I'm new. Realtor asked why tell owner I'm offering 85% of home pr

11 Replies

I'm a first time home buyer. I've been on bp for about a year. Listening and reading. I'm bidding on this home. The realtor asked me what's my justification for asking 85% of the asking price. He said you could get rejected. I said "So". I asked why would they ask that. He said if you knew how much it was appraised you can ask that. I said wouldn't they put the price higher for negotiations. Am I wrong?

@Jimmie Feaster

Yes. You're wrong.

Properties aren't listed in some arbitrary method. They are listed based on comps in the area (solds, pending, actives). You also have to understand the average days on market for the area. You also have to understand what percentage of list price homes close.

You have to know what the current market value is. It could be over, could be spot on, could be at a discount.

Don't put in arbitrary offers.

You are right in your response of "so". If he does not understand you most likely have a realtor that has no experience in income investment properties. If his area of expertise is home buyers he will be useless to you as a investors realtor.

Chances are to be successful you may need to find a new realtor that also invests in rental properties.

All you need to say is that is the number that works for you as a investor. You could throw in a list of necessary work required to bring the property up to standards, with estimated dollar amounts, but your realtor should already know that info. 

I don't agree with putting in an arbitrary offer of 85% if that is your strategy.  You need to look at the individual property to determine what it is worth.  I don't think you will get far just throwing out offers of 85% on multiple properties unless you are willing to negotiate as well.  

I have put in offers for 20% less on properties before and have gotten them to go through, but that is because they were overvalued and not getting anywhere at the current asking price.  Sometimes it takes lower offers to get unreasonable sellers to understand the value of their home but it isn't always the case.

The second you replied "So", any agent who is worth their time would have parted ways with you.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

@Russell Brazil

"The second you replied "So", any agent who is worth their time would have parted ways with you."

You are probably right and both parties would have been better off as a result.

He needs a agent that will understand and respect his clients position. It is very difficult to find good agents that truly understand investment property buying. If his present agent understood he would not have showed his client the property in question. Obviously the list price clearly did not fit his clients requirements.

@Jimmie Feaster ,

IMO it 100% depends on the quality of the house, and who is selling it? Homes are unique, and costs will vary house/house. Is it well cared for, or a POS no one cares about and has neglected? A lot of intangibles need to be factored in, maybe you did that...? That being said, how did you come up with that number, is it based on historically in the past 6 months homes normally go for 15% off MLS price, or did your contractor specify the amount of work needed? Has it been on the market a long time where they might take it?

I know nothing about your market, but I do know where I live is an insanely hot market, houses move VERY quick, normally around 5-20K over asking price... and I also know where I invest, where you can get things 20-40% off.   The market will tell you if what you're asking is reasonable, or if it's a  waste of time.    If you're confident in your analysis, I wouldn't worry 1 second about the realtor's opinion good/bad.

You are wrong.  Your realtor is asking you this because he wants to justify to the selling party why you are putting in a lower offer.  You also didn't mention the price of the house.  15% off on a $1M house is a reduction of $150k but 15% off on a $50k house is only a discount of $7.5k.  This is somewhat relevant in answering your question.

You mention you are a first time home buyer.  Many who fall into this category seem to take a long time to close on a deal because of cold feet, fear of making the wrong decision, and always thinking they can get a better deal.  I had a friend who "fired" several realtors because he was arbitrarily asking for reductions like you.  Couldn't close on a deal, said it was the realtors problem and that they didn't know what he was looking for (apparently a turnkey house under market value).  Took him 1.5 years to close on a property.

If you are looking for a fixer-upper it is somewhat common to get a price reduction.  If you are looking for a move in property and your market is hot like many your chances of landing a house with a 15% discount are very unlikely. 

Remember, the realtor works for you and you have to value his time.  If he is asking you these questions he is A) trying to help sell your offer, B) try to learn more about what you like or dislike about a given property which may help on the next, or C) trying to engage in a discussion about how your offer may be unrealistic.  He is there to help you, it doesn't matter if this person specializes in investments or not, you have no reason to withhold your intentions from someone trying to help you.

In a hot market you may not get a response to lowball offers.  If you want a place you can't rely on a counter offer.

To the comments about his RE agent not understanding investments - he didn't mention whether he was looking for an investment or a SFH to live in.

Originally posted by @Thomas S. :

@Russell Brazil

"The second you replied "So", any agent who is worth their time would have parted ways with you."

You are probably right and both parties would have been better off as a result.

He needs a agent that will understand and respect his clients position. It is very difficult to find good agents that truly understand investment property buying. If his present agent understood he would not have showed his client the property in question. Obviously the list price clearly did not fit his clients requirements.

 When you say good agents - good for whom? I see a lot of investors who want agents to do a lot of stuff that if the agents did all of it they'd be making roughly $10 per hour. Who is that good for? It's not good for the agent. If the job isn't good for the agent then the agent is gonna quit. Hence why industry wide 90% of agents fail & there are a ton of agents running around without any clue on how to transact real estate.

A good agent is a successful agent. A good agent knows how to value their time & run a profitable business. Just like I think it'd be good if my cable bill was $5 per month & not $130 I understand that ATT wouldn't be around if they charged me $5 per month.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

Buyer and broker need to both write down who THEIR ideal match would be with specific criteria. Meaning the broker/agent should tightly define their ideal client and discard or refer off the rest.

The buyer should define what they want the broker/agent to do and give that upfront so that the broker/agent accepts the terms going in.

The problem becomes when both the broker/agent and the buyer both think they can mold the other person into who they want them to be.

These days on commercial I rarely touch anything under 2 million in price. I find those that have 500k or so to do something they want a quality retail property in a strong suburban to urban core area that goes for 3 to 4 million. The lower priced stuff doesn't have the cap rate they want.

The Dollar Stores tend to not be in areas the buyers want though they like the 7 caps.

I am finding a better match for the 500k buyers to invest with me as a sponsor on larger deals that have they quality they are seeking. This way they own a smaller slice of the quality they want instead of the whole thing of something they do not like. Otherwise they have to partner up or wait more years to save more money to get in the areas they want.

Some people send me value add retail with 10 mom and pop tenants to analyze at high caps that are under 2 million and tons of work for a broker. The buyers barely want to pay the commercial attorney so try to have the broker do most of the due diligence,etc.    

For the buyer of residential you have to know how many more other properties are out there like the one you are bidding on? Are there tons available or one every few months? Availability of inventory and pool of buyers will tend to dictate demand. 

Once  a broker has been doing things awhile they know what things will be a time suck and a lower return of their time.

Originally posted by @Jimmie Feaster :

I'm a first time home buyer. I've been on bp for about a year. Listening and reading. I'm bidding on this home. The realtor asked me what's my justification for asking 85% of the asking price. He said you could get rejected. I said "So". I asked why would they ask that. He said if you knew how much it was appraised you can ask that. I said wouldn't they put the price higher for negotiations. Am I wrong?

 It sounds like your Realtor is trying to give you a reality check on the market &/or feel you out. Let's say this house was listed for $100k. If all the comparable houses in the neighborhood are flying off the shelf for $100k in a matter of days & you offered $85k the agent wants to hear your understanding or reasoning as to why. Why do you think you would get it for $85k? Is there a major defect you noticed? Or do you just want to pay 85 cents on the dollar for what everyone else is paying full freight for.

See what I mean. Agent needs to vet your quality as a client just as much as you need to vet the agents quality as an agent.  

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

@Jimmie Feaster   I think where you're running into issues is the relatively arbitrary figure of 85%.  I know that I've have my "lens" through which I evaluate property.  And by "lens" what I really mean is "spreadsheet".  I can monkey around with variables within the spreadsheet based on what I think of the property but at the end of the day it always spits out some price.  What's more, it can spit out some oddly specific price ranges where I can make the deal work.  However, those prices that it spits out have nothing, absolutely nothing, to do with the "listing price".  So there are times when that price is close and there are times when it's literally hundreds of thousands of dollars away from what the owner is asking for (through their agent).  

From my limited experience there are two types of agents.  Those who care how you came up with your "I want to close at-or-below this price" and those who don't.  The one that I work with now knows the different prices, where my comfort lies, where I will wave contingencies, etc.  And she knows that before we make the first offer.  I let her tell me where she thinks we should start.  Ultimately I don't know that she deeply cares about "how the sausage gets made" (read: my spreadsheet) because I've closed deals before and she knows I'll close more in the future.  If we win, we win, if we lose out, we lose out.  

I'll also tell you that I've shared my spreadsheet with other agents (in other markets) when my offer price would be extremely different from the listing price.  I'll point-blank ask them to take a look, see what I might be overlooking, if estimates are low or high for certain areas, etc.  In all cases (so far) the feedback as been "nope, your numbers look right to me...it all makes sense...we can go ahead with an offer if you like but it probably won't get the deal done".  

The net result is that some care, some don't but I don't take a listing price and throw an offer out at 90%, 80%, 70%, or any other fixed percentage.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.