$35k reasons you should always use experienced agents for real estate purchases.

[Robert Frazier]

There is a narrative among real estate investors that they can go it alone and just need someone to do the paperwork when it comes to negotiating deals. Most deals I work, I find that the most inexperienced party in a real estate transaction will end up losing 4-10% of the value of the home in the transaction because they don't know what they are doing. 

This past week I helped two investor clients buy sfh for investments. One is a non-conforming duplex, the other is a flip with lot split-development opportunities. The non-conforming duplex was on the market for just $430k. A cash-flowing, large lot, alley loaded duplex that needed a new roof, painted and new floors. The agent listing the home has only done one deal. The house has been on the market for 26 days when we made an offer. 

My client and I settled on an offer of $405k with all contingencies in place (inspection, appraisal, financing). That is a 5.8% discount on the price. The listing agent and seller did not counter on price and went under contract at the offered price. My client would have been willing to pay up to the whole listed price because the property will be worth ~$525k ARV.

The inexperience doesn't stop there. After the initial inspection we sent a response to the inspection asking for $21,500 in seller credits to cover the roof and furnace (both needed replaced).  The listing agent did respond with a counter on this amount and offered $15,000 in seller credits. But my client would have moved forward with the deal for as little as $5-10k in concessions. 

The seller will end up with $35,000 less because the agent did not understand the market or the process of selling. That is an 8% expense for inexperience. 

An experienced agent would have worked with the seller to do the repairs before they sold, and captured the forced equity in the sale. If the seller would have spent $10k for a new roof, $8k in paint, $7k in flooring and $5k for a furnace they could have sold the house for $120k more. a $30k investment for $120k higher sales price. I've even seen agents that will finance repairs with a lien to maximize sales price for their seller.

Who you work with matters and will mean the difference between a quality BRRR that cashflows or a property that doesn't work.

I love to talk real estate. Tell me your favorite deal that you negotiated and where you found it.

[Victor Patel]

My favorite real estate deal was actually my very first one. I was a brand-new agent and an aspiring investor when I bought a run-down 1 bed/1 bath house in Covington, KY for just $35,000. At the time, I was over the moon. The neighborhood was in great shape back then, although it declined a few years later. Still, the property continued to cash flow well, and I never had any trouble keeping it rented—even without doing any renovations.

I held onto that little house for about 20 years. It was only about 700 square feet, and I lived 20 miles away, so when I decided to relocate to Ohio, I didn’t want to deal with managing it anymore. I listed it through a real estate agent friend for $65,000, but to my surprise, the best offer I received was $35,000—the same price I paid two decades earlier.

That’s when I decided to invest in some updates. I replaced the roof, siding, flooring, bathtub, and bath tiles, spending about $12,500 in total. Once the renovations were complete, I re-listed the property at $135,000.

The house sold the very next day—for full asking price. The cherry on top? The buyer was a veteran who absolutely loved the home. It felt great to close the chapter on my first investment with a win for both of us.