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NEVER Beat Up on Real Estate Agents

By Mike Butler, Author of Landlord on Autopilot 

Every profession or occupation has a few bad apples; however, the very few bad apples should not taint all of the excellent, great, and good folks who do a great job every day. 

This article may help open your eyes on how you should treat real estate agents as you continue to grow your real estate business. 

If you’re in the early stages of investing and you take a look at your settlement or closing statement when buying, you might cringe to see how much agents are paid in commissions. Don’t worry, I did the same thing too. This is part of your education growing up as an investor. 

“Common Sense” plays a big part in building your relationships in your business. 

Here’s one of my mine. It was Thanksgiving and my family had gathered at my parent’s home. An agent who regularly brought me great deals calls me on my cell phone telling me about a listing he just got just a few minutes ago. The house was on Lehigh off Taylor Blvd. In fact, he called me from his car as he was leaving the seller’s home. Talk about fresh and hot! Owner died, vacant, never been a rental. 3 bedrooms, 2 baths, 2 kitchens, finished basement with a garage. This agent told me on the phone I could have it for $56,000. The ARV (after repaired value) is approximately $100,000. 

Now keep in mind, this listing has not been entered into the MLS (multiple listing service). I knew the neighborhood like the back of my hand. This house was about 10 minutes from my parents’ home. I told this agent I’m on way to look at this house and he agreed to meet me there.  

Repairs needed: replacing the countertop in the basement kitchen, repainting the interior, and cleaning up the lawn. Now remember, this agent told me they would take $56k. In this situation, his price was a great deal. Pigs Get Fat and Hogs Get Slaughtered. Don’t kick a gift horse in the mouth.  

I chose not to dicker back and forth on a purchase price. This was a great price and I wanted to keep this agent happy so he would keep me at the top of list of cash buyers. Just imagine if I had tried to offer less. This would not be an easy slam dunk of a sale for this agent, and I might not be at the top of his list of cash buyers. I made a cash-offer and closed within 7 days at Borders & Borders. 

After running my numbers and reviewing tax concerns, I decided to retail this house for $99,500. It could’ve been listed for more, but I wanted to have a quick closing to get a big chunk of cash. My “all in” investment was approximately $60,000. With a sale price of $99,500 subtracting 6% commissions for the agents involved, my net profit was $33,000. All repairs were completed within one week and listed. Buyer took about 30 days to close. I owned it less than 2 months. 

Back to the NEVER Beat Up on Agents lesson. At this time in my investing career, I met a great broker/agent when I purchased one of his listings. Together, we crafted a great relationship beginning with HUD owned properties. Rick Nix with Realty Plus was an expert on the HUD properties process and still is today. 

Rick became my HUD House Bird Dog. He monitored the HUD program and notified me asap when a house in my target areas hit the market. Rick was paid $1,000 flat fee for every HUD home I purchased, regardless of purchase price. This was awesome and I bought a good number of HUD homes with Rick. 

Question for the Lehigh Deal.  

Do I give this listing to Rick Nix or to the agent who brought me this listing before he entered it into the MLS? Believe it or not, I actually struggled a little bit on this one, but fortunately, common sense prevailed. 

The agent who brought me this deal is the reason I was able to make a quick $33,000 cash profit. If this agent did not get this listing when I was ready to sell it, not only would he have gotten his feelings hurt, but he would probably never bring me another deal ever again. I wanted this agent to continue bringing me great deals. 

In trying not to quagmire my relationship with Rick Nix, I explained my pickle to him. Rick told me I would be making a huge mistake if I did not let this agent have this listing. Lesson learned. 

This same mindset applies to all deals involving agents. Step into the agent’s shoes for a moment. Imagine sitting at the closing table or the day before and the buyer threatens or challenges you to discount your commission. Guess what this agent will think of you? Plus, when they hear your name again, what might they say about your way of buying real estate? 

You want ALL real estate agents to be your bird dogs, even before you get your license. 

PART 2: After my first two years investing in real estate, it was plain for me to see all of the superstar investors and mentors I admired, all had this one item in common. They all had their broker’s license. You might think they got their broker’s license so they could make commissions representing buyers and sellers. FALSE! 

Not True. All of them never pursued getting listings or representing buyers. They all told me they were their own best customer as a buyer or seller. Representing buyers and sellers was NOT the best use of their precious and valuable time. 

There are several reasons why they got their broker’s license.  

  1. Resources: access to the MLS and other services 
  1. Education: the required continuing education kept them current and up to date with new laws, rules, and regulations involving the real estate industry. 
  1. Trump Card: as a broker or agent representing myself as the buyer, I could choose to allow the listing agent to keep all of the commission; but only if they brought the deal to me. 

Enrolling in real estate agent school was an eye-opening experience for me. At first, my reason was to obtain my Trump Card to have more negotiating power. Boy, was I wrong! After traveling all across America, burning up my vacation time from my job, time away from family, airfare, hotel expenses, food, tuition and more, Jay Long and I attended almost every boot camp and seminar we could find. Some were great and some were not so great. 

Both of us believed we crammed over 30 years of experience and strategies into our brain in about 18 months or so. And our results were outstanding as we averaged buying almost 2 rentals every week! 

To make a long story short, real estate agent school was perhaps the best ever real estate training. This school taught me so many things the gurus never mentioned. Fair Housing, Title Insurance, all of the different ways to take title, and so much more. I felt very lucky because prior to this training, I never purchased Owner’s Title Insurance. The next deal, I purchased it and the heirs of the estate sued me and their oldest sister who was in charge of the estate. My Owner’s Title insurance policy took charge and handled 100% of all of the legal fees and charges. I was left alone with no worries. 

Back to NEVER Beat Up on Agents – After passing the state exam to get my “Sales Associate License” I had received my new Trump Card in doing deals. 

From that day forward, at every closing on a deal I found on MLS, I had a conversation with the listing agent to learn more about them AND they were told had they brought this deal to me without me finding it on the MLS, I would let them keep BOTH sides of the commission. Back in those days, it was common for the listing agent to get half and the selling agent to get half. I let the listing agent know I would give my half to them had they brought this deal to me. It worked. 

The other big Trump Card involved marketing to results-driven agents who listed homes in the neighborhoods I wanted to buy rentals and basically repeated the same thing. 

The Bottom Line is to NEVER Beat Up on Agents because they are Bird Dogs for your business. 

About the Author 

Mike Butler began his real estate investing career while working his full-time job as an undercover police detective in Louisville, KY. Mike Butler began buying fixer uppers and renting them to make extra money vs. working “off duty” moon light jobs like many of his fellow police officers. Mike discovered very quickly how investing in real estate is the way to true financial freedom for his family. He then exploded his real estate business by buying an average of 2.5 rental properties every week while working his full-time job!  Mike’s investing success has been featured in Money magazine’s featured article “Can Real Estate Make You Rich?” and The Wall Street Journal Radio network with over 170 syndicated radio shows.