The first question is ‘how do we find a house to buy?’ Answer: Get a real estate broker. Yes, there is a difference between a broker and an agent. I will refer to them as ‘a broker/agent’.
Buying is easy, seller pays the commission. But we will consider the complete buy/sell/buy cycle. Should we
use a “full service” (i.e., 6% sales commission) agent/broker or one of the many ‘cut rate’ options now available?
Here are the options from most hands-on to most hands-off:
1. no agent/broker, do it yourself,
2. “OpenDoor ” type,
3. Redfin 1% sales,
4. flat fee agents,
5. local discount agents,
6. full service broker (6% sales commission, usually split 50/50 between the sellers and buyers agents, fee charged to the seller at escrow).
Note that we don’t recommend any of the linked services. They are just examples we pulled from the Internet.
Is “1. no agent/broker, do it yourself” even possible? Yes. In 2005, Michelle sold seven properties in less than a month without using any real estate agents. We were buying our first large (76 units) apartment complex in Tempe by selling four triplexes and three fourp lexes and doing a 1031 exchange (deferring capital gains taxes) into Broadway Park Apartments. The listing agent asked us, “Can you raise one million dollars in cash in a month?” We said, “Of course.”
We put down a one hundred thousand dollars, non-refundable deposit (seller gets the $100,000 whether the deal goes through or not) and Michelle got to work raising the remaining $900,000. In 28 days, she sold all seven without using a single real estate agent. And by ‘sold’ I mean; escrow closed/money deposited in our 1031 account, free and clear.
Would we recommend this? Absolutely NOT.
So why are we choosing to go with a “full service” broker/agent now?
Four reasons:
1. We have lots of other stuff to do; SO DO YOU.
2. The broker/agent does your work for you. You specify the criteria. They do the work.
3. A broker/agent knows all the legal/regulatory/disclosure/scams in the industry. They will advise and protect you against these.
4. Using a broker/agent is the best way to start. When you get experienced, you can explore the other five options above.
So, I would like to introduce Jeff Sutherlin of expREALTY.