Hey there, JP here!
I want to tell you about something really cool that I learned from a good buddy of mine: Bob Norton.
Back during the crash of ’08, he gave me an inside look at one of his secrets on how to become an insider with REO brokers, and basically, turn them not into bird dogs. 🙂
Sure, he shared it with me many years ago, but it still has value because it’s certainly possible/likely that we’ll face another tsunami of foreclosures from an economic downturn in the future.
And most people don’t even know about this tactic.
But now you will.
Yay!
Bob taught me how zero in on the big REO brokers in my area, how to approach them correctly (and how not to do it) and how to basically convince them to be your “bird dog” and give you an early, inside scoop on deals you’re looking for.
Sounds great, right?
A little context, first…
When Bob, who was a licensed Realtor, approached REO agents, he’d sweeten potential deals — he’d waive his commission as an additional incentive for the brokers he was talking to… enticing them to work with him even more.
Here’s what you do: You ask the Realtors to write up offers for you, and you do what you say you’re going to do: follow through on the deal. You both win that way.
And pretty soon, those brokers will start calling you with deals. Those REO brokers have just become your bird dogs. Better yet, you don’t even have to train them as bird dogs, they already know what to do as brokers.
PS: Need a refresher on the REO process? Check out our REO guide.
How to work with REO Realtors
So, how do you approach them? How do you develop credibility, if say, there’s 5 other guys like you calling them?
Well, it’s kind of like a type of interview of sorts. See, the broker has to figure out right away what kind of a person you are when you call and make an offer. He/she has to try to determine if you’re legit. And whether you’re a new investor versus a seasoned investor.
But here’s the thing, being a newbie isn’t detrimental to you. The broker just has to sort it out, is all. So you DON’T want to bluff. You want to be honest. Always.
Now, when you call about a deal that’s a new listing — don’t make an offer unless it’s within 10% of the asking price. If you’re going to go lower than that, it’s just going to get rejected. The agent will then be frustrated and won’t want to work with you.
But if the deal is priced right based on info you’ve gained about the property and the market, do this…
Call and say: “I’d like to make an offer on a house.”
Agent: “OK, what are your terms? How are you going to buy this house now?”
And right away, you have an opportunity to be up-front or try to bluff it. And good agents will see right through you. Even if you’re a newbie, with few deals and no hard money lender lined up (yet), you can still do this.
Here’s how…
See, what they’re looking for is to know that you did your homework, you looked at the house, you know what it’s going to take to fix it up and you know what you want to buy it for.
They don’t want to hear: “Well, Mr./Mrs. Agent, what do you think about this price?
You’ll need to say: “I want to buy it for $30k. That’s my price.”
Once they hear that, you’ve shown them you’re conveying confidence and communicating a purpose. You’re demonstrating that you know what you’re doing and what you’re looking for. And you can help each other…
So now, that agent is willing to push your offer because the bank’s going to ask him/her what they think about you. And their response will either be that you’re flaky if you didn’t handle the call correctly, or that you sound pretty legit.
And, let’s say you do have a hard money lender and the Realtor doesn’t know that person. No problem. Simply tell them you’ll email them all the info and documentation they need.
Here’s a pro tip: Always waive your inspection clause.
Why?
Because doing that, again, shows you’ve already looked at the house and done your homework. Your only contingency at that point should be whether you can offer a higher earnest money deposit (EMD), which will set you apart from other investors. Try going in at $2k, instead of the $1k most others might offer.
Personally, I’ll sometimes offer as much as $10k EMD cash. That shows I’m serious.
Where to find Realtors
Here’s what Bob told me he did…
He identified the top 15 agents in southeast Detroit, where he lived and did deals, and constantly watched their inventory. When a good deal came along, even it wasn’t exactly right, but the numbers were close enough, he’d call up the agent:
“Hi, Mr./Mrs. Agent, I want to make an offer. Can I drop off the paperwork at your office?”
If you do that, it shows the agent that you’re going to make their job very simple. And they love that. They want to be able to move on to the next deal.
Make an effort to strategically build those relationships.
They are worth gold.
Think about this, too…
There have been some deals where I didn’t want to buy the deal…. I couldn’t wholesale it… I couldn’t afford it… I paid too much for it… I got in over my head.
But it didn’t matter. I closed on those deals — that’s the secret to winning REO brokers over.
Because that’s one of the best ways to build a relationship — once you make an offer and it gets accepted, if you actually close, then you’ve developed all the credibility you need. And they’re happy at the closing table because they’re getting paid both sides of the commission.
Then, you follow up with them…
You’ll simply remind them that when they get more deals in a certain area that you like, they should call you. Here’s why they will… the more deals you close, the better off they are too. Win/win.
I know some investors who get several calls or emails a week from Realtors they’ve established solid relationships with. Sure, not every deal they bring you ends up working, but it’s such a smart strategy to add to your REI arsenal.
And that’s how you can become a trusted insider with your local foreclosure brokers.
Give it a go!