Agent doesn’t want to “lowball”

Buying & Selling Real Estate
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Agent doesn’t want to “lowball”

Thomas Ingrao
Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes

So I found a property that has SERIOUS potential. The duplex is owned by an elderly couple, both of which were moved into a home and this is an estate sale. Asking price is $27,900 and assessed value is $19,800. The house will need one new electrical panel, a tub surround, carpets, and paint. Im estimating around $2000 in renovations (I’m an electrician and have a friend who does hvac plumbing so it’s mostly material cost. My real estate agent is being reluctant to make an offer below assessed value and i don’t understand why. The owners already accepted an offer and financing fell through so I’m up to bat but I want this to be my game and I’m just at a cross roads with a non-aggressive agent and me who just wants to get a killer deal. Any opinions? Rent roll after renovations will be about $550/unit, taxes are approximately $800/year. I have a preapproval from the bank and I’m thinking I can get this place for less than $7,000 upfront, out of pocket. Trying to make an offer today, let me hear some opinions!!

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Steven Foster Wilson
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
5y

@Thomas Ingrao find a new agent, theres plenty out there, key is to find a good one. Nothing wrong with making an "aggressive offer".

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  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y

    @Thomas Ingrao find a new agent, theres plenty out there, key is to find a good one. Nothing wrong with making an "aggressive offer".

    37Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    Assessed value is not the same as market value.  What is the appraised value of the home?  That is the number you want to work with.  

    Given the price of the home and fact that financing fell through on the first offer, I'd guess someone tried to get a private loan as a bank won't hand out a mortgage for that small amount.

    10Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Theresa Harris my bank gave me a preapproval of $40,000 with no minimum amount. 25% down, 25 years, 4.7%

    0Reply
  • Arsen Atanasovski
    Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes
    5y

    Find a new agent.

    18Reply
  • Cole Simpson
    Rental Property Investor · Columbia, SC · Member since 2020 · 302 posts · 186 votes
    5y

    I would just explain that you are an investor so it is important for you to get the best price, you are not trying to lowball every property but in this situation it just makes since because of the situation.  What is the offer you are trying to make?

    3Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Cole Simpson I offered $18,500. Listing agent came back and said they won’t entertain anything that’s not in the 20s.

    0Reply
  • Cole Simpson
    Rental Property Investor · Columbia, SC · Member since 2020 · 302 posts · 186 votes
    5y

    I mean it sounds like even at full price it should be a great cash flowing property, will probably meet the 2% rule is there something I am missing?

    10Reply
  • Kevin Leonce
    Investor · Atlanta · Member since 2016 · 58 posts · 54 votes
    5y

    @Thomas Ingrao You should remind the agent that they have a fiduciary duty to submit all offers. But you should find another agent and get your offer submitted. Vet the agents before working with them and let them know that you're an investor and will sometimes make aggressive offers and find out if they're ok with that.

    20Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    5y
    Originally posted by @Thomas Ingrao:

    @Cole Simpson I offered $18,500. Listing agent came back and said they won’t entertain anything that’s not in the 20s.

     Then you have a number.  Offer $20,000!

    23Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Cole Simpson not missing anything. Would be a good deal even at asking price but I’m trying to save as much out of pocket as I can for renovations.

    0Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Dan Maciejewski I was thinking $20,500 just to be polite!

    6Reply
  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    Am confused, is property listed or not?  If it is, then go to the listing agent and submit an offer directly.

    If it isn't listed, write up your offer and submit it.  Use either another broker or an atty.  I'm assuming you have NOT signed an buyer agency agreement (which I would never recommend).

    3Reply
  • Sean McKee
    Rental Property Investor · Chicago, IL · Member since 2017 · 268 posts · 189 votes
    5y

    I agree with get a new agent or push them to go through with it. I recently made and got an offer excepted for almost 100k less than asking. You never know what might happen.

    7Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Thomas Ingrao:

    @Dan Maciejewski I was thinking $20,500 just to be polite!

     My suggestion is offer $20,538 and tell them that is the number that works. The number is so specific down to the dollar that it makes it look intentional. If you just offer $20,000 it looks like quick low ball offer. 

    Did your agent refuse to make the offer or advise against it for the sake of getting it accepted. Those are two different things. A good agent will steer you to an offer that gets accepted. You don't want to lose the deal to someone offering $22,000 if that number works too. My point is make an offer that reflects a deal, don't fixate on trying to get it for below asking. Offering over asking can even be a good deal sometimes.

    31Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    @Kevin Leonce @Thomas Ingrao Just to be clear....a Listing agent has to present all offers, written on the realtor contract forms but a Buyers agent is not required to actually Create said offer....they can choose Who to work with and what offers they are willing to submit.

    As an aside, the commission on a $20k deal is less than peanuts and I never could have imagined working on such a low priced deal as an agent.  Most agents will have a minimum commission amount they are willing to for, so it is to Your advantage to offer additional commission to a buyer agent working on such deals.

    13Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Joe Splitrock this is the best response I’ve gotten. She’s trying to get me the deal, knowing that it would cash flow even at asking price. She was discouraging me from offering $18,500 and more towards $22,000+

    2Reply
  • Thomas Ingrao
    OP
    Rental Property Investor · Jamestown, NY · Member since 2020 · 33 posts · 55 votes
    5y

    @Wayne Brooks I asked her about low commissions, she said that usually under a certain sales price, there is a flat rate paid to her for commission.

    0Reply
  • Jessica Stevenson
    Real Estate Broker · Manchester, NH · Member since 2017 · 149 posts · 103 votes
    5y

    Make sure you have good communication with your agent. At first it sounded like she was refusing to make the offer, but then it sounded as if she was trying to guide you to making an offer that was more likely to get accepted.  

    As someone else said, vet them a bit and make sure ahead of time they are comfortable with working towards your goals and explain to them how you plan to get there. Each investor is different and everyone has different priorities, expectations, etc.  Some agents will tell you outright that you are not the type of client they usually work with, and that's ok.  Once you find a good agent who understands you, the outcome can be very favorable to you both!  Chat with a few more and you'll get some clarity.  Good luck :)

    6Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Joe Splitrock

    I once offered $80,169 on a hud house. Winner winner!

    1Reply
  • Michael K.
    Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
    5y

    @Thomas Ingrao

    So your agent put in the offer you wanted and it was rejected? Maybe your agent knew something you didn't

    5Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Account Closed:

    Guess this kinda brings up the hypocrisy involved in investing that has always kind of bothered me- doing on to others as you'd have done onto yourself is often contrary to being a smart investor. 

    Being a landlord and collecting rents is gainful for me because my tenant pays the tab, but I wouldn't want to be a tenant.

    I like profiting from dividends from companies I would never work at. 

    I buy at prices I wouldn't sell at, and sell at prices I wouldn't buy at

    I like making "aggressive offers" to others and want them accepted, and if someone makes one to me I chew their ear off and/or make sure they understand to never contact me again. 

    Cognitive dissonance 

     Cognitive dissonance is a state of mental discomfort from holding two competing beliefs. I can make aggressive offers to others and when one is made to me, I can reject it. In both cases I know aggressive offers are unfair to the seller. Making one as a buyer is congruent with rejecting one as a seller. 

    Humans are very hypocritical, but there are also many situations where different beliefs apply in different situations. It may be the best choice for my tenant to be a renter, given their life situation. At the same time, it may not be the best choice for me. I can be a landlord and not want to be a renter, without those beliefs being contradictory. You don't need to be a customer just because you own a business. I am sure there is someone out there who owns a pizza restaurant and hates pizza. That is not cognitive dissonance, it is just the realization that 99% of the rest of the population loves pizza.

    8Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Thomas Ingrao:

    @Joe Splitrock this is the best response I’ve gotten. She’s trying to get me the deal, knowing that it would cash flow even at asking price. She was discouraging me from offering $18,500 and more towards $22,000+

     Even that $22,000 offer is 21% below asking price, so that is a significant reduction. The danger in low ball offers is offending the seller and resulting in them not wanting to negotiate with you. That means even if you come back later with a higher offer, some sellers may just not want to work with you. Understanding the seller psychology and motivation is important if you want to get the deal done. Of course if the property is a bad deal at the higher price or you could care less if you get it, take a low shot and move on. 

    Part of it also depends on how much competition there may be. You may not like a situation where you are throwing low offers at them and someone else comes in at $22,000 and takes the property from you. Maybe that won't happen. I don't know the market where you are at. If you are taking a low offer, get it in fast and have a short approval window. Ideally make the offer as cash with no contingencies. Last deal fell through over financing, so all cash would probably seal the deal.

    4Reply
  • Cara Lonsdale
    Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
    5y
    Low ball offers almost never yield the best result compared to a smart pricing strategy.  In most cases, the lowball offer will end up higher (after negotiations) that a well strategized priced offer.  You wanted a profit, and that is fair.  However, Sellers always know when they are being fleeced, and they get angry about it, and often will retaliate with a higher counter than they normally would have responded with, because they are mad at the notion of someone trying to take advantage.
    My guess is (and this could be biased because I am a Realtor) that your agent didn't want you to just throw low numbers at the Seller, that might upset them, but rather come up with a smart pricing strategy for obtaining the price you think is fair, and the Seller can live with.  As it seems to have turned out, your agent must've had some kind of wisdom as what she told you seemed to be mirrored by the listing agent when they told you nothing under $20Ks would be considered.


    7Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y
    Originally posted by @Account Closed:
    Originally posted by @Joe Splitrock:
    Originally posted by @Account Closed:

    Guess this kinda brings up the hypocrisy involved in investing that has always kind of bothered me- doing on to others as you'd have done onto yourself is often contrary to being a smart investor. 

    Being a landlord and collecting rents is gainful for me because my tenant pays the tab, but I wouldn't want to be a tenant.

    I like profiting from dividends from companies I would never work at. 

    I buy at prices I wouldn't sell at, and sell at prices I wouldn't buy at

    I like making "aggressive offers" to others and want them accepted, and if someone makes one to me I chew their ear off and/or make sure they understand to never contact me again. 

    Cognitive dissonance 

     Cognitive dissonance is a state of mental discomfort from holding two competing beliefs. I can make aggressive offers to others and when one is made to me, I can reject it. In both cases I know aggressive offers are unfair to the seller. Making one as a buyer is congruent with rejecting one as a seller. 

    Humans are very hypocritical, but there are also many situations where different beliefs apply in different situations. It may be the best choice for my tenant to be a renter, given their life situation. At the same time, it may not be the best choice for me. I can be a landlord and not want to be a renter, without those beliefs being contradictory. You don't need to be a customer just because you own a business. I am sure there is someone out there who owns a pizza restaurant and hates pizza. That is not cognitive dissonance, it is just the realization that 99% of the rest of the population loves pizza.

    Justification. It's one of the tactics people use to avoid the cognitive dissonance of doing something to others that you know isn't fair and/or wouldn't accept yourself. 

     Explanation, not justification. Buying and selling are two different actions. A buyer strives for lowest price and a seller strives for highest price. Using your logic, wanting to win a football game would be an example of cognitive dissonance. If you wouldn't accept loosing, why should the other team accept loosing? But is is NOT, because there is an expectation by both teams that they each want to win. Therefore they do not hold conflicting beliefs. They want their team to win and the other team to lose. Sports team example is exactly the same as a negotiation. 

    1Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Thomas Ingrao It's hard to find a solid agent at that price-point...you're really scraping the bottom of the barrel in the talent pool. Discount buyers at these price-points are very difficult to service...that said, you do have an agency relationship and the agent has elected to represent you...maybe they just don't get it. An open conversation with their broker may be a good start. 

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