11 Hidden Investment Tricks Realtors Are Keeping Quiet About On Purpose! | Ep 88

James: Today I'm gonna share 11 tricks or tactics that realtors and brokers do not because it's illegal, but because by doing them, it keeps them in the loop and they get paid.

Okay? And so we're gonna

talk about today. We're going to talk about that today on the Furlo Capital Real Estate Podcast, where we dive into the intricacies of passive real estate investing, and our mission is to equip people to invest wisely, whether people try to hold it from them or not, so that together we can build wealth while improving housing.

I'm James, and this is my wife Jessi.

Jessi: Yes, I am here. I'm a little scarred from. Puppy bites, but, oh man, I'm here. I asked someone, so I was chatting with someone in the office the other day and they're like, wow, like, what is, what happened? You know? I was like, oh yeah, that's just our puppy. He's teething and I have scratches and bites all over my arms.

James: And which you did not. Oh, that's so fun. Which you did not see or hear was we sat down, we're ready to record, and he started chewing on one of the mic stands and we're like, oh, stop. So we had to,

Jessi: we, he has a, he has a pile of. Chewies. Yeah, but that's,

James: but I mean, it's way more interesting to chew that scene.

Oh yeah. He's new and he's about, and he just hit a camera. Awesome. So we're gonna go with it. You know what? That's okay. Puppies those are some of our secrets. That's right. That we have, which isn't much of a secret. 'cause we talk about like every week. 'cause he is a troll maker. He is a tornado. Oh, I'm excited for him to get trained up.

But here's the deal. I wanna talk about some realtor secrets. Yeah. And things that they, you know, they're tricks, tactics, however you wanna think about it. They're things that they do. And once you know about 'em, I can talk about a little bit how at least we overcome them. And this is intriguing to me.

Yeah, I know. That's why I came up with this topic, these secrets. Yeah. Really it's a way for them to help create value is what it is. And that camera's already off. So it is what it is. So the first thing they'll do sometimes it depends on where you're at. It's either called a whisper listing or a pocket listing.

Jessi: Okay.

James: So it's essentially they've got a listing that they quote, hold in their pocket. They don't just put out right away, and it's to, to give to people who they like their friends. So these are things that never hit. The MLS.

Jessi: So is that legal?

James: Yeah, totally.

Jessi: Hmm.

James: As long as yeah, I mean as long as they find a buyer and as long as the seller knows going on, I guess.

I guess that's what

Jessi: they're signing up to do is help the seller find a buyer. So like when you worked

James: in the real estate office Yeah. Right. When your boss had one that was coming up. Yeah. He would. While it was still getting prepped and ready mm-hmm. He would tell other people about it. Sure. And it was kind of the, that's, that's essentially the equivalent of it.

Jessi: Yeah. Well, and, and I mean, if you really think about it, like he's got a list of buyers already and he knows what they're looking for. So if a property came up that he was like, this matches all of your criteria, like, why wouldn't he tell 'em? It's like a guaranteed sale.

James: Right. So it is, but not necessarily top dollar either.

Oh yeah. Okay. So, which is fast, which, you know, again, most people are okay with it. But the point is that one of the ways that you get around it is A, become friends with brokers.

Mm-hmm.

Or B, go find those deals yourself.

Hmm.

Which can be hard to do as a passive investor. Right. Which is why sometimes it's nice to piggyback with me.

'cause a lot of deals that I bring. Also never hit the MLS. Mm. Yeah. Just 'cause we're out talking to people. So that's the first trick. Second one is that the idea of like have you ever heard it where they say, Hey call for highest and best offer. Mm-hmm. We've had that. All the time.

Jessi: Yeah.

James: And what they're trying to do is they're trying to manufacture urgency.

Mm-hmm. Trying to get higher things out of it. Yeah. And sometimes it's real, sometimes it's not really real. Yeah. And as, as an investor though, the trick is to not get into the, I have to win this deal. Mm-hmm. We've talked about the, the line I always like is we fall in love with the deal, not the property.

Yeah. And you gotta let the numbers and data rule the day on what you're willing to make for your offer. Yeah. So that's something that like. I'm, I know. I'm good at it could be really hard as another investor not to get sucked into that.

Jessi: Well, and there is some strategy there because you don't just want to give your highest offer first and say, well, these are the numbers.

This is what I can afford. You know, it's like

James: Right.

Jessi: You want to go low and then negotiate and have some room and those sorts of things. Yeah. But like you're saying, don't overbid. Just because you wanna win it. So I didn't actually,

James: I didn't I didn't write this one down. It's kind of related is sometimes people will intentionally put a low price on a house.

So they get a lot of offers in, 'cause everyone goes like, this is a great deal. Oh. And then they turn around and say, okay, we're looking for highest and best. And so they, they let the market decide. Sure. Like how, how should this thing be priced dead? Right. And so it's a way of it going like they can get top dollar and going fast.

It's, it's potentially risky gambit, but Sure. Yeah. That's a little trick that feeding frenzy. They do. Unbelievable. Number three here is sometimes there's, there's a term that's called dual agency. Mm-hmm. And so that's when the agent represents both sides of the party. Yeah. And I have mixed feelings about this.

I've done deals where this is the case. Mm-hmm. And. You know, the issue is that it's not dual loyalties has been my, has been my experience. Typically the broker likes one of the two more

Jessi: Oh.

James: Has been my experience. 'cause it's usually like, it's, it's either, it's one of the two sides and usually it's the buyer.

Like, Hey, I know the buyer. That'll be perfect for this. Interesting. And and so they're bringing their friend and they get both sides of it. Hmm. It's just potentially. You know, there's just potentially conflicting interest there.

Yeah.

So for me, I, yeah, it's an interesting deal. You just gotta be like, choose carefully.

Here's what I would say. If you've got a broker who you like, who you've been working with, and they're gonna do a dual thing, that's fine. Yeah. If if. They're, if you don't know them mm-hmm. And they're wanting to enter you into this type of thing, I'd be very, very weary about it. Hmm. The reason why they wanna do it is they collect twice as big of a commission and usually they give a discount to the seller.

'cause like, Hey, instead of me getting 6%, I'll only take 4%. Mm-hmm. You know, which is still more, but Yeah. Yeah. That's the that's one of the things oh dude, this one drives me bananas. Marketing photos lie. Okay. This one it kills me.

Jessi: There's

James: wide lenses. Yep. Ideal lighting, selective angles,

Jessi: uhhuh, you know that, oh, I used to take pictures for the agent that I worked for and yeah, we made it look the best.

We can make it look like some dingy, tiny little bathroom was like, wow, that's like nice.

James: Yeah. So so the rule is you always gotta walk the property. Yeah. Now I actually, so it's interesting, I have I probably have what's the, a counter opinion. Of this, I actually think the photos should be worse than than the property because think of it in terms of like over promising.

You see the photos and you go, that's like that bathroom, right? Amazing bathroom. Then you walk into the house and go, then it's all wet down. Wah wa what is this? Yeah. And I've, I've actually picked up properties because the listing photos looked amazing. And then you walk in and you're like, dude, this place is kind of dingy.

And other people just don't want it. Yeah. They're like, we've had to work with that with some of our listings that now that we're doing flips. Yeah. Like we'll put photos on there. And I've more than once gone back to the photo photographer and said, these are too nice. Wow. Like people are going to be disappointed.

I want you to make it look more realistic. Represent real life for me.

Jessi: Yeah.

James: Otherwise, it's just an over promise. Hmm. Now the pushback I've gotten is like, well, everybody touches up their photos and ours will look like garbage if, if we don't do this. Mm-hmm. This is the game. To which I'm like, okay. Okay. I don't know if I care, but I mean, I, we usually find a happy medium Sure.

Where it's like you're allowed to do some touch up stuff, but not much. Now with the advent of ai mm-hmm. You know how we're talking about selective angles to make sure you, like stuff gets cut out. No, they just wizard it out. It's totally like, it's so wild. It's totally a thing. It's, yeah, it's, it's very wild.

Again, I don't know how I feel about it. Alright. Here's another one that I don't think gets talked about much is that the real value, honestly, is in the land. It's not in the structure. And I think it's like, you know, they talk about location all the time. But I just think that that's, that's really true.

And I think a lot of, like fixer uppers, they're really just kind of like their land value plays that are in disguise where they've, they've found a good location. Mm-hmm. Like this is not a great property. And so we're going to bring the property up to the standard for this location. It really is. Which I guess is yeah.

Jessi: Can you really even separate the two?

James: Yeah, I think you can. Hmm. Yeah, I think location yeah, no, I think you can,

Jessi: I mean, in certain, in certain cases, that makes sense to me. If you, if you have like a bigger plot of land and there's something else to offer, but it's like a city lot, I guess location does matter.

So the plot Yeah. Of land

James: and where it is that matters. That's what you're, but I think a lot of agents best degree's, right? They just focus on the house and the features. Yeah. And they're like, so what if you drive 20 minutes? Sure. You know, they're, yeah. It's

Jessi: like, no, that is actually, that,

James: that still turns out as number one.

Yep. But, but yeah. So, so that's another one. Oh I like this one. When you see like a price reduced, that doesn't necessarily equal a motivated seller. Right. Right. If anything, it's they're just trying to get more movement in the market. Mm-hmm. Trying, because anytime you do a repricing, it shows back up on everyone's search.

Mm-hmm. Who's in that area for the MLS. Yep. Or if you see something newly listed, oftentimes they'll pull it off for a little bit mm-hmm. And then put it back on. Mm-hmm. And like it resets the days on market. There's a whole bunch of things that it does. It looks new,

Jessi: even though it's not.

James: Yeah. Mm-hmm. Yeah, I know exactly.

So you really wanna look for other signals of distress beyond just oh, price drop.

Mm-hmm.

And I think like days on market is a big one. Whether or not they're an absentee owner is another big one. A price drop, it's a signal, but again, I just like, I think too often you can find, fall into the, oh my gosh, it's dropped.

Yeah. And I mean, Enzio obviously, like they highlight it on their website and other places. Sure, I get it. But. It doesn't necessarily mean that they're motivated.

Jessi: So does that mean that you shouldn't necessarily, you know how like realtors will put you on on an update list of like,

James: yeah,

Jessi: okay, here's what you're looking for.

I'm gonna send you listings, and every time a new one pops up, like you'll get a notification or something. Does that mean you can't really rely on

James: what they're sending you? No, you can. You just gotta recognize that it's some other agent is playing a game to get it to show back up on your screen.

Jessi: So if you see something pop back up, it's not necessarily

James: Yeah.

Yeah. Lower. Which by the way, if I get on my soapbox, it drives me bonkers. That realtors, you tell them, Hey, I'm looking for, you know, a, a three two with a central air and like no carpet. Mm-hmm. I don't know, just throw out a couple things. Sure. And they'll be like, totally, totally hear you. So we're gonna set up the search.

We're gonna go from two bedrooms to four bedrooms and you know, we'll do. With cadets and Aden in Central Air, and we'll do maybe, like, we'll also just throw in carpet in the bedroom. Yeah. Like they, they set up a wide, a wider search than what you told them. Yeah. And that's just like, what the heck?

And, and it just creates a whole bunch of noise for me to then sift through. And, and the interesting thing is like, the research is actually, doesn't, isn't, I don't wanna say it, it's unfounded based on the research, what people pick, that that actually works.

Jessi: Interesting.

James: Yeah. If anything, you just create decision fatigue for them, and so it takes them longer to decide on what they want.

Jessi: Yeah. Well, what we, what we found when I was working with the realtor, he had, he had this process where he almost like, this is a, a side note, but. Instead of doing that to try to determine and scope down what they actually wanted. He would just do that up front, so ahead of time would go through this process of like, all right, what do you like?

What do you like? Are you aligned? How, how much would you rate that? How important is that? You know, and ask a ton of questions. Really narrow it down, and then just give them those listings. He'd, he'd actually only look at maybe like. Two to five.

James: Yeah. So anyways, so, which I think is a, a good way to do it.

Sure. Respects to the people what they told you. But yeah. I, that just bothers me. Yeah.

Jessi: I get it.

James: Yeah. Yeah. Number seven here, cap rates can be massaged. So a cap rate is a ratio of the income of the property divided by the price. Mm-hmm. And so, yeah, that's the it's the net operating income, I should say, of the property divided by the price is what it is.

And how can

Jessi: that be massaged? It seems like that's like, those are both,

James: ah, let's known numbers. Let's say you decide to redo the flooring. Is that maintenance or is that a long term capital expenditure?

If it's a maintenance thing, it shows up in the NOI if it's a long-term capital expenditure, it does not.

Hmm. Let's say

that, you know, you're gonna sell in the next year, and so you decide not to replace that flooring mm-hmm. Which you normally would've done. Mm-hmm. Which now your, your NOI looks higher. That makes sense. Happens all the time. You're not

Jessi: just tweaking numbers to tweak them. You're Yeah, yeah, yeah.

There's decisions or the other one

James: that will drive me batty is. They'll publish, this is a seven cap or an eight cap. Mm-hmm. And it's all based off of future could be numbers. Mm-hmm. And yeah. Yeah. They're like, man, all you gotta do is find cheaper insurance. Yeah, yeah. And do this, get the, get your rents up to here.

Mm-hmm. And this, it'll look awesome.

Jessi: Yeah.

James: And they'll like, they'll half, like, they'll put a asterisk around it so they're being honest, but like, man, that's something drives me, drives me banana.

Jessi: What do you call that when you're like, you're promising something in the future. There's a, there's a term you used to use.

Vapor vaporware. Well, that's like

James: for software, but Oh, yeah. I always call it perfect math. Perfect math or stuff like that. Yeah. So like for me, I always do my own underwriting. Mm-hmm. I actually have a column where I go, these were their numbers. Mm. And then I have, are my, actually my numbers both when I take it over and then after I do my thing.

Interesting. So I actually have three columns there, but that's like, that's the kind of thing, and you want someone who does that, who, who looks into those types of things. Number eight. And this is actually, this is, this is kind of similar, I guess I, I bumped it into the, the cap rate one was deferred maintenance can get hidden.

Mm-hmm. Right? And so it's things like it, it's related, but it's like. Still on a coat of paint and not actually fix something. Yep. You know, that kind of thing. And then in

Jessi: your amazing listing photos, you can't really tell. Right, right, right. It's like, wow, that actually Nice.

James: Yeah. And so let's just do the quick cosmetic fixes, uhhuh, which I mean, I get, and yeah.

But you know, that's one of those tricks that, that they do like, just throw a coat of paint on it, like, which does cover up a lot of stuff. Yep. But it may not be good, and it's really hard to suss that stuff out.

Mm-hmm.

That's another reason it's good too, to walk through. Yeah. It's good to know what you're talking about.

Get it inspected, that kind of stuff. Yeah. Find a good inspector. Yeah. Yeah. Yeah. I remember, oh dude, it was when we bought our first singer family home. Mm-hmm. And I mean, that house was, there wasn't anything to cover up. We knew it was bad, but we were gonna stink and sweet deal on it, so it didn't matter.

Yeah. But I remember on one of the posts there was some dry rot and the inspector just stuck his screwdriver and just started doing circles. Yep. And I was like. We're not gonna fix this place up. Stop destroying it. It was like the, it was like we bought a fixer upper and weren't going to fix it up, which we didn't.

We're

Jessi: just gonna wait until it makes sense.

James: So we sat with that stupid post,

Jessi: oh

James: my gosh. With the, it all real whittled out there for like five years until we finally moved on. I'm just like, ah, man. We did fix

Jessi: it up and then rent it out. Yes, we replaced, but we were willing to put up with,

James: but we replaced everything or whatever.

The new people, oh man. That was, I couldn't, I was like,

Jessi: whatcha are doing? He's like, look at this.

James: Oh, so much rock. This is falling right out there. I'm like, yeah, I know. Have you seen the price? Leave it. Geez,

Jessi: I

James: get it. Yeah. Anyways usually

Jessi: that's a good thing to find a good inspector. He'll point things out.

James: Yeah. Yeah. Number nine listing agents, often they don't know rent laws, or at least they don't. I mean, they should, but they just, they don't keep up on them. Sure. Has been my 'cause they don't deal in that world. Right. It's

Jessi: not their, so they forget about stuff that's not their day to day.

James: Yeah, yeah.

Yeah. And so and Oregon, like that matters. Mm-hmm. One of a recent one, which most realtors know about this is often when you when you're buying a place, you get outta contract. Mm-hmm. It's somewhere between 30 and 60 days to, you know, to close. Mm-hmm. Right. And then when you have to move in you have to move in within.

I believe it's like 30 days of buying the place. Okay. Is part of the But the closing date, yeah. That's like one of the lender requirements. Mm-hmm. I think I'm getting my numbers right. I don't sell so I don't know. But in Oregon for renters, if you are terminating a contract for a quote, a landlord reason, you have to give them 90 days

Jessi: Oh.

James: To move out. And so there can become a potential timing issue that happens there, where if you get it under contract. You're like, okay, we're doing our due diligence now. We're ready. We know we're gonna close. Oh yeah. It's like, well, you can't, you can't do that in 60 days is too late to give the 90 day notice.

Yeah. If you were gonna wait until it was a guaranteed thing. Now Oregon just passed a rule to help solve that problem. 'cause everyone was like, like, these numbers don't work. They should

Jessi: align. Yeah. And

James: so it was, it was causing issues. So they're working, they, they're allowing for you to essentially pay to get them out faster.

Or it's either that or they're requiring banks to wait a little bit longer.

Okay.

One of the two. Sure. Yeah. But anyways, oftentimes like they just don't pay attention and they're just kind of rolling and doing whatever. Yeah. Yeah.

Jessi: The time will work. It's great. Well,

James: Yeah, just yeah. Something to, to be aware of and obviously we know all the rules.

I'm a property manager, so I'm, I'm aware of what we can and can't do. Sure. At least on the rental side of things. Yeah. Number 10. The MLS filters out creative terms and stuff. The MLS is just not designed for creative deals. It's just like, here's the price

Jessi: standard deals. That's what fits. Yeah.

James: And oftentimes it'll just say in a little description like open to creative finance or seller financing or something like that.

But like it just, the entire system is not set up. And oftentimes an agent, they've heard the terms, but they don't really get it. And. It can be harder for them to get their commission Sure. If it's a super creative deal. Yeah. And so they just don't like doing it. Mm-hmm. And so they're just like, Nope, nope.

Don't trust them. Whatever. Even they're like, dude, we have all sorts of paperwork and things that we can put in order that reduces the risk. Go listen to last week's episode. About the unknown type of risk and how to overcome it. But yeah, I think there's a ton of agents who they just like, they don't

Jessi: yeah, they're not willing to list.

Creative financing, interest deals, or even entertain

James: creative offers. Yeah. That's been a, that's been a hard one for us to try to crack. Hmm. And so we don't get very creative on the MLS when we go after those deals. Instead we just make crazy low ball cash offers. Sure. And they go for those. Then we go, all right, whatever.

And then we board. So it's typically

Jessi: things that aren't listed that you're doing that creative financing and seller financing and interesting setups and

James: agents. They just, as a general rule, don't wanna touch it. Yep.

Jessi: Alright.

James: I know. I feel like if you're an agent who could figure that out and get good at it, you'd have a lot of business, but most don't.

Yeah. And then finally, number 11, the true gold is in the follow-up.

Mm.

Yeah. I think there's a lot of situations, and this is something that I haven't since learned. Since our few deals. I mean, our agent was amazing. Yeah. But I do think we took nos too easily. Mm. And could have done a better job of following up on stuff.

And that's something interesting we are getting better about now.

Jessi: Yeah.

James: Is if someone tells us no, go round to it. Like let's try this. So I actually, part of why I'm in this amazing getup is we just made a film for submitting an LOI that we wanted to submit to the people. Mm-hmm. Because they said no. And we were like, wow, that was kind of weird.

Like. I wanted to be able to represent it myself. Yeah. And 'cause I just don't think the agent they're working with gets it, I guess. Sure. And so, but we submitted it. They said no. And one a month later coming back saying, Hey, we've been thinking more about this. What about this? And let's present it this way and see what happens.

Mm-hmm. And I picked up a few deals now where it's like a month or two passes and then they come back and, say yes. Yeah. Because, you know, time has passed and so I think there's just a lot of agents where like, let's just do the next one and the next one let's just keep submitting offers that don't necessarily loop back right to those original properties.

You know, and part of it depends on how hot the market is. Sure. Like, it may not be around, but I think a lot of agents could do better. They just move on to the next one. And instead of being patient with potentially the house that you really want.

Jessi: Yeah.

James: So yeah. So what does this mean for passive investors?

Right. I think it means a couple things. Number one. You want a sponsor who knows these types of tricks mm-hmm. Knows how to overcome them. Yep. Who isn't fooled

Jessi: by

James: them?

Jessi: Who's able to work with agents and. Work around them and Yeah.

James: Makes sense. Yeah. And just remember, like, you're not just investing in a deal, you're also, you're investing in that system.

Mm-hmm. And that advantage and that knowledge Yeah. That you may not have the time or expertise to to take advantage of. Mm-hmm. Yeah. And so that's one notes, but they're not important. I feel like, I feel like that's a good landing spot. Mm. So yeah. I just, things to, just, things to be aware of with, with agents.

And again, they're not malicious. They're not trying to be mean. Sure. I think they're just like, they're working for their commission and they've got a system that most people use that I think works well. Mm-hmm. And when you start to deviate outside of 'em, you know, they, they don't get paid. Yeah. And so it makes sense that they would do it, but I also think a lot of 'em just don't even talk about the other stuff.

Which, I mean, I get it too. There's things I don't talk about. 'cause Yeah. If you're

Jessi: not an expert in it, then it's Yeah. Uncomfortable to talk about.

James: Yeah. Yeah. Though I would say like on the property management front. Man, A lot of times if someone asks me to manage it, like, why don't you do it yourself?

Like, I was like, just curious. 'cause it can be done.

Yeah.

And which, which is fun. 'cause ultimately if they do come around and say yes, I'm like, okay. Like they've, they made it now they thought this through. Yeah, yeah, yeah, yeah. Which is good. And I've had a couple people, like, if they really think I can do it.

Yeah, I think you can. Yeah. I got one. Not a client because she had a situation where she had a house full of people and she was like, man, if they move out, like I think I can do better renting by the room. I don't wanna tackle this. Don't wanna be my thing. And so my advice to her was actually like, which again, I didn't have to do this 'cause I would've been like, sweet, yeah, I'll pick up a, a new big house tenant or client.

And I was like, well I'll tell you this. Lemme give you some advice on how to present the rent increase to them. Mm-hmm. Which I did help to draft the email and I was like. The, and if they say, yes, you can totally handle this. Mm-hmm. 'cause they're existing, you know what you're doing. You got the relationship like, you don't need me for this.

Mm-hmm. But once they move out, yeah. Gimme a call.

Mm.

And I got an email a couple days ago. She goes, good news. They said, yes. That's awesome. Thanks for the help. And they even pushed back a little bit on it. And I was like, all right, all right. Here's how ya, yeah. Here's how you me message it. So. That's, you know, so I push people in that direction.

So I think more realtors could get, could get better about that. Like, man, do you need to list with me, like maybe there's some other ways to do it and.

Jessi: Interesting.

James: Maybe, maybe, I don't know. So anyways, if you would like yourself access to the kind of deals that a realtor won't tell you about check us out at furlo.com.

And you can learn more about our investing thesis and what we do there. The types of deals that we buy, which often are ones that don't qualify for bank financing right away. Mm-hmm. If it's a short term deal or if it's a longer one. Like they're just complicated. Yep. And cool. And so that's what you can find out there.

Sign up for the email and you can learn all about Morgan. About how we invest and it'll be great. Thanks for listening. Have a great day.