Agent and I not on the same page

67 Replies

Hello everyone, I'd like to tell a story about a recent experience I had with my agent and would love to hear your input on it. So recently, as of two months ago, I learned about real estate. I quickly realized that I didn't know much, so I picked up a book. Then another, and another, and twenty more. Now I have a basic grasp on the fundamentals. However, I have no practical experience, so I decided it'd be good to get in touch with a real estate agent. So I did. We spoke for a while, I told him what I was trying to do (house hack a duplex), what kind of time frame I was looking at (6-12 months), the price range (70-100k), and many other things. We seemed to have been getting along just fine, as far as I could tell. A couple weeks later, I stumble upon a duplex for 100k. Nice house, pictures looked clean, good area, boasted high rents, low expenses, everything looked great, except the price. It was too high, and the numbers didn't work. At 100k, it had a negative cash flow of 200. So I thought to myself, well I really like this house and it's not that far off, so let me run the numbers at 90k. Much better. So I email my agent and say "Hey! I found something, what do we do now?" We ended up looking at it, and it was great. I told him I wanted to put an offer in at 90k. He says "Maxwell, that's way too low. If anything, we have to offer above list price. Its a sellers market, there's going to be multiple offers, and you are financing with a FHA backed loan. We should put the offer in at 105k". My first thought was "Are you freaking kidding?!!" but of course I didn't say that. I said, "Okay, well I've ran the numbers as thoroughly as I can, and the house doesn't make sense at anything over 90k. That's all I can do". We go back and forth for a few emails, and I eventually tell him to not make an offer. I'll find something else. A week later I did. Similar situation, similar outcome. What do I do? I don't want to seem like a jerk. But, the numbers are going to drive my decision. I'm not going to buy a property that is going to lose me money. At the same time, I'm new at this. I don't want to be a pain, I don't want to drag my real estate agent around for months and making low ball offers and looking at apartments if I know that we have very different approaches to determining the amount I offer. Do I need to let up a bit, get a new agent, or is there something else I am missing? Any advice greatly appreciated!

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Sounds like you likely have unrealistic expectations for the market.  The market decides on the value of the property,.not your formula.  Most markets currently are extreme sellers markets. We have a nationwide inventory problem.

Your agent will most likely have a good grasp on the market so I would say they should be leading you in your best interest.  With that said, if you insist on making an offer, they have a legal obligation to offer it.  It is your decision not theirs.  We work in our clients best interest  (sigh) or at least that is what we are supposed to do.  If you feel that is not the case then I would find a different realtor depending on any exclusive contract you signed with them.  There is far more than just the price involved in an offer - financing and closing time-frames and other things come into play as well.  Do your research to see what those properties sold for and the terms.  Also - don't judge all realtor transactions from one bad one :)  Best of luck.  Take care,

I suggest you learn the outcome of these properties ($ sold, downpayment, loan type) and decide if you want to participate in this market. Most realtors would like the buyers to become successful. I showed clients stats. In our area it is +20% over listed price in some areas and high crime area median price of SFH is still a million dollars. That avg +20% means of 10 offers submitted if you offer +20% over you are #5 if not 6th highest offor. FHA has restriction on code, termite etc. Frankly, I have not processed one FHA non-occupied ever in my 14 year career. These days even 20% down is shaky as one is competing with high down, no-contingency, no loan approval or no inspection requirement as the market is steaming hot. Be prepared to compete with all cash, quick closing strong buyers.

I suggest you work with patient realtors. Some will let you take your time others want a quick sale move on to next deal. 

@Sam Shueh How can I compete with an all cash, 24 hour closing? I have enough cash to cover 3.5 percent down plus closing costs. I have no shot. Any advice? Maybe pray haha

Ok....... 

90k on 100k property is not lowballing!! are you kidding me. Unless the property is really priced below market.  If it is on the market for more than a week or 10 days then it is not that below the market. Usually below market properties get accepted offer within hours, a day, or 2 days at the most. 

I really like how you were firm with your numbers. Great work. Most newbies dont. Buy what work for you and dont be afraid to put an offer based on that.

As far as your agent. Some agents, unfortunately, care about their reputation more than the principle. or I should say too much. They dont want be known for low offers. You do not need such an agent if you want to be an investor. Find Agent investor friendly. Someone who invest himself and has few rentals. He or she will understand you better. 

Remember an agent is working for you. Do not be afraid to tell them what you want or find different one. Just keep in mind if one agent show you a property, you should stick with him for that transaction or otherwise he could sue you. 

I am newbie too and went through the same situation as you. 

Haider  

@Maxwell Milholland did you take into account the rent you are saving by buying the duplex when running the numbers?  You can't expect a duplex to cash flow if rent is only coming in from one unit.

@Ned Carey Hey Ned yeah I did. I always run the numbers as if I won't be living there to get a good idea of it's potential.
@Maxwell Milholland Well like others have alluded to fha offers generally are the weakest. It’s either those or VA offers. So if there are other non fha offers the seller will go with that almost every time. Second 90k on a 100k list isn’t that bad. I’d probably expect to end up around 95. So that being said I think you find another agent and if the same thing happens again, then readjust your expectations.
Originally posted by @Maxwell Milholland :
@Ned Carey Hey Ned yeah I did. I always run the numbers as if I won't be living there to get a good idea of it's potential.

 And do you run the numbers as if you put 20-25% down like an investor would?

@Russell Brazil Hey Russell No I havn't been doing that, should I? I figure since I know for certain that I wont have 20-25 percent to throw down than it would be pointless to analyze it that way. 

Originally posted by @Maxwell Milholland :

@Russell Brazil Hey Russell No I havn't been doing that, should I? I figure since I know for certain that I wont have 20-25 percent to throw down than it would be pointless to analyze it that way. 

 I dont know your market....but I would expect any property to be cash flow negative at 3.5% down.  If you want to analyze a property as an investment, then you need to analyze it using investment criteria. If you want to analyze it as a living situation then you use a different criteria.

Sorry I'm confused about something. If it's negative $200 cash flow at $100k isn't it roughly negative $150 cash flow at $90k? At current rates $10k translates to just over $50 a month.

$90 is not an unreasonable offer, unless the place is going in a bidding war in the first week.

And at the end of the day your agent works for you.

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@Sam Barrow hey Sam good question. Yes you are right The numbers I mentioned weren't exact as I didn't have them handy and didn't remember them exactly. But at the 90k price, the deal just about broke even, and I really really liked the house and area so I was happy with that. And yeah I totally didn't think 90k was too unreasonable! It had been sitting on the market for 23 days. who knows right, maybe they'll take 90 and everyone's happy, at least that's how I thought of it.
@Debra Thomson Hey Debra thanks for the reply. I have a question. I know it's part of the agents job to submit offers (obviously) but on a scale of 1-10 how time consuming is submiting one offer. The reason I ask is im imagining a perfect scenario where I can offer on twenty properties a day and eventually somebody will accept on my terms. Have It be a numbers game. In this same scenario, I can also imagine my agent wanting to murder me. What is a reasonable amount of offers I can ask to put in before my agent basically says okay, enough is enough?

@Maxwell Milholland - in the scenario you mention - I think its riskier then you think.  When you submit an offer - you usually give the seller a time frame to get back to you -- minimum of 24 hours but really 30 hours is often the case.  People work or are out of town and they need time to consider.   So if you made 20 offers in one day --- what if all 20 accepted?  You are obligated until they respond.   Are you willing to buy 20 properties?    I can't even imagine there would be 20 you really wanted - if so you aren't picky enough :)  Just kidding.   I would not recommend your strategy.

Originally posted by @Maxwell Milholland :
@Sam Barrow hey Sam good question. Yes you are right The numbers I mentioned weren't exact as I didn't have them handy and didn't remember them exactly. But at the 90k price, the deal just about broke even, and I really really liked the house and area so I was happy with that. And yeah I totally didn't think 90k was too unreasonable! It had been sitting on the market for 23 days. who knows right, maybe they'll take 90 and everyone's happy, at least that's how I thought of it.

Still a big difference - $200 should mean a ~35K difference in price unless maybe you're pegging other numbers to the purchase price (insurance, etc)? Break even is not good for an investment but as long as you admit that to yourself, if you want to pay a little extra to live somewhere you like, there's nothing inherently wrong with that.

On the market for 23 days? Your agent is being absolutely ridiculous and I would tell him/her to put the offer in or you'll find someone else who will. I make much more insulting offers on a daily basis. Sometimes, I even wind up with a deal, even in this market.

I think the term "dime a dozen" was born from trying to describe real estate agents. Get a new agent. Find an agent who isnt afraid to "offend" the seller with a low offer. I say this as someone who used to be an agent. There are more agents than stars in the sky. Find one who aligns with your goals.

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