Sniffing for deals

Bird dog: With the real estate market on fire, more and more people are making money by scouting out properties for investors.

Inside The Froth

Behind Baltimore's Housing Surge

June 26, 2005|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Chris Smith, full-time real estate investor, is on the hunt for deals, steering his Mercury Cougar along the quiet residential streets of Lochearn at 15 miles per hour so he can see any hints of vacancy or financial hardship: Tall grass. Overgrown or thick vines. Curled shingles.

But in a year of searching, he's bought one bargain for himself - and passed more than 40 possibilities along to other investors.

It's not cold feet. It's bird-dogging.

In this hot housing market, there are uncounted but apparently growing numbers of people like Smith who ferret out potential buys for someone else. The reward ranges wildly - anywhere from 10 bucks for a photo of a house in bad shape to thousands of dollars for detailed sleuthing work on a deal that makes it to settlement.

Bird dogs - so dubbed because their work is akin to the canines who flush out prey for hunters - are usually new to investing and want to learn the ropes without risk. Some, like Smith, are also looking for themselves.

"Bird-dogging gets your foot on the ladder," said Alan Chantker, president of the Mid-Atlantic Real Estate Investors Association, based in Pikesville.

No one seems to know when investors first began using bird dogs, though the idea of a commissioned deal-finder is probably as old as commerce. But with low interest rates and quickly rising home prices drumming up interest in real estate, more and more people are trying it. The Mid-Atlantic association is even offering a bird-dogging class at 6:30 p.m. Wednesday at the Pikesville Hilton - taught by Smith.

Investors who use these one-person referral services say it's worth paying a fee to get a deal, especially in a market where buyers are routinely getting into bidding wars for homes. Bird dogs often hunt for properties that aren't listed with a real estate agent.

Jo Lovitt, president of Alexandria, Va.-based real estate investment company Succession Inc., has about half-a-dozen bird dogs on staff for small commissions - mostly retirees and college students working part-time, driving through neighborhoods armed with cameras - and she also does business with "independents" like Smith.

"We're constantly trying to grow our bird-dog sales force," said Lovitt, who focuses on rent-to-own real estate. "We look to try to buy at least one property a week, so you need somebody out there looking for these properties all day long."

The work appeals because these deal-finders don't need lines of credit or cash for down payments, and they can do their digging in the evenings or on weekends if they don't want - or can't afford - to quit their day job. But people who think they're going to get rich quick as a bird dog will probably be disappointed.

`Haven't made a living'

"I haven't made a living ... off of this yet," said Smith, 46, a Columbia resident. "You've got to be realistic. You're building a small business."

Smith worked for 25 years as an engineer, most recently for Corvis Corp., a Columbia company that produced fiber-optics equipment and taught him that a 9-to-5 job isn't a guarantee of financial stability.

He was there for the spectacular ride up as the company ballooned in size in the heady days before the dot-com crash, and he held on afterward during the waves of layoffs - until the end of September, that is, when his position was eliminated. The company has since changed its name to Broadwing Corp. and provides telecommunications services.

When his job disappeared, Smith, who was already several months into the hunt for real estate, decided to do it full time. He had three months' salary in severance to cushion him, and he'd been interested in investing for years.

He bird-dogs because he's "very particular" about houses he would buy. He doesn't want rental property, he doesn't want homes that need super-expensive overhauls and he doesn't want to buy in the city, which is tricky ground for people who aren't familiar with the neighborhoods on a block-by-block basis. In general he's looking for relatively modest residences at relatively modest prices with relatively modest problems, and anything of value that doesn't fit the bill is passed on to other investors.

Lovitt calls him a "full-service bird dog" because his referrals are more fully researched than typical, which means he gets a bigger fee if they pan out.

"He does everything - negotiating, everything," she said.

Smith's one investment property, purchased in May, is an eastern Howard County rancher on 1.2 acres that he's rehabbing - attacking the mold, replacing the drywall and erasing other signs of long vacancy. It cost him $205,000 to buy, the fixes will probably add up to about $50,000 and he figures he'll end up with a nice profit when it's sold.

That's where the money is, he figures - not in bird-dogging. But right now, what he's made in real estate has come from bird-dog referral fees - all $10,000 of it. It's a small amount because he gets paid only if the deal closes, and so far just three have.

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