Over the past 12 months my partners and I have been buying single family home foreclosures. Homes are selling for deep discounts and providing high cash-flow rates once rented. Our strategy is not to buy and flip, but to buy, rehab then rent to provide cash-flow and capital appreciation. On the surface this may seem as easy as drinking coffee because of the high number of foreclosures available. But don't be fooled with high quantity and low prices. Buying foreclosure properties is not as easy as it may seem. Buying houses for cash has been our strategy which is one way to up your chances of success. Refer to my previous article "Buying Real Estate With All-Cash" In todays article I'll outline another strategy that when paired with all-cash works for us.

Buying homes at deep discounts for cash relieves vacancy pressure as there is no unerlying mortgage. You may still have a lean on the property held by a private lender but hopefully you have worked out the terms so that you have 60-90 days until your first interest payment. Racing out to find a tenant before your first payment is no longer a pressing issue. You can be more choosy when screening tenants. You can hold closer to your asking rent price and not decrease it just to get the property occupied. You can save money by performing more of the rehab yourself. These are just a few of the benefits.

As easy as it might seem to buy real estate at low prices, a problem has arrisen that must be addressed if we are to successfully close deals with banks. I have found, as with many of my collegues that seller real estate agents have all the control when it comes to you submitting your offer, deciphering which offers to submit, how much information they tell you ahead of time, and lets face it some blatently do nothing. As a buyer in the past I have typically used a buying real estate agent to help me track down candidate properties, perform showings and leg work. As a result I did not close many deals dispite offering near or above asking price. The reason...

Yes, it is true as much as it should not be that when you use your own buying agent the selling agent as well as the buying agent put you at the bottom of the list when it comes to getting back to you, submitting your offers, giving you information and showing you properties. Let's face it, times are very tough out there for real estate agents (I have nothing against hard working agents) as commissions are drying up due to the scarcity of buyers. Commissions are morphing smaller because properties are being sold at such deep discounts. This makes the typical 3% commission for buyer agent and 3% for selling agent very small. For instance the commission on a foreclosure home selling for $30,000 would put only $450 in the pocket of each agent. The 6% is split between buying and selling agent brokererage firms. This 3% is split (i.e. 1.5%) between the brokerage owner and the agent!

What does this do? It makes agents more selective when deciding whether to represent you ably or not. Agents only work hard for serious investors who buy with cash and plan on purchasing more than one property. Many agents will only fully represent those buyers that can create steady commissions. As sad as it may seem this is the new market reality as everyone must now fend for themselves and it will not change until housing prices recover. I understand why agents are selective as they need to pay for their own mortgages and raise families. Times are hard for all and I take my hat off to those still brave enough to stay in the real estate game. It can be hard to break into a buying cycle in a particular area where investors are competing on a sometimes un-even playing field. I scratched my head many times trying to figure out why I could not close more deals until I finally discovered what successful buyers were doing...

For those investors who ARE NOT agents....

Since commissions are low selling agents are not motivated to work with buyers represented by a buying agent. I have found most are not. I now buy my properties directly through selling agents. This in normal times is not recommended since selling agents have to represent both you and the seller. But many times you can get more inside information about the seller especially in this tough economic time... Oh, I wasn't supposed to say that but it is true. As real estate agents have a fudicial responsibility to represent with integrity both you and the seller as stated by their license. Even so, many selling agents will bend the rules and give you more information about other offers on the same property, though not directly. But, if you need a hint on whether to up your offer or keep it the same in many cases the seller agent can give you hints. Many agents, instead of hinting, tell you exactly the sellers motivation and minimum price. They can also tell you more about the psychology of the seller which can help you structure your offer. This information you get directly from the selling agent without being filtered through a middle third party buying agent.

For those investors who ARE agents....

Even if you are an investor-agent you can offer to give your 3% of the commission to the selling agent to increase their level of motivation.

As a result of buying properties through only a seller agent, information is now gathered by one individual (i.e. the selling agent). The time between the seller accepting your offer and closing is often spead up considerably. This is because you do not have to send information and fax signed documents via a buying agent who might be busy representing other clients (i.e. buyers and sellers). And, selling agents generally have good working relationships with title companies who can contact you directly if anything is amiss.

Eliminating the middle man has greatly improved my closure rates when buying distressed properties. I strongly believe it can help you too during these troubled times. There has been an explosion of real estate investing buyers all competing for foreclosure properties nationwide. You need to constantly be adjusting your stategy in order to stay in the game. As the Obama administration is promising to help home foreclosure victims stave off losing their homes, competition will grow as fewer foreclosures will be available. This means having a good buying strategy that works is key to your success. Buying only through a selling agent is one way to improve your chances of success. It must also be said that yesterdays strategy is not todays working strategy. Smart investors never sit still, do not sit on the sidelines waiting for things to happen and are always looking for methods to improve their success rates and financial situation. Keep this in mind and good luck!