How Does an Agent Get Paid on a SubTo Deal?

How does an agent get paid on a SubTo deal? This is one of the biggest questions I get in real estate. To understand the true value of this house, watch me lay out the math on this deal to show you how you can find some extra money for the seller so it’s a win-win-win for all parties involved.

How does an agent get paid on a sub 2 transaction well this is a house it’s in buckeye arizona and it’s a three bed two bath house i believe this is my first time coming here i never had to talk to the seller i never had to negotiate with the agent the story of this deal comes right here seller of this house has a four hundred thousand dollar bank loan the house is

Also worth like 425 thousand dollars the problem as most people don’t understand if the seller owes four hundred and twenty five thousand dollars and they sell the house for 425 they owe 400 000 to the bank you think that the seller would have 25 000 left over that’s not true because the seller would have to pay the commissions to the agent the uh the seller’s

Agent the buyer’s agent closing costs home warranties a whole bunch of other things so technically this seller at 425 000 value doesn’t have any equity actually they have negative equity okay so the seller hires an agent they put the house on the market for four and a half months but unfortunately because interest rates are so high they weren’t able to sell the

House okay that’s the reason why they weren’t able to sell it so the agent had plenty of people wanting to look at the house but they were having to lowball the seller even though the house was worth 425 nobody could afford to pay for 425. so this is common it’s going to happen a lot more over and over and over the next couple of years because interest rates right

Now i think we’re getting quoted somewhere around i think we’re getting quoted like seven percent six and a half percent on all of our burr deals so if you guys are doing the burr strategy you’ll see you’ll run into this a lot we’re getting hammered on the burst strategy so that’s what was going on on this deal so how did we come in contact well as you guys know i

Teach people how to do this so i get wholesalers that come to me and they have dead leads and they go pace i’m generating leads for buying wholesale deals and i don’t know what the heck to do i get agents that come to me all the time and say pace i have a listing that’s not selling i don’t know what to do the answer always is creative finance okay so here i am i go

Guys this is like the easiest thing in the world like you guys just don’t understand the value of this house the value of the house is not the actual house the value of the house is the bank loan that’s already in place you got a buyer that says i can’t afford to pay this house because they’re going to the bank and the bank is saying hey we’ll give you 7.5 interest

Or 6.5 interest or whatever it is well with that interest rate they can’t afford to pay four hundred thousand dollars the cool thing is this seller already has a bank loan with wells fargo at 3.25 interest so you’re gonna go get a new loan as the buyer for seven and a half percent to pay off somebody else’s loan at 3.25 it makes zero sense for me to go and get a

Loan a brand new loan of seven and a half percent that nobody makes any money the agent doesn’t make any money the seller doesn’t make any more money the only people that make money are the banks and so why am i going and getting a brand new loan at seven percent or six percent to go pay off somebody else’s loan at three point two five percent and so what i do is

I teach people how to overcome this by taking over the mortgage so here’s what we did i taught my student he was a wholesaler obviously he’s doing more than that now i said if you can get this deal done i’ll pay you ten thousand dollars so go to the agent which you did go to the agent tell the agent you’ll pay the agent ten thousand dollars if the agent goes to

The seller and says we’ll pay you twelve thousand dollars if you let us take over your wells fargo loan right so wells fargo has a he has an existing loan with wells fargo let us take over four hundred thousand dollar loan subject to 3.25 percent and i’ll make the payments to wells fargo instead of the seller and in that process i will receive this magical thing

Called a deed and the deed transfers over to me the buy and holder i’m the guy that is buying and holding the property so i get the deed i get the ownership and the wells fargo stays in the seller’s name but i’m the one that makes the payments the mortgage i end up being the buyer right on the buy and hold there’s a mortgage balance of mortgage payment of 1400

I can rent this house out for twenty one hundred dollars and there is a positive cash flow of about 700 per month okay that’s pretty good i don’t mind passive income of 700 a month i don’t mind that now the problem is it costs thirty two thousand dollars because remember my student got paid 10 grand my the agent got paid 10 grand and the seller who was going to

Have to lose money over here on a traditional transaction the seller is going to move lose money on a traditional transaction the seller actually in a sub 2 creative finance transaction made twelve thousand dollars the agent who was going to lose the listing made ten thousand dollars and the student who was a wholesaler trying to buy this deal under 400 000 this

Was the only way they were going to get that that deal made right so ten thousand dollars here now where did the money come from because it cost us thirty two thousand dollars plus ten thousand dollars in miscellaneous costs right so when i buy a property like this what i’m gonna do here is i’m going to clean it up do a little paint uh maybe replace the carpet i’ll

Probably spend less than five thousand dollars here literally less than five thousand bucks two thousand dollars on paint um fifteen hundred dollars on carpet and then like another thousand dollars maybe maybe 1500 bucks just going around and doing little drywall repairs replacing batteries stuff like that so i’m going to be all into this thing 42 000 now for a

Brand new person forty two thousand dollars scares the crap out of you well i’m a buy and hold investor so other buy and hold investors already know that if i buy a four hundred thousand dollar house and i’m all in for roughly 10 man i got a screaming deal and the fact that i gotta take over an existing loan at three point two five percent oh my gosh i didn’t have

To apply for the loan nobody had to look at my bank records nobody looked at my job history my tax returns literally nothing was shown for me to take over the wells fargo loan at four hundred thousand dollars and i didn’t have to pay the bank anything i didn’t get approval from the bank i can legally take over the deed i can take the ownership of this property i’m

Standing in a property i currently own right now without any of that stuff no application no loan was involved okay i didn’t go out and get a loan and i um didn’t have to qualify look at my bank records nothing literally nothing okay now where does the 42 000 come from now when you get more experience in the business maybe that comes from yourself but here are some

Places that money comes from you’ve got a private money lender this is friends family etc i’ve actually had a lot of um sellers my previous sellers on other deals will go hey pace if you ever have a deal i’d love to fund you and be a lender for you you could bring in a partner right i’ve done a lot of deals with my dad i’ve done a lot of deals with my friends i’ve

Done a lot of deals with other investors that maybe i found the deal so they go hey i’ll bring the money to the table so they bring the 42 but i bring the deal right and we go 50 50. if you’re doing a lot of real estate wholesaling you can probably self-fund it from one of your wholesale deals or you could have it come from your self-directed 401k also we’ve been

Teaching people how to go get lines of credit how to do this stuff if you guys go to start with if you go to start with they’ll teach you how to get a line of credit and you can go and do stuff like this now here’s what’s amazing about this my uh the way i got this deal is i actually brought on a partner i have people that come to me all the

Time that say pace i’ve got a lot of cash i don’t know what to do with it i don’t know how to find my own deals and so they bring the money so they brought the forty two thousand dollars so we’re splitting the deal down the the middle all i had to do is educate the wholesaler all i had to do was educate the agent and educate the seller on how this whole process

Works it is way easier i don’t have to get banks involved i don’t have to have credit approvals i don’t have to do inspections appraisals i don’t have to do any of that stuff creative finance is way easier than a cash transaction so when people tell me oh wholesale i’m going to start with wholesale you’re going to start with something more challenging i can pay

Top dollar and actually get into a deal like this with no money out of my pocket but not with wholesale i can’t do that with wholesale now one thing you can do is you can wholesale create a finance so what i did is this agent i taught the agent how to get this under contract so we got we got a contract right here sub 2 contract i helped the agent write this up

Because they didn’t know what they were doing the agent assigned it to my student okay with an assignment contract and then my student assigned it to me with another assignment contract so one assignment contract paid my student ten thousand another assignment contract paid the agent 10 000 and the original sub 2 contract paid the seller twelve thousand that is

How the agent got paid in this specific deal if you’re an agent and you’re trying to learn how to get deals done like this please head over to see if we can help you guys out we’d love to teach you how to do this process how to take a listing that’s not selling and actually convert it into a creative finance scenario if you’re a wholesaler and you’re having

A hard time with your leads please hit us up let me know i’d love to know down in the comments if you guys need help with your leads or if you’re a buy and hold investor this is magic right i’m i’m my wife is an agent i’m a wholesaler i’m a fix and flipper and i’m a major buy and holder this year we bought thirteen hundred thirteen hundred units 300 units primarily

Using creative finance and i want to show you guys how we do that it is absolutely powerful so hopefully you liked this video today if you did please make a comment down below and i hope this answered the question of how do we pay agents

Transcribed from video
How Does an Agent Get Paid on a SubTo Deal? By Pace Morby