Posted by ken in sc on December 15, 2000 at 08:42:26:
I am a broker so that I can access MLS data, and list MY properties on occassion. But I do not list others properties for sale. My main business is the buying & selling of houses, and property mangement.
Commission on a 90K sale would be $3150 at one half of a typical 7% comm.
Thus, they would have to reduce the price by the 1/2 comm. plus another $6850 to get me down to 80K price.
But, no matter how you compute it, if I buy for 80K and sell for 90K that is a 10K spread. Some of it may be comm. off the price, but there would not have been any comm. for me if I was not financing the deal.
His method of only working with prequalified buyers is good. I will look into it from that point of view and maybe split advertising for clients with my mortgage broker friend. That could work.
Very Interesting Ad Today… - Posted by Houserookie
Posted by Houserookie on December 13, 2000 at 13:37:24:
I came across a local ad in the paper. Read “Investor Homes Must Sell No Down Call 999999.” I called up a voicemail and it tells me to go to REALTOR.com.
Evidently, yoiu search for what you want, then call him.
This guy has’t owned those homes yet. Has anyone here done or seen anything like this before? What is he trying to do?
Re: Very Interesting Ad Today… - Posted by Justin Fu
Posted by Justin Fu on December 13, 2000 at 19:57:36:
HAH! That is so funny! I havn’t ever seen a phone number with 7 identical numbers other than 2 and 4! What I think is, Realtor.com is probably taking an alternative approach to advertising! (Creative eh?)
Check out Realtybar.com- The Fastest Growing Online Real Estate Community
Re: Very Interesting Ad Today… - Posted by JohnBoy
Posted by JohnBoy on December 13, 2000 at 14:30:47:
There is a broker in my area that has people wanting to buy a home that can’t get bank financing to go out and pick out the house they want. Preferrably one that is listed through them but not mandatory. The buyer negotiates the best price they can get and the broker will buy the house and then sell it to them on contract.
He sells to them with as little as $1k down and usually get around $2500. He carries the contract at 10% interest and they must get a new loan in 12 months to pay him off.
Aside from collecting a spread on the interest rate I can’t imagine how else he makes money doing these other than adding another property sale under their belt to boost sales through their office and pick up a commission off the sale since he is a broker.
Sounds pretty risky to me by buying properties to sell to someone else on contract for the same amount he pays for it and only getting a spread on interest and a small real estate commission!
I have thought about doing that… - Posted by ken in sc
Posted by ken in sc on December 14, 2000 at 08:08:46:
but have not tried it. I think it would be easy to create a $10K spread. Say if the house was LISTED at $90,000, but you bought it for $80,000 which was your commission off the price and also they reduced it some for a cash sale. Then you sold it for $90,000 on a ls/op or contract. It could work…
My main concern is how to advertise for it without being swamped by people who want a house but would not really meet my criteria to do business with. But I think a decent spread could be made for sure, plus you would KNOW the house was sold and that your carrying costs would me basically zero.
Re: I have thought about doing that… - Posted by JohnBoy
Posted by JohnBoy on December 14, 2000 at 17:22:43:
You would not create a $10k spread. Assuming you were a broker doing this that $10k isn’t a spread created by you, it’s already money you would have made as a commission for listing and/or selling the property for the seller. So whether you out right sold the house and got paid the $10k commission or whether you stepped in to buy it yourself and elected to have the commission deducted from the sales price, that commission was already your money earned, not some spread you created that would add additional profit.
In this case with the broker I was referring to, he doesn’t negotiate anything on the selling price. He lets the buyer go out and find the property they like and they negotiate the best price they can get with the seller. The broker then steps in and buys the property at that price and then turns around and sells it to the buyers on contract. So the only thing the broker is making in addition to a real estate commission is the spread on the interest he charges his buyer vs. his rate on any financing he obtains. Or, perhaps he is paying cash with his own money and is happy with earning 10% on it instead of leaving it sitting in a CD or something earning a lower rate.
Before he buys a property for anyone to sell to on contract, he sends them over to see a mortgage broker he works with to see if the broker would have a problem getting them a new loan within a year after establishing a payment history paying on the contract. If they look decent he sends them out to pick the home they like. That would be the way to handle getting swamped with people interested in buying a home. Send them to your mortgage broker first to get them qualified for a loan now or at least within a year after establishing a good payment history where they can refinance. Those that don’t qualify through your mortgage broker…NEXT! Those that do…tell them to go pick out their dream home within the price range your broker qualified them for.
The good thing is you get lots of sales as a realtor/broker and earn some profit on the interest spread. The bad thing is the amount of risk you take for the amount of profit involved.
By the way, the $1k - $2500 down from the buyer gets eaten up as closing costs leaving the full purchase price as the amount being financed. If they have less than the $2500 to put down, the difference is added onto the sales price and financed with the balance.
Re: Very Interesting Ad Today… - Posted by JohnBoy
Posted by JohnBoy on December 14, 2000 at 17:32:17:
No, he lets the buyer pick out the house and negotiate price with the seller. He then buys the property from the seller at that price and sells it to the buyer on contract. Whether he uses his own money to buy these or puts financing on them I couldn’t say. He does have lots of money so he could be using his and acting as a lender to get a better return on his money without having to make a loan giving a mortgage to avoid any foreclosure process by selling on his own account since he would become the seller and sell on contract where he can evict vs. foreclosing. Plus he gets to remain the number one realty company in town by having the highest home sales in the area. Evidently something is working to his advantage that justify’s the risk involved to make this worth doing to him.