Real estate agents
The Real Estate business is changing. More and more Real Estate Agents are finding new ways to help their clients sell for more. Discover how the Pay-at-Close Program can help you change the way you do business, keep more clients, and make more money.
A funding source for homeowners who need to update & repair their home before they sell and giving you a higher commission.
Available to Real Estate Agents for their clients
Who Will This Work For?
Benefits for the Agent
How to Get Started?
Show Me in Action
Let’s say you find a client who has a home that would be worth $300,000 IF they were to renovate and invest $40,000 in the home. Often homeowners want to sell their home for top market value even though it does not match top market condition.
As an experienced listing agent it is your job to use the market data to convince them their home an not sell for top dollar without changes. Most of the time sellers do the math in the head. If my home is worth $300,000 with a $40,000 investment I will sell for $260,000. This all makes perfect sense to the seller, but in reality, home buyers, whether they be investors or home occupants, are not willing to take on $40,000 project for zero financial benefit. If the homeowner is unable to invest money in the home they have 2 options.
This is the lowest stress and the fastest option for the seller, but in the above scenario the $300,000 home is only worth $200,000 if the investor knows what they are doing. The below table will explain why.
Current Market Price
Top Market Condition
Lender Title Policy $200
Escrow Fee $415
HOA Transfer $500
10% HML Interest $5,250
Listing Agent Commission $9,000
Buyers Agent Commission $9,000
Title Policy $843
HOA Transfer $5,950
Escrow Fee $415
In short an investor purchasing a home they plan to resell for $300,000 doesn’t just have the expense of remodeling the home. They have acquisition costs, carry costs, a second round of sales costs because ownership transfers hands twice, remodel costs, and their projected profit. As you can see above, with these conservative numbers (1% HML closing point and 10% HML interest), the investor only makes $20,000 if the home is bought for basically $201,000. You might be able to find a cash investor that will pay a little more because they have lower acquisition and carry costs. You might be able to find an investor willing to make a little less money, but no matter how you slice it the home isn’t worth much more than $200,000.
Option 2: Pay-At-Close....A New Way to Sell Real Estate
Many new investors and average owner occupants fail to calculate all the expenses involved in repairing and reselling a home. In the case of an owner occupant they likely ignore liquidation costs all together because they are thinking about living in the home not selling it for a profit.
Additionally many people underestimate remodel expenses. For these and other reasons a home that would be worth $300,000 with $40,000 in needed repairs and updates will often sell for around $225,000…even though a savvy buyer should only pay $200,000.
If you are a listing agent who invests or represents investors you will likely try for option 1 because it makes you the most money. Often this results in the seller getting other bids and selling to Open Door, a wholesaler, or an inexperienced investor willing to overpay. In any of these scenarios you get nothing for your effort. Many agents then use option 2 as a step down sale. You are exposed to the same risk of loss but the higher potential profit for the seller is often enough to convince the seller to list the home with you. You end up listing a terrible property, deal with major termination risks, and when all is said and done you make 3% listing commission on $225,000 or $6,750. As a real estate agent this is not my favorite way to make money. The seller feels cheated which results in fewer referrals, the buyer ends up cheated because they overpaid, the sales process is stressful because the risk of the buyer backing out is so high, and it is generally the wrong thing for everyone involved in the transaction.
Option 3: Pay-At-Close....A New Way to Sell Real Estate
To combat the above scenario problems we have created RSHST Capital, LLC.
The New Way
RSHST Capital Advances the money. In our example the $40,000 is advanced to the seller and gets paid back out of the proceeds of the sale when the home closes.
Available to Real Estate Agents for their clients
A 10% funding fee is added to the amount borrowed and a processing fee is assessed based on the amount the home owner borrows.
(Minimum Processing Fee – $1,000)
10% funding fee + .3% of sales price processing fee
10% funding fee + .45% of sales price processing fee
10% funding fee + .75% of sales price processing fee
The math for the home seller is simple. Typical cost of sell is around 8%. 6% for listing and buyer commissions and 2% in title, HOA, escrow, recording, and other fees. In option 1 above you probably want to get paid a listing commission, but there probably would not be a second agent commission so let’s call the cost of option one 5%. The seller gets 95% of $200,000 and walks with $190,000 less liens, taxes, and judgements.
In option 2 the seller gets 92% of $225,000 and walks with $207,000 less liens, taxes, and judgements. With option 3 the seller gets 92% of $300,000 or $276,000. They would have executed a Pay-at-Close agreement with RSHST Capital which adds on a 10% funding fee, plus a processing fee of 0.75% of the sales price to the cash advanced to the seller. In this scenario where the seller needed $40,000 for repairs and remodel their bill at closing would be $46,250.
That means they walk with $229,750 less liens, taxes, and judgements. That is a whopping $22,750 more profit than option 2 and $39,750 more than option 1. If you make that kind of extra money for a seller you are going to have a friend for life!
The Funding Process
There is a tremendous amount of work that goes into this funding process and there is a tremendous amount of risk for whoever advances the capital.
This is not a mortgage so if something goes wrong there is no way for RSHST Capital to force the sale of the property so advanced money can be paid back.
The 10% fee is relatively low given this risk and is usually more than offset by a good listing agent putting pressure on contractors to give good pricing in exchange for the promise of future business.
In the Dallas market, where the program started, we routinely get discounts of 20-40% off remodel and repair work because of our strong and long standing relationships with wholesale contractors. This means that even a seller with capital could afford to use our program, pay the 10% fee, have no cash out of pocket, and still put 10-30% of the remodel costs back in their pocket over what they would have paid if they found their own contractor.
RSHST only gets 5% of the profit from the 10%.
This means that in the above scenario where we advanced $40,000 the profit is $4,000 and RSHST only gets $200. Obviously this is not enough to justify our involvement which is why we charge the .75% processing fee of the sales price…which is offset by increases in after repair sales prices.
All in all this is a way for the seller, the listing agent, RSHST, RSHST Capital’s investors, contractors, buyer’s agents, and buyers to all win without anyone involved losing. That is the RSHST Capital way…win-win or no deal!
Who will this work for?
This program may be the perfect solution for your client if:
- Your client’s home could sell for more money if updates and repairs were completed.
- They do not have the funds available
- You are struggling to convince a seller to list their home at condition-adjusted market value
- About to have a listing cancel or expire because of condition and lack of resources.
- Working with a client who may be considering an offer from a wholesaler.
discover the benefits of the Pay-at-Close program
Benefits for Real Estate Agents?
- Real Estate Agents: Sell a house for more money than they would have otherwise and make a larger real estate commission.
- Offer your clients a solution that will help save their home and sell for top dollar.
- Easy to Sign Up: Agents can apply and become an Approved Agent. You may offer the PAC Program to clients over and over again.
- You are authorized to advertise the Pay-at-Close program as part of your business offerings.
- Marketing Materials Provided
- Sales Training Included
Become an Approved Agent
Requirements for Agents?
- Our ability to get paid pack is tied to the listing Agent’s ability to get the home closed.
- Must have had at least 5+ listings in the last 12 months and 10+ lifetime.*
- *Less qualified agents may Partner with a more experienced agent in their area.
- Qualify your client for the Pay-at-Close Program
- Build your Real Estate Business.
FREE PAY-AT-CLOSE PROGRAM GUIDE
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