your goals.

 

Simple Strategies Real Estate Entrepreneurs Can Use to Improve Their Credit Score

Every real estate entrepreneur quickly learns that establishing good credit is essential for structuring sound and profitable real estate deals.  Whether you are searching for long-term financing for a new rental property or looking for short-term funds for a fix up, your success may very likely be tied to your ability to secure loans with lower interest rates and great terms.

Lenders will evaluate your ability to repay these loans based to a large degree on what is known as your “credit score”.  This credit score is also referred to as your FICO Score. This term has become common place in the finance community because the software used to calculate the credit score was developed by the Fair Isaac Corporation (FICO).  Since 90 percent of all commercial lenders use the FICO Score to determine an individual’s ability to repay a loan, it makes sense for the real estate entrepreneur to improve his or her credit score as much as possible.

Creditors make their decisions based on your credit score.  The credit score is determined based on five factors.  Payment history accounts for approximately 35% of the score; amounts owed for approximately 30%; length of credit history approximately 15%; total amount of credit approximately 10%; and types of credit approximately 10%.  You can’t hope to improve your FICO Score unless you know what that score is.  Start immediately by obtaining a copy of your credit report.  You can contact the major credit reporting bureaus, including: Equifax, Experian, and TransUnion.  There are also numerous resources for obtaining a free copy of your personal credit report.  Simply log on to one of the major search engines and search for “FREE CREDIT REPORT”.

 

Strategy #1 – Obtain and Review Your Credit Report

Once you have access to your credit report, you need to commit yourself to reviewing the information contained in the report.  It’s possible that some of the information provided by the banks, financial institutions, and contributing companies could be in error.  It’s also possible in today’s climate of identity theft that your identity could be used in fraudulent transactions.  If you identify any errors, you need to call and contact the contributors to correct any mistakes that you identify.  In some cases, a simple contact by phone might immediately improve your credit score.

When you contact these companies, you must be aware that you will need to provide evidence of who you are and why the item you dispute is incorrect or outright false.   One entrepreneur recently reviewed his credit report and found that his score was negatively impacted by failure to pay alimony and child support.  He was quite surprised because he had never been married or fathered any children.  In his case, he had been misidentified because there was another man with the same name and the social security numbers were mixed up.

This action of reviewing your credit report should be done on a regular basis as new entries on your credit report are constantly being added.

 

Strategy #2 – Immediately Improve Way You Pay Bills

Your credit score is determined by five major factors starting with the payment history.  Approximately 35% of a credit score is based upon the history of the payments made on past and present bills.  This being the case, you need to take preemptive steps to maintain good payment practices or improve slow or late payment practices.  When you review your credit report, you will notice immediately the impact of late payments.  If that’s the case, now is the time to turn that trend around.

Start by the simple act of making a schedule of when you pay your bills and then pay the bills on time.  It helps to make a list of all your bills and the due dates on regular bills.  An added benefit is that you see in real terms what how much of your income is going out on regular bills.

Consider signing up for automatic payments on regular occurring debt.  The advantage of this is that your bills are paid promptly, and in many cases, you will get better terms from the lender.  Make sure that you have the funds on hand in the accounts you use to fund these automatic payments.

There may be times when you as an entrepreneur find yourself in a financial situation where you can’t avoid a late payment.  Avoid these situations whenever possible, but if it happens, make sure that you never let the late payment go more than 30 days.  Some lenders don’t always report late payments up to 30 days, but all report late payments that are 60 days late.  Above all, don’t make a habit of being late even for a few days on bills that become due.

 

Strategy #3 – Manage Your Personal Credit

Approximately 30% of your FICO Score is based on the amount owed by an individual.  Your first objective is to avoid opening new credit accounts.  In today’s world, you are offered incentives to open new credit accounts on a constant basis.  Even if you don’t plan on using this credit, the newly opened credit account will have a negative impact on your credit score.  Despite the credit account being open, the lender may believe that you may have future problems in reducing or paying off the debt.

Next focus on paying off credit cards.  Credit card interest is usually the highest interest rate charged for a loan.  When you have credit cards, try and pay off the loan as rapidly as possible, and once you have past credit card amounts paid, attempt to pay off the balance entirely when it comes due each month.  This will help raise your credit score right away.

It’s entirely possible to get into the position of having high credit card balances, but doing so will create problems with your credit score, while having a negative impact on your ability to make good real estate deals.  If you do have a balance on your credit card, it’s been found that you want to keep your credit card balance at approximately 30% of the card’s available credit.  This means, in simple terms, that if you had a credit limit of $10,000, you would not want to have a balance of more than $3,000.

 

Strategy #4 – Start Eliminating Debt

Naturally we all want to get out of debt.  When we do so, we have a much more enjoyable life, but it also allows us to increase our credit score.  There is a difference between investment debt and personal debt.  Your credit score can actually increase when you are purchasing a home.  If you haven’t had credit in the past, you will want to establish credit by purchasing an automobile or some other asset on credit.  The key is to establish the credit and then to pay it off.  It has been shown that if you maintain the loan and make regular payments for at least 8 months, you can establish regular payments.  Once you have established credit, start getting rid of as much debt as possible.

The first debt you want to immediately eliminate is credit card balances.  You should now be aware that these unpaid balances on credit cards will reduce your credit score.  Some entrepreneurs want to cut up their credit cards, which will help if you are overspending, but credit cards you’ve had for a long period of time that are paid off or have zero balances help your credit score.

When you have a lot of unused credit available and not using it, your credit score will improve.

 

Strategy #5 – Establish and Maintain an Emergency Fund

Financial advisors have suggested for decades that it’s always wise to have an emergency fund that will pay for dry periods when you can’t meet a portion or all of your financial obligations.  The ideal amount seems to be six months of your annual income.  This may seem daunting at first, but if you learn to budget, it’s achievable over time.  In order to build up an emergency fund, you will need to learn to live on a budget.

Six months of emergency funds won’t happen immediately, but if you start with the goal of having one month and then two, it can take place.  Once you have the reserve to meet your regular budget needs, and especially your debt payments, live itself becomes much better.  Your credit score with naturally improve.

The different credit bureaus have different ranges, but they all seem to be fairly close.  Experian uses the following range to evaluate scores:

RATING SCORE
Very Poor 300-579
Fair 580-669
Good 670-739
Very Good 740-799
Exceptional 800-850

 

Improving your credit score takes work and time, but the rewards for the real estate entrepreneur can be amazing.  With a better and improved credit score you can qualify for better interest rates, get faster approval on loans, and open the door for bigger and better real estate deals. You can improve your credit score with discipline, and when you do, you will have access to better and better deals.

You Shouldn’t Buy a House If…

Almost everyone dreams of purchasing a house of their own. However, there are always downsides and upsides to it. And, home buying isn’t for everyone. When you are in your 20s, are young and confused, and haven’t quite got your life together, then maybe you should really think hard about whether buying a house at this point in your life is the best decision. If you’re uncertain where your life is headed because you have a lot of plans and not all of them are aligned to one path, then maybe you should think twice about home buying.

If you still have to or plan to go back to school, don’t buy a house just yet. Unless you’re certain that you can afford a monthly mortgage payment and you have enough resources to maintain the property, or you’re sure that you’ll be staying in that house for years, you might not want to buy one. You can always opt to rent first while you’re in this uncertain phase.

Buying a house isn’t as easy as 1, 2, 3. For young adults, it’s always okay to wait until you’re financially able to purchase a house of your own. Don’t feel rushed by society’s timeline. You are not obliged to buy a property of this type or that price or in this location. You have the freedom to choose the house you want in the neighborhood you feel comfortable in. Don’t get fooled by society’s present standards. So, wait until you’re ready to buy a house.

Even though you’re in your 20s, you will soon grow older and may have a family of your own. It’s hard to know what size of home will fit your needs. This may grow and change over time – soon you may have a significant other, have kids and even have some pets. The size of home you need may change, so it might be too early to decide what to buy right now.

Don’t buy just yet if you are the type of person who likes moving from one place to another. Take time enjoying this phase of your life. When you’re done wandering is when you can settle in a place where you’ll always feel convenient, comfortable and content.

Moreover, some young adults don’t consider buying a house because they don’t want to get caught up in the responsibility of owning one. They have other priorities, like traveling, seeing the rest of the world, saving for a car, enjoying a new hobby, and such. Home owning does not end when you’ve finally signed papers, moved in and the house is officially yours. You have to take care of a lot of things in order to maintain a property. That includes the maintenance and monthly utility payments. Sometimes these fees will drain you financially and get you really stressed out. Thus, if you think you’re not ready yet, buying a house should not be your main goal.

Overcoming the Fear of Making Offers

Overcoming the Fear of Making Offers

The first thing required to make deals in real estate is to overcome the fear of doing what is necessary to get properties under contract. Only then can you sell a property to willing buyers.

Obviously, if you don’t make offers, you won’t get deals. Having a “due diligence clause” and an assignable contract should help because you can sell the contract to a buyer if you find one or get out of the deal if you can’t without costing yourself any money.

For some people doing deals comes easy. Some investors even make money without using any of their own. The way to make money starting off without using your own money, or by using very little of it, is to get properties under contract and then sell those contracts to rehabbers or landlords and landladies.

Even if you only buy a home to live in, the home appreciates as the years go by and equity is gained as the mortgage is paid down. Naturally, most investors want to make more money and gain faster returns than just that.

The concept is simple: buy properties for less than you sell them for. When wholesaling you don’t even have to buy the property. Just get the property under contract at a price that allows a rehabber to buy the property from you at a higher price so you can make some money. By having a property under contract you have the right to purchase it if you so choose or you can turn those rights over to a buyer. As an exit strategy you should have a “15-day due diligence” clause. Never forget that this is how you protect yourself if you can’t use or sell the property.

The best way to remove the fear of making offers is to have a “due diligence” clause that allows you to get out of any deal for any reason during the time period of the clause. Here is an example of an effective due diligence clause that will allow you to just walk away as long as you exercise the clause with written notice as indicated in the clause itself: “Commencing upon receipt by Buyer’s Agent of a mutually executed Agreement of Sale, a Fifteen (15) day period shall begin (the “Due Diligence Period”) during which the Buyer shall have the right to carry out and perform all reviews and investigations deemed necessary by Buyers, including, without limitation, a physical review and inspection of the conditions of the buildings and the soil, environmental inspections, review of title, review of zoning, and review of any permits and approvals for property deemed necessary by Buyer. If Buyer, in its sole discretion, is not satisfied with the review, evaluation or investigation during the Due Diligence Period, Buyer may terminate this Agreement by written notice to Agent for the Seller prior to the expiration of the Due Diligence Period, and at such time, shall receive back deposit and neither party shall have any further obligation hereunder. If such notice is not given, this Agreement shall continue in full force and effect in accordance with its remaining terms.”

 

As you can see from the due diligence clause, there is nothing to fear. But, you may decide to be fearful anyway. If so, it is time to do a little soul searching. We can help. Give us a call on the Advisory Line.

Building Your Buyers List – Part 2

Building Your Buyers List – Part 2

Step no. 1 Identify the market that you wish to start investing in. This is critical as this will be the market you will start looking for cash buyers in. A real estate market can be defined in a number of ways, such as:

  • City Limits
  • County Limits
  • Zip Codes – this is the most common
  • District – in the larger and more populated cities

Step no. 2 Find realtors to help with your market research and analysis to determine the following:

Step no. 3 Find cash buyers. Here is a list of both online and physical resources you can use:

  • Local real estate agents, such as Keller Williams, RE/MAX, Coldwell Banker and Berkshire Hathaway.
  • Title companies, such as Chicago Title and Old Republic Title.
  • craigslist.com
  • biggerpockets.com
  • Various paid websites that offer real estate software products that allow you to search county records and the Multiple Listing Service for recent purchases of real estate that were done with cash.
  • County records. This can be done online or in person.
  • Real Estate Investor Clubs. Make sure to search online for the local REI club in your area and attend the next meeting so you can speak with cash buyers there.
  • For finding contact information, search the following websites:

Step no. 4 – The Qualifying of Cash Buyers – here is a suggested list, both scripts and questions:

RECEIVING INBOUND CALLS FROM INVESTORS

“Thanks for calling. I apologize, but I put the ad out a little premature. I haven’t got the contract accepted yet, but if this is what you are interested in I’ll call you back once I lock it up. Before I let you go, I assume you’re an investor, correct? What kind of deals are you looking for?”

MAKING OUTBOUND CALLS TO INVESTORS

“Hi, my name is [name]. I found your information online and it says you’re buying houses. I’m a real estate investor too, and I wanted to see if you have anything for sale. I can sometimes get great deals through other investors. Do you have anything available?”

QUALIFYING CASH INVESTOR QUESTIONNAIRE

Where are you investing? (City, County, Zip Codes, etc…)

What type of properties are you buying?

What property characteristics do you look for? (Beds, baths, sq ft, etc…)

What types of repairs do you typically do on your properties?

What is your maximum purchase price?

How much profit do you need?

How many deals can you handle per month?

Networking at Local Events or Festivals

Networking at Local Events or Festivals

“You should always be networking and marketing your business,” said my mentors to me when I first got started in the business over a decade ago. At first, I was a little embarrassed to do so. I felt like I was being pushy and needy, but I did it anyway. It turned out to be one of the best pieces of advice I have ever gotten. I tell you this because you must realize you are the catalyst to your business. There is no boss spending money on marketing, networking or advertising for you to bring in business. You are the boss and this is your business. You control your success. Networking is a very easy thing to do. Just let people know what you do or what you want.

Summer is upon us, so that means more people we be out and about. I encourage you to get out to the masses, attend all local events or festivals that will are taking place. Be a walking billboard for your business. I usually wear black or yellow pants with a yellow polo (golf shirt) with a collar. I have written in black lettering on the front, “I want to buy your home” and on the back, “Ask me how I can give you a THOUSAND DOLLARS.” This outfit is a conversation starter. Whenever someone approaches me I tell them who I am and what I am looking for. For instance, “I am a real estate investor looking for deals. If you bring me a property and I close on the deal, at closing I will pay you $1,000 cash” or I will tell them, “I am a real estate investor and am looking to buy distressed properties in any condition, and I will pay you cash and close quickly.” Either way I have somebody’s attention and they might sell me their home or bring me a possible deal. Regardless, you will be getting your name out into the community and getting noticed. Also, bring a stack of business cards with you to give out to people.

Networking, marketing and advertising are closely related. In the opportunity above, you get to do all three at once. This does not have to cost you a ton of money in order to be effective. Get creative with how you get noticed and make it happen. Don’t be afraid to talk to anyone about yourself and your business. You will be amazed of how many people love real estate. You never know where the next deal will be coming from.

3 Ways to Stay Connected to Your Cash Buyers

3 Ways to Stay Connected to Your Cash Buyers

In the real estate world, cash buyers are people who are able to purchase properties without needing to take out a mortgage or loan. They can be private individuals like retirees, lottery winners, heirs/heiress, or foreign or local investors. They can also be corporations with the capacity to buy properties with cash. If you have successfully built a massive cash buyers list then the next thing to do is to make sure you stay connected with them.

Having a good relationship with cash buyers can be very beneficial for real estate investors. They do real estate transactions faster than buyers relying on financing. Financing requires a lot of inspections, making the transaction more complicated, and, oftentimes, the buyer can fail to get approved for the mortgage loan. This would mean that the seller would have to repeat the same process all over again, spending precious time and money looking for new buyers for the property. These disadvantages that affect a real estate transaction are less severe when you are dealing with cash buyers, making cash buyers very important players in the real estate industry.

The relationship between the buyer and the seller is usually transactional, meaning it ends after the sale; however, this need not be the case each time. Instead, the relationship can be nurtured, making your past cash buyers a continuous flow of reoccurring business referrals and possible future clients. Of course, everything would depend on how well you were able to complete the real estate deal. You always want your clients to think of you as a nice, honest, competent, and trustworthy person so they are willing and wanting to call the next time they want to do business.

Here are 3 tips real estate experts shared how to successfully keep in touch with past cash buyers.

  1. Add Them On Social Media, Send Emails and Call Them

Online networking websites can let you contact and invite past clients to stay connected with you in a friendly and informal footing. For example, invite former clients to be your friends on Facebook. It’s a sure-fire way to keep in touch with them. Send emails or give phone calls to remember birthdays and any special occasions in their lives. Share home improvement insights and relevant real estate related news that they might find useful. These are just some of the ways you can make sure they won’t forget you.

  1. Drop By Bearing Thoughtful Gifts

Visit new homebuyers after they move in and bring them unique housewarming gifts like potted plants, a basket of goodies, a framed sketch or watercolour of their new home or a bottle of wine. It is also important that you make your timing right. Let them settle down in their new home first. You don’t want to barge in uninvited when they have just moved in and still have plenty of work to do. Visit them once or twice a year, especially on holidays, as an excuse to get reacquainted.

  1. Send Newsletters

Whether it is via email or snail mail, sending newsletters to your clients is a great way to stay in touch with them and, at the same time, give them useful information on what they might need and a gentle reminder of the services you offer.

Getting clients to remember you for future business may be tricky but the key is consistency. Nurture business relationships with your cash buyers and you will surely reap the best results over time.

How to Find International Real Estate Investors

How to Find International Real Estate Investors

The United States real estate market is for sale. Over the last several years there has been a lot of international interest in our housing market. The majority of foreign investors are buying in Florida, California, Texas, New York and Arizona. Canadians lead the international front for the most foreign investors in our economy. Combined, these investors have bought about $102 billion dollars’ worth of real estate, and 50% of them are buying with cash, per statistics from the National Association of Realtors. As a wholesaler, you do not want to ignore this class of cash investors. Sharpen your pencils, and let’s get to work. Let’s discuss some fantastic ways for you to find these investors, especially if you work in any of the states I listed above.

  • Realtors: Build relationships with realtors in your area that specialize in working with international buyers. Let them know you are an investor who wants to bring investment deals to their clients. You can find international agents at larger brokerages like Sotheby’s, Keller Williams, ReMax, and many others.
  • Foreign Realtors: Make sure to build relationship with foreign realtors as well. Talking to agents in the home countries of these investors is a great, quick way to get to them. Let these realtors know you want to work with them. Let them know you can bring great deals to their clients who are interested in investing in the United States.
  • Local Community Groups: Find local community groups with an international presence like the Asian Chamber of Commerce. Go to their events and network. Find people in the group who can connect you to foreign investors.
  • Get Online: Setup accounts on sites like LinkedIn. The online community is vast. Search out online groups for international investors and advertise yourself as a wholesaler who can help foreign investors find deals.
    • Try to work with the Association of Foreign Investors in Real Estate. Their website is http://www.afire.org/. This site has a wealth of information on foreign investment trends in the states and many other topics that can help grow your business.
  • Network: Get out to local international community events in your area. Talk to everyone let them know you are an investor who can help them or anyone they know find great real estate investment deals.

This is a market missed by MANY wholesalers who are trying to grow their business with real, committed investors. Don’t be afraid to approach these investors just because you are new or wholesaling. They all care about the numbers on the deal, and I know you can help them find many transactions. Add this group of investors to your buyers list, and I know it will make a great impact in your business.