BP has many great blog posts, BUT ....
Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes
BP has many great blog posts, BUT ....
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Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
11yOriginally posted by @Brandon Turner:
Hey @Walt Payne - I'd love to hear more of your thoughts. I think the point of the article is more of a "when negotiating, include everything" and I don't think the intent is to take advantage or be dishonest. I mean, when I'm negotiating for a deal, I'm obviously going to mention everything I find wrong with the property to get the best deal. But I think this is an interesting topic for discussion - so what, in particular, would you disagree with? I'm sure this discussion will help others as well!
Brandon,
I have to disagree with you on this. The blog poster admits that he enters into the contract knowing his intention is to strong arm the seller once the seller can no longer field other offers.
I don't believe that the blog post should be removed but the O.P. definitely operates in a gray area & @Walt Payne brings up some valid ethical points.
I don't know if there really is a right or wrong answer to this debate.
87 Replies
- West Chicago, IL · Member since 2014 · 39 posts · 4 votes11y
I am so new here so my input may not mean much and i appreciate learning all sides of real estate and negotiating. Still, I have no desire to play games and feel that one can maintain integrity with business dealings. Using the term slum lord, hmmmm. But, we should all be able to read between the lines
- Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes11y
I have always been under the impression that negotiations do continue after you are under contract assuming the contract has appropriate terms for inspection and other contingencies, etc. IMO, the seller is signing the contract (with advise from their agent) with these conditions and should realize the potential that the buyer may have some go-backs. The seller reserves the right to say "No". The reality for a lot of buyers is there is a certain amount of due diligence that is not going to be done unless you are under contract. Most new investors cannot do a walk through of a home and be able to understand every repair needed particularly if you are in a fast acting situation. They may need the property inspection and should have the opportunity to go-back to the seller (IAW the contract terms) just as easy as the seller has the right to say no I am not fixing S**t.
With the above being said, I would not enter into a contract with the "premeditation" that the blogger has. I also have an issue with #2. It is an over exaggeration and not 100% true. It is a scare tactic. I guess money does not mean as much to me because I could never do some of the sleezy and half true things that I read and hear to get a deal. It aint that serious to me bruh. I am confident I can get to where I am headed truthfully even if the trip is longer.
- Rehabber · Niantic, CT · Member since 2012 · 443 posts · 150 votes11y
@darren h, the premeditation is exactly the issue. As is the sleaze and half-truths (which I'm not even sure are half true here).
Also, to one of your last comments: it IS serious to me, bruh. That's exactly why crap tactics like this tick me off.
- Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes11y
You're taking the guy too seriously. He's a relentless self-promoter who graduated from college 4 years ago. He has probably never done most of what he has talked about; he even inflates his claimed job title (He was VP of Acquisitions - Northern California, not VP of Acquisitions. Silver Bay is Provident, which many of you have probably dealt with or at least heard of. VP of Acquisitions for a given geo is just a local bird-dog.)
Don't get too worked up about him, he's nobody.
- Real Estate Investor · CA · Member since 2011 · 47 posts · 14 votes11y
In my home market, the current practice prevents the tactics described in the post.
Typically, prior to listing, the seller has an inspection done and includes that in the disclosure. Any buyer can of course write an offer with an inspection contingency, but in the typical multiple offer situation, the offer with the inspection contingency isnt selected.
There is no negotiating after going into contract, you just have to show up with the money on closing day. This practice results in very quick closes, I went from in contract to closed in 21 days. Of course, cash deals are even quicker.
In some ways this seems unfair to the buyer, but as long as the inspection is reasonable, I guess its reasonably fair. Out here the SF Bay Area, so much of the value is in the land vs the structurs (land is 2X the value of structure in my house) that in some ways the risk to the buyer is less. THe neighborhood is the neighborhood, dont need an inspection for that.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes11y
I have seen just as many games from sellers. It's a two way street where each party is trying to get the final upper hand.
Sometimes you have an honest buyer and seller and other times one or both parties are trying to game each other.
At the end of the day ethics and the law are 2 very different things. Many people on BP do things and make deals with their cash that I would never touch but they are happy making those choices.
Everyone has a right with their capital to invest and negotiate how they see fit. It might not sit right with other investors because they do things differently.
After reading the blog post that is child's play compared to what some try to pull out there. There is the perfect world and then there is reality of how properties are sold and bought everyday.
It's not surprising to me at all.
- Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes11y
Originally posted by @Colleen F.:
@Account Closed
I agree it is an opinion and I don't give bigger pockets blogs any higher value then another investor blog. (although I would not expect outright misinformation from the BP blog, whereas investor blogs I weigh on the writers experiences)
I actually do give BP blogs a higher value, and credibility rating. Why? Specifically because there is a knowledgeable and experienced community whose members are not afraid to "call BS" when warranted and to question and discuss ethics and values, and to point out misinformation and mistakes. That doesn't mean they are gospel, and can be totally accepted as the right way. But it does mean that you are likely to at least get the opposing view. so that you can make an informed decision.
- Flipper · Cheney, WA · Member since 2014 · 77 posts · 47 votes11y
Great Discussion! My two cents worth is that it is a dishonest tactic. The way you run your business is a direct reflection of who you are. On the podcasts Josh frequently talks about dubious tactics giving all investors a bad name. I would put the blog below bandit signs on the poor practices totem pole.
- Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes11y
Originally posted by @Joel Owens:
I have seen just as many games from sellers. It's a two way street where each party is trying to get the final upper hand.
Sometimes you have an honest buyer and seller and other times one or both parties are trying to game each other.
At the end of the day ethics and the law are 2 very different things. Many people on BP do things and make deals with their cash that I would never touch but they are happy making those choices.
Everyone has a right with their capital to invest and negotiate how they see fit. It might not sit right with other investors because they do things differently.
After reading the blog post that is child's play compared to what some try to pull out there. There is the perfect world and then there is reality of how properties are sold and bought everyday.
It's not surprising to me at all.
I don't find it surprising that it happens. I have seen a lot of unethical tactics, sleaze and dishonesty both in RE and in life. Dishonesty and sleaze will happen, no matter what any of us say or do. I am not naive about that. I just don't think it is a tactic that should be promoted and sold to new investors as something to do.
I also think that part of the problem overall is that getting ahead at any cost is placed above doing things right by too many people. It can get you there quicker, but it can also result in a faster and harder fall. I am not one to preach religion, but whatever your beliefs, I think the concept of karma is real.
- 11yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
The most unethical part of the whole premeditated deduction strategy after contract negotiation is the real estate agents that support this and are paid based on the original offer. @Tony Gunter a dual agency situation where someone is pushing this like in you situation is just unethical in my opinion. I know there are people who don't think so but where else do you do this? On face value it is sleazy.
As for the BP blogs including such strategies I think it has sparked some ethics discussion so that is good. I am still on the fence about whether this is something I would expect an intervention. It isn't factually wrong. However hearing a balanced opinion would have been also been good. Not sure how you would do that, I admit I read forums more then blogs and there you usually get opposing views.
- Attorney · Shawnee, OK · Member since 2013 · 350 posts · 230 votes11y
I like BP because I believe there is real value in the blogs and posts. For me, that value is real people doing real deals and telling me (for free I might add) what and how they are doing it. I appreciate there is an ethical discussion (another reason I like BP) but I personally would highly resent attempts to censor what others are doing unless it is clearly illegal/immoral. I can make up my own mind as to what is right.
As for the post itself, I guess everyone posting negatively has had different experiences with sellers and disclosures than I have. In my experience, Sellers have had no problem concealing issues that they had to know about and disclosure forms are just about useless. Institutional lenders make it very clear that the property is as is. Often the utilities are not on or in the case of an occupied unit, the tenant is visibly upset about you rummaging through their things. As the buyer, it is all on me. What is the point of an inspection clause if you don't use it?
As for #2, I personally would not use it. Not because I think the blogger is wrong/bad, but because I don't think the seller would care and it would cause hard feelings thereby negating the other suggestions. Then again, I am an attorney by profession so I am willing to allow that I tend to focus on what is legal and assume some level of competency from each party. (Plus I am willing to allow my moral compass may be skewed toward legality;)).
So, thanks Conor Flaherty for the post. While I may not use everything you posted, I learned something new. That is why I am here on BP.
- Investor · Aiken, SC · Member since 2014 · 398 posts · 120 votes11y
The first property that I purchased as a rental we had to go back and forth with the seller a few times over items that needed repairs. We found a few things that were major violations, brought this up to the seller & came to a solution that everyone was happy with, a little price reduction & a little credit after closing. However, most states have a limit to what is required to be repaired if it is caught on an inspection, I was surprised how small the list actually is.
But, this method is taking every nit-pick item to the extreme. Just because the roof of a house is nearing the end of it life doesn't mean that I should try and strong arm the seller into giving me cash or reducing the price to cover the new roof, he already paid for it the first time, and I should be observant enough when I looked at the property to have noticed it & allowed for it in my offer.
I would also have to disagree with the blog's recommendations, at least for me, I live in a smaller market & REI is about people & relationships. If I were to spend my day trying to push people around eventually word would spread and selling agents would strongly discourage their sellers from entertaining my offers. This business is all about people, & this just sounds like bad business to me.
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes11y
I didn't read the blog post either but I too get the gist of it and know the game well. This is certainly not a strategy I use or support, from either side of the fence. That said, it is not new and actually very common. Not long ago, it was a common practice my wholesalers here in So Cal to make offers at or close to full MLS ask price and then use the inspection period to retrace the price down with the seller. I have found that such a strategy is not a good one as evidenced by the fact that most who did this are no longer doing it or out of the biz completely after ruining their reputations with brokers and sellers.
In this business, your reputation is just as important as your education in the field. I don't believe it is possible or worth the time for BP owners to go through each and every blog post to see if the info is correct, moral, or legal. The beauty of BP Nation is that when someone posts something wrong, bad. Incorrect, imperial, etc, BP members at large come in to counter the post, regardless if it is a personal blog, BP blog, or forum post.
I too agree that spreading the word that this is a good tactic via a BP blog post is a terrible idea, but that is just my opinion as I and the blog poster are entitled to. As opposed to taking offense, simply posting a comment to contradict the poster using viable and non personal attacking comments are the best way to shut down such posts. As people read them, they see just how bad the original advice is.
- Investor · DMV Maryland · Member since 2013 · 867 posts · 370 votes11y
As a not-a-complete-noob-but-not-very-experienced wholesaler, my philosophy and what I state to the potential seller is ---> I am not coming back and adjusting the price after we agree on it. So while you may think my offer is completely off the chain, I am making you an offer based on what our group needs to do to the property to monetize it. I can only offer what works for us. If this doesn't work, then yes, please go with the higher offer you are presented. Just know that WE will not be coming back asking discounts after we agree to a price with you. What we offer is what we offer.
I think sellers appreciate this because I know that I would NOT want someone coming to me with the whole "bait and switch" approach on the selling price after we've entered a purchase and sale agreement. I'd feel like I'm being had. I'm with those who state that the time for negotiation is before entering the contract.
Of course, there are exceptions to this like with everything but for me it would have to be MAJOR. As long as I'm wholesaling, I want my wholesale rep to be stealth (the deals are so good they never see the light of day) and above-board (I treat everyone fairly and I expect the same in return - I'm very conservative with the deal numbers & I don't command greedy fees so don't nickel and dime me and expect me to go back to the seller).
- Real Estate Investor · Westminster, CO · Member since 2014 · 201 posts · 74 votes11y
I had a case with a recent property where the inspector and the contractor both thought the heating and electrical were fine as they were. Then we went to contract and as we started digging in, we found that the heater needed to be replaced as well as a full replacement and service upgrade were needed. This was used to negotiate the deal further. It's not like we were trying to pull a fast one on the seller - these were legitimate issues that came up after the contract was signed and would have made this a very bad deal for me had we not negotiated after going to contract. I'm on the fence about this. I don't think it should be your go to tactic for getting a good price, but it should be available if needed.
- Rehabber · Niantic, CT · Member since 2012 · 443 posts · 150 votes11y
@Paul Choate - that's not the point. An inspection clause and legitimate unearthing of problems is fair game. I think some people here are missing the point. It's perfectly fine to renegotiate if new info arises or yes, if the seller was trying to hide something. This guy is talking about making false offers and entering into contracts he has no intention of following through on. Further, just because plenty of sellers also play their own sleazeball games doesn't justify a buyer partaking in the same.
And @Joel Owens , I would respectfully disagree with your assertion that, "Everyone has a right with their capital to invest and negotiate how they see fit." There is a certain amount of gamesmanship inherent in any negotiation, but there is also illegal and unethical behavior.
I'm also not sure of the intent of this comment: "After reading the blog post that is child's play compared to what some try to pull out there. There is the perfect world and then there is reality of how properties are sold and bought everyday."
Does this mean that we sit by and don't speak out against it? I'm not a wide-eyed, naive little doe, but I do have a really hard time keeping my mouth shut about sleaze. To keep silent is to condone, no?
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes11y
Wow, I almost feel sorry for the guy that wrote the blog, did he get a good trouncing on one of his first blogs! At the same time, this completely addresses the OP comments regarding what is and isn't allowed on BP. Everything has a way of working itself out, all viewpoints are expressed, lessons learned, etc.
- Attorney · Shawnee, OK · Member since 2013 · 350 posts · 230 votes11y
@Karin Crompton I disagree. I should not have gone into the details of the actual advice given. The point I am trying to make is there is nothing illegal nor immoral about that blog post on its face. I have a problem with you and others trying to characterize it as such and have it "banned". You are welcome to read all of the negative connotations into it just as I can take all of the good I can see in it.
This blog makes me think about using the full benefits of the contract that I bargained for to protect myself and get a better deal. I don't have any intent of going as far as he does. I have never asked for a seller credit. I know now it is something I should look out for. Everyone should understand whatever you do will have consequences that you can not control. What is bad in one situation is not bad in every situation. I would like the opportunity to figure that out for myself. Just want to make sure I can keep doing that here on BP.
- Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes11y
Originally posted by @Bill Coleman:
I had a case with a recent property where the inspector and the contractor both thought the heating and electrical were fine as they were. Then we went to contract and as we started digging in, we found that the heater needed to be replaced as well as a full replacement and service upgrade were needed. This was used to negotiate the deal further. It's not like we were trying to pull a fast one on the seller - these were legitimate issues that came up after the contract was signed and would have made this a very bad deal for me had we not negotiated after going to contract. I'm on the fence about this. I don't think it should be your go to tactic for getting a good price, but it should be available if needed.
Bill, that is a totally and absolutely legit reason to renegotiate. Going into a deal knowing you are going to use obvious flaws to get a reduced price is the issue that I find sleazy and unethical.
- Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes11y
Originally posted by @Paul Choate:
@Karin Crompton I disagree. I should not have gone into the details of the actual advice given. The point I am trying to make is there is nothing illegal nor immoral about that blog post on its face. I have a problem with you and others trying to characterize it as such and have it "banned". You are welcome to read all of the negative connotations into it just as I can take all of the good I can see in it.
This blog makes me think about using the full benefits of the contract that I bargained for to protect myself and get a better deal. I don't have any intent of going as far as he does. I have never asked for a seller credit. I know now it is something I should look out for. Everyone should understand whatever you do will have consequences that you can not control. What is bad in one situation is not bad in every situation. I would like the opportunity to figure that out for myself. Just want to make sure I can keep doing that here on BP.
Paul, there is nothing wrong with using any defects to try to negotiate a price reduction. It is the premeditated intent of using known defects to try to get money out of a seller after tying up the property under contract. If you know something is wrong, the defects should be part of the initial pricing, not approached after a contract is signed. If unknown defects are found under the inspection, it is totally appropriate to negotiate a reduction. There is a difference.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes11y
I agree. I think making an offer knowing you are going to strong arm them on the inspection for items you know about is a dirty trick. But, it will catch up to investors who do this. They will get known for doing it and agents will warn their sellers which means they will get less deals.
In the long run it will probably cost the investor doing it more money by losing out on deals than the money saved on inspection objections. Plus in a competitive market the seller may have other higher offers ready to buy and they seller just has to cancel the contract once they see that crazy inspection request. I have done it.
- Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes11y
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes11y
I'm impressed! ;)) I really like most all of the posts here and understand points made contrary to my feelings, but there aren't many. Must say, I'm a bit surprised at the passion.
First, let me make it clear that the two posts removed from this thread were not mine! :)
What we have here is a suggestion not to act in good faith, being deceptive isn't really a negotiation tactic nor is it just playing hard ball to the letter of the contract.
Enticing a seller with an offer that you are not willing to follow through with is clearly deceptive, doing so simply to tie up the property and then misleading the seller saying he will suffer under that contract or later on any future contract.
The point made as to the seller being required to list all "known disclosures" to future prospects or buyers is rather twisted.
If I as a property owner hire and pay for an inspection, that inspector has a responsibility to me, to inform me of defects I may not be aware of. Fine, I admit, I never obtained an inspection to learn about issues that I was not aware of. I disclose what I know and I have no obligation to investigate further doing the due diligence for a buyer.
The inspector/contractor is an extension of the buyer, the buyer is his client, I'm not his.
What ever a buyer claims to be faulty or in need of repair is NOT knowledge gained as an owner or really known by me. It is a claim made by the buyer, I have no obligation whatsoever to treat his claims as facts. I'm certainly under no obligation to take his word for it and disclose those claims as my knowledge of deficiencies.
So, the blogger is first dealing in bad faith, then coercing the seller informing him he has a legal obligation to disclose his findings as if he will be allowing credits for these claimed deficiencies with him or any future buyer. Horsefeathers!
Yes, it's a black eye post to BP. Yes, when you have a reputation of giving good advice or you have some medium of transmitting what is assumed by the public to be reputable and you allow the contrary to occur, you just got a black eye. I understand that public forums and internet sites have no liability for what might be posted, but when posts are allowed to remain that violate the public's perception of some standard of expected quality, distrust sets in and the reputation of that source diminishes.
Poor Dan Rather, while he is not personally liable for allowing or giving a news story that had not been verified or was totally true, it was the reputation of, and the public's perception of, Mr. Rather AND that broadcaster in giving true and accurate news accountings that forced him off the air!
IMO, BP has the same moral dilemma.
I also agree that since real estate is an extremely vast and complicated matter at times that Josh and Brandon or other moderators can't be expected to be fully informed as to what is legal, ethical or good business practice in every case. They can't be the ethics police, but it is something that may need closer attention as the business of BP is influenced by what remains up on the site.
IMO, if I owned the site, I would remove that blog and give the reason as to the two points I made above, that's me, I find it a little too far over the line when my main audience are new people trying to enter RE. That is the target market as holding the site out as a premiere educational site.
Why do you guys think a jump in some threads with booth boots? Just because bill enjoys raining on parades? No, I don't enjoy it, it is the obligation of all members to call out bad advice, illegal or unethical behavior......and most of us do.
We recently had a 7 page thread that was taken down due to suggestions that fell outside the line of ethics and even into illegal operations as well as with a heavy "under the radar" marketing aspect. So, I don't think BP is totally about clicks, but that is the business. I believe Brandon made the right decision concerning that thread and did what was best for the community.
I've made suggestions before, and I understand why some are hard to implement. But here is one:
We have professionals on this site who have been exposed to ethical and legal determinations as they carry out their professional careers. We have attorneys, we have experienced Realtors, we have compliance folks, so we have a great deal of knowledge and expertise in the BP family.
If I owned the site, and didn't have the expertise or desire to take the rap for tossing some post off the site, I'd consider this;
I'd ask those who have the greater knowledge, experience, expertise and understandings of what is and what is not expected in the RE industry to serve on occasion when a questionable post is made. A board of reviewers, guess you could look at them as the ethics cops. These volunteers would simply review posts and give their opinion, they would not be known to the general membership. The opinions would be confidential with the staff. The staff could then weigh the opinions and reach a better informed opinion on questionable posts.
Actually, I kinda think this is already done to a certain extent.
I think the BP staff knows the personalities of members and are fully aware of personality clashes or conflicts of interest to ensure a fair, impartial opinion was obtained in any assessment to be requested.
It's also all members responsibility to report questionable posts, the staff can't be reading 10,000 forum posts and every blog weekly, so everyone ought to belly up to the bar and just be good citizens in the community.
I'm done, thank you if you got this far! :)
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes11y
I often have a hard time getting through some of Bills long posts, but I have to say I read this one all the way through and could not agree more. He makes some legit points and offers some solid suggestions for BP.
While i posted that I think a lot of this gets worked out via responses from those in the know, Bill makes a solid point that really bad advice should not be left up, particularly when it has the name of the "BP Blog" behind it. So, I agree with Bill.
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