Why Investors Don’t Want Bird Dog Leads from the MLS

When talking about properties to scout, you may hear an investor say, “I don’t want anything that is already listed with a real estate agent. No MLS.” Why is that?

First of all, an investor doesn’t need a bird dog to go through the Multiple Listing Service (MLS) for him. Agents are more than happy to send a list of properties that meet the investor’s criteria. They simply set the search parameters into the MLS and the system automatically generates a report and emails it to the investor. The investor will be paying the agent’s commission (technically, the seller pays the commission but face it – it’s the buyer who brings the money). So it doesn’t make sense for an investor to pay both an agent and a bird dog.

Some investors get most if not all of their deals from the Multiple Listing Service (MLS). Others will steadfastly refuse to go through an agent. Many prefer to buy directly from a seller but will use an agent when it comes time to sell a property.

Think about the listing process. An agent sits down with an owner who wants to sell his house. The owner has an idea of what the house is worth. The agent has (hopefully) a better idea of what the property’s true market value is. Sometimes these two numbers aren’t too far apart. The owner is always hopeful that the listing price will be high enough to make a profit. Sometimes the owner is in distress, maybe the house is worth less than the mortgage balance or he is behind in his payments for whatever reason. This owner must have a certain price, whether the property is actually worth it or not. The agent shifts uncomfortably. “Well, we could try to get that for you” thinking that when the market forces speak, the owner will be forced to deal with reality. So many times, an owner’s expectations aren’t in line with the market.

The second part of that scenario has to do with the agent’s fiduciary duty. It is the listing agent’s responsibility to get the highest selling price possible for his client. That means they will advise an owner not to take my low ball offer. Some agents won’t even present low ball offers. (Yes, I know that legally they must present all offers to the owner. Many don’t.) Why would I or any investor bother to make an offer through an agent who is going to advise against my deal?

The third aspect is that owners and agents are thinking retail. I am thinking wholesale. Their starting prices are in the retail realm. We’re not even on the same playing field, much less playing the same game.

Most importantly, the agent plays the role of go-between for the seller. Very few agents allow the buyer to sit down and hammer out a deal with the seller. Good deals are created face to face. As an investor, I need to know why the owner is selling so I can determine what he really needs from the sale of his property. Does he need cash or is he just looking to get out from under the payment? Will getting all cash create negative tax ramifications for him? Are there pressing medical bills in the tens of thousands that need to be paid or does he just need enough money to get down the road into his new life? Exactly how motivated is he to sell?

The reasons for selling are about as many as there are sellers. Because every seller has a different set of circumstances and needs, every deal is structured differently. Most creative deals don’t fit onto the real estate agent’s carefully typed, very small print, one-size-fits-all forms.

Are there deals for investors on the MLS? There can be. But they are few and far between. Any property that is on the MLS has been seen by hundreds of agents and investors. Investors need bird dogs to ferret out the hard-to-find deals, the deals other investors don’t know about yet. Those deals are not on the MLS.  Happy Hunting.

 

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