Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...
From Dennis Fassett, Cash Flow Mercenary...
I’m working on two deals right now. Both of which have some pretty significant profit potential available.
And both should be slam dunk easy.
But unfortunately I’m tearing my hair out on both of them. Because of a couple of idiot real estate agents.
Stop me if you’ve heard this one…..
Motivated seller calls a couple of real estate agents, who of course are friends of his, to find out what his house 1960s-era, never-updated and rarely cleaned house would sell for.
Agents give Mr. Seller a really high number because they want the listing.
Mr. Seller then calls me, a real estate investor, because I sent him a letter and told him I was in the market and I could close fast and pay cash. And he’s licking his lips because he thinks he’s on the verge of getting the agent’s sky high number and my fast, all-cash closing.
So he’s SHOCKED and more than a little angry at me when I give him my number because it’s nowhere near the agent’s number.
So I offer to sit down with him and review what the agent told him.
And what do we find? That both agents gave the seller the listing price based on the house being fully rehabbed – without mentioning that small little detail to the seller.
Yeah you’re shocked too. I can see it on your face.
This happens way too often in my market, and I’m sick of it.
In my state, all it takes to be a real estate agent is a couple of hundred bucks, a 40-hour, usually worthless and nearly always fatally boring class, and a test so easy that my 8th grade daughter could pass it based solely on the dinner conversations she’s overheard over the past 10 years.
So we have moron-level agents running around all over the place.
I thought that we had turned a corner during the crash, because around 1/3 of all the agents in the state quit (YAY!), but the rebound has the agent classes full again and churning out morons like the two brain donors I’m trying to counteract on my two deals.
Thankfully though, the tide may be turning…
Because one state is now getting it right. And I hope it catches fire and spreads to my state as well.
That state is Indiana, good ole Hoosierville, USA.
And they are very happy to report that “the number of state-licensed real estate agents in Indiana has shrunk by more than 13 percent since new requirements took effect July 1.”
YAY!
And article I saw on this said that:
"Prior to July 1, a person could sell real estate as a salesperson, an associate broker or a principal broker. And to be an agent someone had to invest roughly $500 in a 54-hour real estate class and state-mandated testing.
Today, the state offers only one type of license: broker.
The 90-hour coursework for that license costs $725. And that doesn’t include testing fees of $100 or more. Continuing-education requirements also have stiffened, changing from 16 hours every two years to 12 hours every year."
So now it takes a ton of time and nearly a grand to be an agent. That’s a pretty good weed-out mechanism if you ask me!
As you might expect, many current agents in Indiana are overjoyed, because this change will pretty much wipe out the “part time agent,” which all real estate agents universally hate.
One of them even gloated that "Your neighbor isn’t your Realtor anymore!”.
I do think that raising the barrier to entry is a good thing because it will keep out the folks who aren’t serious.
There’s a need to raise the bar for agents.
But what also needs to be done is for agents to raise the bar. Or more specifically, have the bar raised for them because they seem incapable of doing it themselves.
Because just making it cost more and take longer to become an agent won’t stop them from being morons.
The two deals I’m working on should each have had a 95% probability of success. But solely due to the actions of two self-serving moron agents, that probability dropped to 50%.
And that’s not only bad for me, but it’s bad for the sellers. Think about it.
If they accept my offers, each of them will get cashed out by the end of the month.
But if they believe the moron agents, they’ll reject my offers and list their properties.
And is this the best time of year to list a property? In Michigan?
Both are likely to languish – vacant – all winter. And come spring, both sellers will come back to me and ask if my offers are still valid, which they won’t be.
Why? Because the sellers will have left the heat on too low a temperature all winter. So my offers will be lower.
And the real estate agents will just move on to screwing up the next deal and not suffer any consequences for impacting me or my two sellers.
As always.