Referrals are great for any business so why not use them in your real estate investing business Word of mouth can generate great, steady income if it spreads to the right people. So how do you start using referrals in your real estate business
In real estate investing, they are called bird dogs. Bird dogs are people you have working for you who go out and find deals and bring them to you. You can choose to pay them per lead they bring you, or per deal.
If you pay them per lead, $5-$10 for each is a typical amount and if you pay them per deal, $1,000-$1,500 per deal is typical. You want to pay a fee high enough to keep the bird dogs working for you and coming back with more and more deals which mean more profit for you.
How and where to do you find bird dogs You can put an ad in your local newspaper or on Craigslist. Your local REIA (Real Estate Investors Association) meetings are another great place to find bird dogs.
At most REIA meetings, there is a networking table where you are allowed to place flyers and advertisements. Simply make a flyer stating you are looking for people to bring you deals and that you pay referral fees.
Once you find your bird dogs, you will want to provide them with training. You will want to clearly explain to them what you arelooking for and what you are not looking for.
If you really want to systemize your bird dog system, create a training manual outlining your process and what types of properties they should bring you. You may even want to include photos of houses that meet your criteria and houses that don’t. Like the saying goes, a picture is worth a thousand words.
It is helpful to provide your bird dogs with tools as well. You may purchase them magnetic vehicle signs or t-shirts that say I Buy Houses. That way, when your bird dogs are around town, they can attract homeowners with houses for sale. At that point, the bird dog takes the homeowner’s information and passes it along to you.
When bird dog finds you a deal, you will do your research on the property and contact the seller. You are responsible for turning that lead into a deal.
Be careful of real estate laws. Some states do not allow individuals without a real estate license to receive referral fees for real estate. If this is a problem where you live, you will want to structure the payment in a different way that is not referral based.
Remember, just like your real estate investing business, your bird dog referral system needs to be consistently advertised. It is like a business within a business. You will need to continuously spread the word that you are looking for people to bring you deals so you can keep those deals coming.
With the Internet becoming accepted as buyers’ destination in real estate, the discount Realtor is thrust in the front line. The question is, is this really a good thing for consumers
How Is a Buyer Agent Commission Amount Determined
Let’s start with the question of who decides how much a buyer’s agent is received. Is the buyer’s agent recompense determined by the amount presented in the MLS Listing Absolutely not. Many people think it is, but the buyer agent commission is definitely not settled on by the amount a seller is willing to put on toward a buyer’s agent commission.
Basing on the Buyer’s Representation Agreement, in Texas that is, it is a decision settled by the buyer and the hired agent. Practically saying that the buyer pays his agent his compensation. It is the Buyer Rep Agreement that instructs the buyer agent’s compensation amount, not the MLS Listing.
The buyer assents to the 3% pay for our services as agreed upon on the Buyer Rep Agreement. We will receive that amount for our services regardless of the amount offered in the MLS listing, and this is explained to each buyer we work with. The fee amount is first asked for from the seller usually a done-in deal but if the seller gives less than 3% through the MLS Listing, the buyer is obligated to pay the discrepancy if not go for a another home. On the flip side, if the seller is offering a buyer agent bonus, or more than 3%, we rebate that to the buyer so that our motivations and advice can never be attributed to a commission amount.
So far so good with only one MLS listing out of 30 closed deals where a seller offered a 2.5% commission for the buyer’s agent. The seller on that listing offered 2.5% commission. We updated the offer to include the 0.5% difference in paragraph 12 of the sales contract, where the seller pays for in some of the buyer’s closing cost to which the seller acceded. If the seller had not acceded the buyer was ready to take on another home. So in this case, the seller gave the other 0.5% commission to the buyer, who in turned paid us the 0.5% gap at closing. Our buyer was not out of pocket for the difference and the seller didn’t actually save anything by offering a lower commission.
Do Realtors Avoid Listings That Pay Less Than 3%
I find silly the claim that agents will shun of the discount brokers’ listing by consumer groups and others. I don’t see how they can. When a buyer signs up with us, or any other Austin Realtor, we have the capability to assemble an Internet search portal that notifies the buyer via email each day of new listings that match that buyer’s criteria. Every buyer gets this same service from us but cannot say percentages other agents in Austin carry out the same, but it is a priceless tool for us and our buyers as part and parcel of the MLS System with no added cost.
Search portals do not recognize the commission amounts tendered on particular catalog. Buyers will see ALL listings that fit their aptness. For those who say that Realtors avoid or blacklist listings that pay less than 3%, that’s pure crap. The MLS technology inhibits a way for us to filter out those listings or hide them from the buyer.
The buyer sees all listings that are on hand and matching their criteria, and they often call us right away when an interesting one pops up new in the system, and we will show buyers any and all listings that they believe to be good candidate properties.
This is all for now but part 2 of How Discount Realtors Work needs to be looked into.