Real Estate Investor · Spring, TX · Member since 2014 · 39 posts · 13 votes
So I have a few rants that I would like to share. I feel like I can move on after sitting on the BP chair and talk about it.
Story 1 - 22 unit complex in Houston TX
So I purchased a 48 unit complex about a year ago for 21k a unit. Needs work but it is occupied. A few blocks away, closer to interstate (actually facing the interstate) is a 22 unit complex that has been on the market for a year. I called about it a few months back and it was in contract. Well it just went back on the market so I put a call in.
Price - $600K plus an estimated $400K to make habitable. So $1,000,000 and this place will be lucky to net $60K a year. The Realtor tells me that it has to be an all cash deal. Well of course it does. This place would not even appraise at $200k , hell, the county appraisal district has it listed for $125,000. I asked the realtor if his client knew about the comps, like mine selling for $21K a door? He said they don't care about comps, this is the price.
Another potentially good money maker will sit on the market, decay even further and do nothing to raise my property value or improve a neighborhood.
Story 2 - Duplex by TSU and U of H
I purchased an 8 unit property a half away from this one and paid $22,500 a door. This property is run down and been an eyesore on the block. I tried to get in contact with owner but to no avail. Well this property just hit the market. Asking price $275,000.
The only thing in this neighborhood that has sold even close to that was a 4 plex, completely renovated and sold for $250,000. I asked the realtor if she educated her seller on the area, she simply said that this is the amount of money that he wants.
Sorry to go a little geek but this reminds me of a Simpsons episode where this older woman is trying to sell the Comic Book guy all this valuable stuff. She found out from Bart and Milhouse that is was very valuable and she says " Well if this is valuable, back into the basement with you."
I know Realtors want the listing, but are you really doing anyone a service by letting them come up with unrealistic prices for their property? First educate yourself on the market by pulling comps and market trends. Then educate your clients on what type of realistic offers they would expect. The minute you let them become way too unrealistic, they will never see what their property is really worth and investors, renters, neighborhoods and even your clients really miss out.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Brett B. The fact the Realtor took a listing for too high a price doesn't mean they are a "bad" agent, but that they don't know how to control their client.
When I used to sell real estate and ran across a client wanting to list too high, I would simply ask them, "do you want to list your property or sell it?" I would explain that I was happy to take the listing if they wanted to sell it, by listing it at a marketable price, however; if they wanted to list too high, I wasn't interested, because it made me and their property look bad. That did the trick every time.
As for values from local assessors offices etc., they are meaningless. Only comps of actual sold properties help in setting values. Being next to a busy highway I'm sure lowers the value considerably.
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
Brett,
I'm familiar with this situation. The Realtor - any Realtor can educate their client but the client ultimately comes up with the price they want to list the property that they own. He/She may know and it might have been discussed that it will not sell. What you have to do is build a relationship with the Realtor. Simply say, if your client drops his price let me know. After time if it sits and they need to sell, the price will drop. It will definitely be a discussion.
Here's the other issue, it has to be cash because no bank will appraise higher than what it's worth. So the only way he gets what he wants is to make it an all cash deal.
Remember - A Realtor has spent money going to school, studying different aspects of real estate including law (which a lot of landlords do not know), we are required by law to continue educating ourselves. So we can be a valuable tool.
Also, it does cost any of my buyers money to retain my services to assist in the purchase so it's good to have a good Realtor in your corner.
I hear you. I was a Realtor, I let my license expire because I was focusing on my investments. However, I do know that it is not difficult to become a Realtor and it is even less difficult to become a bad one.
So I know the importance from having good ones in my corner for sure. Thank you for the share.
Investor · Houston, TX · Member since 2014 · 116 posts · 41 votes
12y
These outrageous prices for small multi-families are giving me a real headache right now. Anything on the Houston MLS seems to have gross rents less than 1% of asking price. I guess it's time to start getting creative with my search...
Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
12y
Write offers, attach the comps, give them to the realtors. They HAVE to present all offers to their clients, UNLESS their clients have put in writing that they don't want offers presented under X.
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
@Brett
It's not hard but its hard to get a real estate license. Some of my classmates didn't pass the class. Another group didn't pass the state boards. Some passed the real estate portion but failed the law portion.
The issue hear is you spotted a deal and the owner is not accepting the offer. I would not blame the Realtor the judiciary responsibilities is with the seller for the agent. The seller contracted the Realtor and is paying for the services, not the buyer. I can't say that the Realtor is bad based on not having their client accept the offer. If the seller says, "I'm not accepting less then $600K --- you have to write the offer and the Realtor has to present it.
The Realtor could have ran the comps, that's standard to come up with a price - you know that as an ex-Realtor if you worked with clients. Ultimately, the client determines the price listed. If he wants all cash, then the comps can be thrown out by the owner he just wants. Everyone thinks their property is worth more then the market says. This is why, you will see the famous "price reduce" message.
Another secret to the public, if the Realtor is bad the listing is owned by the Broker so a good broker overseas every listing.
Now $600k and $125k is a huge difference.
Be patient and wait - if it's meant for you to get the deal it will happen. You never know something else may pop-up it always does.
Real Estate Investor · New York City, NY · Member since 2014 · 121 posts · 47 votes
12y
Brett,
You are on the money about Realtors educating their clients. The problem is there is always some mediocre Realtor who doesn't have any business and will accept overpriced listings. It ends up being a waste of their time (and the clients) and the 2nd or 3rd Realtor in will sell it in the end when the price finally comes down.
I would just keep checking back every several weeks. It may be one of those deals that takes some time.
Although you may be 100% correct about these two realtors, there is a chance that they did attempt to educate the sellers on the current market. What benefit is it to them, or their client, to tell you that had such a conversation?
Many years ago when I was a realtor, my broker frowned upon taking unreasonably priced listings. However, he was ok with taking such listings if the seller would agree to price reductions at certain future dates. The thought behind it was that perhaps the lack of interest at the seller's desired price would be a wakeup call to how unrealistic he/she was being.
Investor · Des Moines, IA · Member since 2014 · 238 posts · 230 votes
12y
@Brett B. absolutely agree about the ease of becoming a licensed Realtor. Unfortunately, getting the license is the easy part, in my opinion. Some states are making it more difficult, but I would not hold your breathe on true education becoming a real part of the licensing process. What is difficult, is getting enough experience when starting out to be a reliable asset to your clients... I do not endorse over-listing properties by any means but I understand why the originate.
Several newer agents list higher than what they know they will sell it for because they are under the misguided impression that having a listing, with a chance to sell, is better than having no listing... Complete injustice to themselves and the market in general! A bad listing reflects poorly on everyone, incurs marketing expense that will not be returned and will result in a lot of heated "discussions."
As a buyer/investor you can blow as hard as you want trying to educate the guilty parties, but at the end of the day... you'll just be blue in the face and their rose colored glasses will continue tinting their outlook.
As noted by @Sean Brooks your best bet is to have a discussion with the listing agent, state your position with empirical data (recent sales) and hope to get a call in a few months when the seller/agent check in with reality. If you do not hear back, try submitting another offer towards the end of the listing period when expectations have been lowered and everyone is frustrated with each other.
Nashville, TN · Member since 2014 · 12 posts · 2 votes
12y
I will list at whatever price a client wants, but with the understanding that if we dont get that number or any activity in x days(15-30 depending on the details), we go to the market value given by comps/area.
I will list at whatever price a client wants, but with the understanding that if we dont get that number or any activity in x days(15-30 depending on the details), we go to the market value given by comps/area.
Exactly. Sometimes that is the only way to pull the seller back down to earth.
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
I laugh when people say it's easy. College is easy too but not everyone can get in and its always a group that do not pass. I'm not sure about other states but in my state few people pass. Here are some hard numbers from the school I attended, passing rate of 80%. Owner of the school is a veteran broker with 40 years of teaching and 45 years of Real Estate experience. Other schools, listed number like 60% to 70%. Not everyone passed the course in my class, then it was another group that did not pass the state boards. You get 3 attempts to pass the Real Estate sales and law portions. So everyone that says is easy is not educated on the manner. In fact 1 student took the first test, received the results and walked out never coming back. A few others took the pre-math and failed it, dropping out. Nothing in life is easy! If it was everyone including all investors would take the exam.
I had no problem myself but that's because I have known veteran Realtors - award winning million dollar Realtor's for years. I worked as an assistant before becoming a Realtor myself.
Now the reason why most will not turn down a listing is because their in business to generate an income. Now, they will take a listing like the one your talking about with the thought that after the property does not sell for an extended period, the owner will be more open to now listening to the suggestion. Now you mention a key phrase which tells me what happen. "she simply said that this is the amount of money that he wants". She had that discussion and the owner said "I don't want to see any offers less then my asking price". Price goes on the market for $275k
Now if the client is wealthy and is in no rush, they will not budge on their price. Take it from me, most Realtor's are well educated. Just to kept the license, you have to attend continuing education courses plus other courses to get knowledge on other areas.
Now I do agree you have good and bad in every industry. Some are not customer focus driven. I receive advice early on, you have to know when to cut ties because your wasting time on a client that you can not assist selling their property at the unrealistic price.
Now a low ball $100k offer on a $275k list price will always be rejected by most clients. They feel your insulting them because in their eyes the property is well worth $275k. He/she may even say I don't want to see anymore offers from that buyer.
Again I'm going to explain how it works, it's different than the role of an investor. Example: Realtor suggest that the price be $250k based on a lot of data including the appraiser suggestion ---- The owner of the property wants to list as $275k --- it gets listed as $275k because the owner has to agree with the list price (a contract is signed) --- the Realtor works for the seller - not the buyer ---- If their an dual agent - it becomes difficult because you represent both.
The seller is paying for the service of selling with the assistance of a Realtor. No buyer pays for the help of a Realtor in purchasing a property. As your Realtor I would have at least suggested to offer $199k all cash to see if this would start a counter offer. Even that offer may offend the owner. It's another issue here too, the seller knows the price is not worth what he has it at, otherwise he would take a buyer that requires financing. But if he did, the bank would then do an appraisal to determine what they will pay.
Now investors and realtors are in the same business - all the gurus have them in their corner and I suggest everyone partner up too. I can tell by this discuss that a lot of people do not understand the role of a Realtor.
Seller Realtor - attempts to get the asset sold
Buyer Realtor - attempts to purchase an asset from a seller.
Sometimes it has nothing to do with the price, sometimes the terms will get the owner to sell. The Realtor is a messenger between the seller and buyer.
Remember this, anyone that has to go to school, pass a state board, then take more courses to keep a license and keep furthering their education because Real Estate for anyone with a license is regulated. Is serious about Real Estate!
For investors, it's different because your trying to obtain assets at the lowest price. I get it but when they say, it's the Realtor's fault for not educating their client because he/she will not agree to sell their asset to them. Its the owners asset and they will either say yes or no. So that's misleading because you do not know what was discussed when the seller agreed to list the property.
Brett - be patient I know you indicated that you were a Realtor and it sounded like you use it for your personal investing. If the property sits for a period of time, the Realtor better yet the broker who owns the listing (all listings belong to the broker where the Realtor works) will have a discussion with the Realtor and maybe with the client too - to get the price reduced. But if you continue to insult this person - sounds like a client that's difficult ( I don't know personally but by what you're saying) even if you are the only offer - they may not want sell to you.
I want to reverse how to look at the issue. Say if this was a legal issue and the seller had a lawyer. Would you attempt to negotiate with the lawyer or would you get your own lawyer?
I hope you would get your owner lawyer. The same applies here. Seller has a Realtor to represent him. You should have a Realtor to represent you.
Just like Lawyers, Realtors know other Realtors so that relationship could help.
"A broker may not take net listings unless the principal requires a net listing and the principal appears to be familiar with current market values of real property. The use of a net listing places an upper limit on the principal's expectancy and places the broker's interest above the principal's interest with reference to obtaining the best possible price. If a net listing is used, the listing agreement must assure the principal of not less than the principal's desired price and limit the broker to a specified maximum commission. "
That would explain the extreme pricing and realtor's behavior in not budging on the listing price... My coin.
Real Estate Investor · Spring, TX · Member since 2014 · 39 posts · 13 votes
12y
The guy bought the property at a Tax sale for less than $20K and trying to sell it for more than 10x what he paid for it? No work has been put in the property and it has gotten worse over the year or so he has owned it. Looks like GREED to me.
@Sean Brooks - I think you are putting way to much into the argument. I think it is greed on both the Realtor and the Seller. This property will not sell for anything close to what the listed it for.
@Louis Leone is exactly right. I am going to have to wait out a few Realtors until it becomes close to where a $100K offer looks good.
@Matthew Hansen Hopefully you are right and this will happen quickly.
Bear, DE · Member since 2014 · 178 posts · 65 votes
12y
Brett,
If you had said that before I would have been said your not going to get the property fast. GREED is the evil of business. I never said the property would sell at that price without assessing the property, I'm going by what your saying about it. I know what type of person your dealing with. But he's in no rush. Here's what you need to find out. How many properties do the guy purchase at a tax sale? How long does he hold them? What is the average profit made? With the information discovered, you may be able to use that as leverage. Here's another thing, you know he wants to sell but at one point will be sign the offer is the question? Keep waiting.
Now I put more in it because too many people are saying "Some Realtors don not service their clients well". Unless a person has been a Realtor, they wouldn't know what it takes to be one. It's not that television show! Without knowing the discussion between the Realtor and client you can not say it's the Realtor. The property is the owner's possession and it is what is.
I know a guy where I'm at he went through 8 Realtors for one property. It was a real pricey property but was always over priced. Each one thought they would have a different result and get to an opportunity to sell his others. The commission would be great at the right price so each took a chance. Hasn't sold in years and he's not in any hurry.
I can tell you it may take years. I've been in that situation in Philadephia - guy would not sell to me. He just sold after 20 years!
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Brett B. The fact the Realtor took a listing for too high a price doesn't mean they are a "bad" agent, but that they don't know how to control their client.
When I used to sell real estate and ran across a client wanting to list too high, I would simply ask them, "do you want to list your property or sell it?" I would explain that I was happy to take the listing if they wanted to sell it, by listing it at a marketable price, however; if they wanted to list too high, I wasn't interested, because it made me and their property look bad. That did the trick every time.
As for values from local assessors offices etc., they are meaningless. Only comps of actual sold properties help in setting values. Being next to a busy highway I'm sure lowers the value considerably.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
Hi Brett,
I understand your reasoning and mathematics.
The seller to me sounds like they want a sucker buyer.
These are usually investors with cash but have not invested in real estate or more specifically that asset class. That is why the "all cash" offer.
They tend to be out of town as well without a firm grasp of market dynamics. Some buyers even out of the country. In their country they might get 1 percent return on their money. So buying all cash here with the international tax treaty and getting 4 percent they are happy with. The local investor will deduct for micro dynamics they know exist.
We get this on the commercial side with sellers liking 1031 buyers for larger deals or finance. The all cash buyers want it really cheap but a seller sitting on cash can wait for a 1031 buyer who will buy an okay to good deal at a premium versus an amazing deal.
So you have to remember that there are all types of buyers and they will pay differently based on experience level and how much money they have etc.
Things get grossly overpriced. An experienced broker knows when something is realistic or it just too far out there. For instance if someone comes to me with a 5 million strip center and wants to list at a 6.75% cap I know it's aggressive. I know also though that cash buyers will probably think it's too low but a financed buyer at a 7 cap putting 25% down can get great cash on cash or a 1031 buyer looking to avoid taxes. This property wouldn't work for an investor like you trying to buy cheap and force appreciation through rehab and lease up.
So it's a balance over many years or decades in the business to know what is within range and what is not for listing a property.
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
I also wouldn't get too worked up over these properties.
TIME can change a situation. If you wait maybe they come closer to your price OR maybe a buyer pays a price you never would. In any case you monitor the property but move on to others.
I just leave information with a seller or listing broker and tell them if your situation changes get back to me. Sometimes it happens and others it doesn't. It's all part of the real estate investing game.
since your not an agent and you do not have any fiduciary responsibilities and you really want the property which it sounds like you do...Then just go find the seller and if they will meet with you meet with them and then you can educate the seller in a nice. Way and put your number out there so they know your serious... When the listing expires because its way over priced maybe they will contact you.
Joel hit the nail on the head this is no different than the West coast sales or marketing companies selling mid west Turn Key and charging more than the properties are worth but hey they sell 100's a month to people that live off shore or in CA... I have had many Aussie clients come to me with deals that were so grossly over inflated they just did not know they were paying way to much.. One jumps out at me particularly a 4 plex in Youngstown Ohio. it was a piece of crap.. it was bought at tax sale for 5k the Aussie paid 99k cash as is.. And then could not figure out why he could not sell it.. same with many markets in the US in the Turn Key space... many homes are bought sub 10k basically nothing done to them then flipped for 40 to 60k with extreme profiteering going on.. And those homes are being sold to what exactly Joel is alluding too SUCKER BUYERS and because Houston is soup de jour right now in the Turk Key world and apartment world the seller is looking for that dummy not a local who can and is buying wholesale like you are...
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
12y
It's almost impossible to know what the real issue is. I've told this story before, but I did run across one listing where the agent basically admitted that his client only had the property listed (at an inflated price) to appease his wife, who wanted him to retire. He had told her he'd retire when it sold!
(btw, "serve their client" would be a better way to phrase it. "Service" sounds a little....agricultural.)
