Thinking about BRRRR but feel bad for agent

13 Replies

I have a property that was meant to be a fix and flip. The reno is done and it’s on the market.

510 Friendship rd, Waldoboro, Maine

I think we're coming up on 2 months and not a single offer. So I'd like to at least explore the BRRRR strategy for this house. However, my agent has put a lot of work into this house. She came over before I bought it, for real, and helped me with what to reno and ARV. I used a lawyer to purchase the home so she didn't get anything. She's done a lot of work putting it on the market at well. I love working with her and I'm using her for our next project as well.

The answers I’d like to avoid are the cold hearted ones. That’s just not me and I don’t want to operate like that. Has anyone run into this before? Should I offer to pay her some small amount? Is the reality that I just have to be cold hearted?

Well, my take:

1. The agent's primary responsibility is to bring your property to a successful close. That's why they are paid a commission, and not an insignificant one depending on the price of the house. If you followed most of her advice regarding improvements, pricing, timing, etc. and the house hasn't sold, she probably needs to work harder finding a buyer.

2. If you're using her for the next and future projects, these things wash out in the end. My agent didn't make much from me on my first purchase relative to the amount of work, but I've made him some good money since then. Part of being a realtor is putting in the time networking and working "for free" so to speak to pay dividends later. Not unlike putting money into an investment and waiting for the compounding effect.

3. You could always list the rental with their agency if you really feel a need to throw them some money on the deal.

4. Sometimes houses just don't sell. That's the reality of it going in and why realtors get paid decent on the ones that do sell. 

5. Because you bought it with her input kind of acting as your "buyer's agent" to some extent, you could always give her what would have been her fee (usually 1.5 of sales price). If you feel that strongly about it. 

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Sometimes homes dont sell. Its part of the gig.  Stay loyal to her, give her more business, and refer clients to her...that will be thanks enough Im sure.

I like the other responses - but also be honest and communicative. They should understand if the house isn’t selling, you need to look at other strategies.

If/when you do rent it, give your realtor a nice bottle of wine, thank them, and let them know they will be part of your next venture. They’ll be happier with that than wondering if you’re going elsewhere next time.

Originally posted by @Bryan Carleton:

Thanks everyone, all great responses. I'll start putting together the numbers to see if it makes sense to BRRRR

A small gift could be nice as well a flower basket with goodies in it.. to show our appreciation..  

I would make sure she knows that you want her involved in your future ventures and you appreciate all she's done. And while I know sometimes houses don't sell and realtors don't get a commission, If it was me, I would provide some monetary payment for her work. But that's just me.

As an Agent, I work for a lot of people that never close with me! It happens; it's life. I love to give advice about the area and trends and what to expect and how to enter the market and all the stuff investors like. I know that when the call's done, they're likely going to find a unit and reach out to to listing agent to ask them to reduce to help them in the negotiations or whatever they have to do to make a deal work at my expense.

Agents worth a darn cast a wide net and enjoy doing it regardless of the outcome of one situation. I'd let her know that she did a great job if she did and that she'll be the first to call if anything changes with that or any other house and then move on. That's what we sign up for.

@Bryan Carleton Back in 2007 I put an offer on a hud home for a investor I had known for about 2 years but never done business with. He backed out last minute for some reason I can’t remember. He came to my house and gave me $2000 cash for my time and effort. A month later I called him on a opportunity. He made $40,000 on that flip. Then we did another one and another. To this date we have done well over 100. We have had a ton of success with each other. I called him on the opportunity because of the respect he showed me when I could have called a number of other ones I had worked with. Point is everyone’s time is worth something and relationships are important in this business. You never know she may have a few deals to bring to you. If you want longevity in the business treat people with dignity and respect. My bet is your priced too high to sell. Either that or she has no clue what she is doing which it doesn’t sound like. Good question and best of luck!

I would ask her advice. Maybe give it a couple more weeks and an open house to see if it goes. Maybe drop the price $5000 for one last chance to get it sold. She'll understand. I used to be a real estate agent and there are some people you spend SO much time and energy on for nothing, but then there are others that are a slam dunk and you feel like you are robbing them. It all balances out. You are in Maine, winter will be here soon and your opportunities to get a buyer or renter are dwindling by the day. This is your business, and in the end you have to do what is best for your business. While your compassion for her hard work and effort will always be appreciated, do you want to heat this thing for the winter? I'm in MN. Getting flips moved is key. I just sold mine a couple of days ago and was already getting nervous about it. She knows that if she works hard for you that you will keep using her services. She'll earn plenty from you over time. My realtor has earned so much money from me it's crazy, but sometimes things don't work out and that's okay too :) Good luck!

@Bryan Carleton Questions for clarity:

1) Prior to your purchase, was the property listed, or off-market?  I presume the latter if there was no listing agent and you used an attorney to close.  That said, your agent was not involved, except as your advocate, for which you had some sort of arrangement, or not.  Sounds like the arrangement might have been that she would list and bring you a buyer after rehab, which is a good carrot.

2) If, as part of your mutual listing contract, she helped you decide list price and worked with you on a marketing plan, what went wrong?  Why no offers, but better question is:  Is your listing seeing a "normal" amount of showings for that product and price point?  If not, question everything, including the media layout used to fully represent and offer your property to the market.  Smart Phone photos, or professional, wide-angle, HDR still photos?  360 Tour?  Open House?  What feedbacks have you received from showings that have already occurred?  This is incredibly valuable information and, when you hear the same thing more than once, perhaps it is true!?

3) The truest measure of value is what someone is willing to offer based on what they see - Price/Value relationship.  Did you and your listing agent discuss "battle strategy" on when/if to reduce price and why?  Were you involved up-front, or have you requested specific info from your agent to validate her listing price, suggested sales price, marketing plan, etc.?  And, do you agree with her assumptions?  Based on what empirical data?

Not to put to fine a point on it, but as agents, we have a responsibility to our clients to provide actionable information that results in a sale (list-side) or a purchase (buy-side).  If we do our jobs well, your expectations are met.  If not, then not.

As others have stated, I also value these relationships. Keep simple things simple: Reduce everything to writing, including how to react to conditions as they develop or change (think business plans). That way no one gets their feelings hurt later on. If there is a way to salvage this as a flip, then work it out with your agent. If not, then decide on a trigger date to move it to BRRRR, or rental, or whatever serves your portfolio and financial needs and plans.

Sincere best of luck!

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You might talk with her to get her opinion on why there has been no offers. Is it price? Is there a different way to promote? Is it location? Is it market glut? If nothing stands out and you decide to do the BRRR you could have her find a good rental for you. Generally the agent gets some fee for that. You might also consider a short term rent to caver your holding costs.ask her if she or anyone in her office has a client needing something short term. Maybe someone who got transferred to the area but hasn't found what they are looking for yet. Or someone who just sold their house and the new one isn't ready yet. Get a deposit and usually this type of tenant is well worth any risk.