Dealing with a realtor on a wholesale deal(double closing)

If you're on the buying side, the seller pays commission. If you're the seller, you usually pay it. Have you thought about splitting it between you & the buyer?

There might not be enough for the 3% if they want it deeply discounted, that's why I was asking what others have done. I am fine with her JVing on the deal and getting half of the profit if we have to go so low, but fine with 3% if they are not. Just wondering how folks have dealt with realtors that want to be stuck on 3% and not 50/50 with a 1099.

Oftentimes the buyer will have to pay the realtor if they want them to have compensation. The realtor did not bring the buyer. The buyer called you. You do not have to compensate them, and I know you are trying to be fair to all parties. If they are not going to budge on their commission, then he/she may not get anything. What is the realtor bringing to the table in this transaction? If the buyer wants to be represented by a 3rd party, may be better for them to have a lawyer represent than a realtor, as they cannot give legal advice. Either way the buyer needs to talk to the realtor about compensation in this case. I wouldn't worry about it. As you said it wasn't on MLS therefore there is no guarantee of buyer broker compensation. In the future, you might want to tell investors who call that if they bring in their realtor, they are responsible for the compensation.

This looks like a deal where you did the work on the property, and found the buyer. The buyers agent, who really has not done anything is coming in and demanding 3%. I know you said you would cut the agent into the deal, but it is your deal. You decide how much you will be willing to compensate the agent not the other way around. If the agent is not happy with what you offer she does not need to be part of the deal.
Remember you are calling the shots.

Anyone else have to deal with this lately?

I have a question regarding double closing. Once you get a good deal by Dean's 30 day cash formula (i.e Fair Market Value times (.70) equals 30% of FMV.
Minus repairs and rehab
Minus your fee (profit)ie 20k
Times (.97) for holding/closing costs
equals Maximum Allowable offer (MAO).

then if you resale right away by double closing, what is the approprite selling price(so that buyer willing to buy? is it 70% of FMV?) and do you know the percentage sale tax to pay after resale your property?

Jack or anyone can help, really appreciate. thanks

Rebecca

Plain and simple - you owe the realtor nothing. Contact other buyers on your list! If you have only one buyer they call the shots - get more!
fuguiRE - start another thread

Hi, Rebecca. You have correctly put in place Carol's formula, but cut out a big part of it, including your profit. The .70 part of the formula is the part for your buyer so that he or she gets properly paid for the part that they do. The repair and rehab part is also a huge part of the formula because that is part of what brings them to the table. For instance, a buyer who has been doing this for a while will be able to figure out in his or her head how much the repairs are, and depending on what they want to do with the property (buy, hold and rent or buy, fix and flip or make it the prettiest house on the block for that retail end buyer that will just fall in love with that particular house) may or may not be interested in the deal you bring to them. I know of some buyers that just like the challenge of making an ugly house look terrific. This is all included as part of the 25:1 strategy that is used so often here on the DG site.

Also, the final part of the formula (multiply by .97) was not included in your questions. A part of the holding/closing costs is really dependent on how quickly you can pass this deal on to your buyer, which depends on how strong your buyers list is. This is why Dean emphasizes the importance of creating a buyers list right away. An assignment may take a few days to a few weeks, depending on how strong your buyers list is. Depending on where the property is located, a double closing may actually double your holding/closing costs because the county, city or state may actually charge twice the fees for two actual closings (requiring you to multiply the .97 twice). Not all government agencies, entities or jurisdictions have a sales tax and the fees will obviously differ depending on the jurisdiction. However, these may not be and probably are not all of the holding and closing costs that you will encounter.

Two great things about the forum here on DG site. First, since you asked these questions in two different places, I have attempted to answer them in both discussions. I hope my answers will help you and others who may have the same questions. My attempt in the other discussion was worded differently and I hope that between the two I have been able to answer the questions properly. Second, Carol has generously offered to give us some of her time to show what she does and how she does it. Since her track record for wholesaling is that she has done over 600 wholesale deals, I plan to pay close attention.

One further point about Carol's formula and your questions. Carol has taken this formula and used it all over the country. She is the MASTER when it comes to wholesaling. It appears that you may have gotten a part of the formula confused for whatever reason. Because you put the formula there and then asked the questions, you greatly helped the discussion. I think I can speak for the DG family that none of us would like to see you get hurt financially because something wasn't clear. Thank you for bringing the questions to forum and adding to the discussion.

Be your very best always-Judy Williamson

What you focus on is where your energy goes-Kristin

With gratitude,
Patrick

First of all how do you know if the buyer is not just using the Agent to try to save 3% on the deal?

I would deal directly with the buyer since you spoke to him first and if he wants to compensate his Agent that's on him. In my world an Agent just cant pop up and demand money after I have already spoke to the buyer.

Contact the buyer directly and work from there.

Patrick thank you for helping Rebecca out with the formula and for the kind words

My formula...

ARV x .70
subtract rehab
subtract your fee
x .97 ( 3% closing cost)
= OFFER

You know what I am going to say! Your buyer does not need a realtor involved to buy your wholesale property. If your buyer wants to bring in an agent, that is fine. The agents commission needs to be added to your price and your buyer compensate the agent that way, period.
This has happened to me before and I simply tell the agent any commissions will have to be added to my price. Never had one call AFTER I made contact with a buyer! I would have laughed and in a polite way told them to get real.
I would tell your buyer that if he wants the deal this is how it works, if not, you have several other buyers lined up.

Hope all is well,
Michael

Hey Gena,

We had other buyers check the deal out but this is the only one now that is interested, besides another one that is coming into town the beginning of June. Its not a great deal for a savy investor, but good for someone that is just looking for somewhere to park their cash in a cash flowing turn key property. The seller does not need to sell but WANTS to sell. But they said they are not coming out of pocket at all for this and told us they just want payoff.

But we keep advertising the deal and talking to everyone we know about it, which has helped us with more potential buyers in the future. We just keep renewing our contracts with the owners and looking for that one buyer!

Thanks for the post. We plan on calling the buyer back and explain we will deal with him directly and if he wants to compensate the realtor then that's fine. We just renewed the contracts with the seller and have a buyer flying into Charlotte in 2 weeks to look at his other investment properties and these townhomes, plus we are still advertising them and have other buyers contacting us about them.

We are LIVING THE DREAM MICHAEL!! HA HA THANKS for the post. We will be contacting the potential buyer today to discuss this, we had to wait until the seller signed the new contracts with the new date. This realtor sent us a nice email about setting up times to see the places again since she was not present when they went through a couple of them earlier this week, how she needs to see the property disclosures asap, asking if we had any questions about her brochure about working with real estate agents, telling us she would be acting as a dual agent, and then also said she wanted proof we were able to work on this deal without the seller. Mama Knucks was livid and wanted to respond telling her to pack sand but I told her we needed to wait until we got the new contracts signed. Now she is like a race horse, chomping at the bit wanting to write an email to the realtor. THANKS again for your post!

Thanks for your post. Yes we are trying to be fair and make sure we don't ruffle anyones feathers. The realtor had already told us that these were serious buyers and had other investment props so we thought this might be a good fit for the future but after the past email from her, she does not deal with selling investors to well, so she needs to go. If the buyers are interested in working with us then great! THANKS

Hi Jack lets just get this clear your the one in the drivers seat and you control the deal, theres no hurry the way it looks to me so look for other buyers, you may want to use some other adveristing as well, send me PM and ill make a suggestion and it might help!Much sucess, Jim

Turn Michelle loose!!

Talk to you soon,
Michael