Why Do Some Realtors/ Agents Avoid Submitting Low Ball Offers?

Real Estate Investor · Sacramento, CA · Member since 2015 · 26 posts · 9 votes

It seems that most realtors/ agents I've worked with avoid submitting offers below market value even when the comps prove why I'm offering a certain amount. According to California law, aren't all realtors/ agents suppose to submit any and all offers on the behalf of their clients and isn't refusing to do so... breaking the law?

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

10y

A good listing agent will ask an owner what break point they don't want to receive any offers, "Mr Owner, there are many out there that make low ball offers, some can be absurd and by law I will need to present such offers to you unless you give me a "stop order" at a price that is unacceptable to you". At that point the Realtor and agent find the bottom price and conditions that are acceptable.

Now, any offer received below that number is in the domain of the Realtor to reject under the owner's instructions!

Believe it or not, Realtors get a reputation among their peers, other Realtors!

If I'm the broker and have 200 active listings with 100 agents, I'm getting copies in my office of all buy offers or listings. I have to file this stuff and retain documents, it varies as to what must be kept but it's a legal requirement.

Low ball offers waste my agent's time and mine, especially if my agents don't get a stop offers order, as they must be presented, even a phone call takes time and it also ticks off my owner client taking up their time, especially if they are busy. An agent can't tell a seller what to accept, they can say I know we can do better than this!

On an MLS listing a listing agent may put additional details that only members can view, it could say the owner has a minimum for offers to be rejected. That's when a buyer's agent's experience comes in, they know the market and know that some low ball offer isn't going to fly. There may not be anything in the details of that listing, but the agent already knows a low ball without written justification isn't going to fly.

The agent that accepts such offers is basically saying, "hey, please waste my time and reputation" if that's the case, you have a dud for an agent.

Then, when I see an agent's name on those low ball offers, swamping my office and wasting my time and my agent's I'm questioning the professionalism of that agent. Not only do I not want to work with that agent but I'd rather not have them trying to do business with us.

Then the "word" gets around in the office "stay away from that agent, all they do is waste your time". Now, that agent is cooked, s/he is being avoided! That's not a good place to be as an agent.

As to the make the offer yourself......LOL, if it's on the MLS the contract must be the one adopted by the Board of Realtors, it can be as an amendment to another contract but you're adding more work on the listing agent. Not having a buyer's agent as a new investor is a fool's game because you're usually unaware of the duties of the listing agent and the owner's instructions.

Generally, on a retail platform, 20% under the asking price is a low ball offer, but generally accepted to present. I'm talking about move in ready homes, not some gutted rehab project.

Lastly, the OP is too far off saying rehab costs would be 20 to 30K (or whatever) I think he was off with a range about 50%, I can get closer than that in my head after a 10 minute walk through. I'd also suggest you dump that mentor.

New folks that use rules of thumb aren't going to be in business long. Throwing out offers 70+% of an asking price, you need to learn how to sharpen a pencil. You're passing up opportunities if you don't know how to value a property and understand the utility aspects of a property to force more appreciation by renovations. If you know what you're doing you can make money paying more than an asking price! If you have a hot market that usually means investors are there who know what they are doing, if you don't know, you can't compete!

Learn the basics of real estate and you'll understand how to use other professionals and how to seek out opportunities. Good luck :)

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Victor Saumarez
Investor · Lahaina, HI · Member since 2012 · 47 posts · 35 votes
10y
It looks more like a problem with your chosen target area than with your Realtor. Low ball offers work better in depressed markets, or on distressed listings i.e. buyers' markets. Buyers agents I have used invariably recommend an offer price above what they will accept from me, but not by a lot in this market. If you can't get an offer in, put the property on your watch list and see if it sells, how quickly, and for how much. That will tell you if your strategy would have paid off, or not.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
I don't know what the market is where you are (OP), but $100 earnest money around here won't even get a response. I usually do $500-1000 depending on the hous, offer and how bad I want the property. If you don't have any skin in the game worth losing, I can understand realtors dropping you.
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Franklin Romine
Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
10y
If you are a legitimate investor...find a agent that likes you and they will almost do anything for you.
Frank
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Richard Dunlop
Investor · Detroit, MI · Member since 2014 · 755 posts · 462 votes
10y
Originally posted by @Lamont Mitchell:

....
Michael Biggs, thanks for the advise. I suppose your idea would work seeing that offering $20-$50 to submit multiple offers below market value maynot make a realtor or agent feel like it's a wast of time. However, this would be very expensive to do.
It is also expensive from the Realtors point of view, I cant imagine a person wanting to work so cheap $20-$50 per offer.
I would think if I was working as a Realtor I would want to average $250-$300 per offer submitted or in other words get paid a commission at least 1 for every 10 offers submitted.
If your Realtor is making a commission on only 1 out of 100 offers plus $20-$50 per offer, then their compensation is not anywhere close to what I would consider realistic and you are complaining that it would get expensive.
ALSO your Realtor is going to run into the same problem you are having where the listing agent won't bother taking their call or returning their messages EVEN when they are working with a REAL buyer.
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Lamont Mitchell
OP
Real Estate Investor · Sacramento, CA · Member since 2015 · 26 posts · 9 votes
10y
Victor thanks for your response. I've read through all of the previous post and yours seems to be the most locgical. My partner and I have put certain properties on our watch list, and most of them sell for a lot less than list price.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Lamont Mitchell if that is the case then they sell for what you would have paid or a lot less. then its your EM that is killing you...
Try getting a cashiers check made out to title co. for 10k and present that with your offer. This what I do.. and sometimes I will get a cashiers check for the entire purchase price to submit with my offer.. this is what gets sellers attention.. Even as noted 500 to 1000EM @JD Martin won't work in CA OR or WA.
We are killing it right now buying off of auction sites that require 5 to 10k EM... seperates the wholesalers and those that are too timid or really don't have any cash.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Lamont Mitchell Ok lamont here is my reciepe I use all over the US.. I did 6 in SAC this year already. if its a private party seller.. won't work with hud or auction company.
1. EM 5 to 25k.
2. 5 day due diligence. EM non refundable after the Due diligence period.
3. subject to clean title at close
4. close in 14 days or whenever title is ready after the 5 days.
This is your competition ... ME and many others like me.. If you want the smoking deals you got to put your best foot forward.. so sellers or asset managers look at your deal and they will take the strongest with the best EM the shortest time to close and ALL CASH no loan no HML etc etc. then they work it backwards.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Lamont Mitchell in some markets like Vegas a year ago so many cash investors were buying first time home buyers were literally getting shut out never getting an offer accepted because it was subject to financing.
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Victor Saumarez
Investor · Lahaina, HI · Member since 2012 · 47 posts · 35 votes
10y
Originally posted by @Lamont Mitchell:

Victor thanks for your response. I've read through all of the previous post and yours seems to be the most locgical. My partner and I have put certain properties on our watch list, and most of them sell for a lot less than list price.
Then I'd be persistent and get that offer in. If you are confident you have a solid offer, don't be concerned with what Realtors or others say.
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Victor Saumarez
Investor · Lahaina, HI · Member since 2012 · 47 posts · 35 votes
10y
Originally posted by @Jay Hinrichs:

@Lamont Mitchell Ok lamont here is my reciepe I use all over the US.. I did 6 in SAC this year already. if its a private party seller.. won't work with hud or auction company.
1. EM 5 to 25k.
2. 5 day due diligence. EM non refundable after the Due diligence period.
3. subject to clean title at close
4. close in 14 days or whenever title is ready after the 5 days.
This is your competition ... ME and many others like me.. If you want the smoking deals you got to put your best foot forward.. so sellers or asset managers look at your deal and they will take the strongest with the best EM the shortest time to close and ALL CASH no loan no HML etc etc. then they work it backwards.
If you want "smokin' deals" you are unlikely to be finding them where there is a lot of competition. So rather than putting a foot forward, you might want to take a step back.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Victor Saumarez I had dinner at Longhi's last weekend.. place has sure gone down hill. The one over at Ala Moana I think has better food maybe because Longhi's son lives there and runs it.
and the development N of black rock is really something. We started going there in the late 60's when the airport was right behind black rock it was way cool flying in a 414 Cessna and landing in the Cain fields... and in those days I could fly right seat.. never do that these days.
I also went out with the Mauiflightacademy.com I think that is one of the best bangs for the buck there in Maui.. I own a Cirrus so I flew left seat.. I got to fly right down the cliffs of Molokai the water falls were full.. its was awesome I got to land at Kalapapa and then a landing at Lanai then back to Kahalui flew over Molokini etc. great place to hand for thanksgiving.
As to Real Estate your correct:
its one reason I work in 14 states. However in each state there are 1000 buyers as capable as I am.. Its a very competitive environment out there.. NOw you take the big rust belt cities and some others and you can buy 10 houses in a day if you want... all for next to nothing.
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Victor Saumarez
Investor · Lahaina, HI · Member since 2012 · 47 posts · 35 votes
10y
Longhi's not so good. In fact, its a challenge anywhere to find really good food. We went to Merrimans for a great brunch three Sundays ago, but went back a week ago and I think they must have sacked the chef for being too good.
It is getting pretty competitive in many traditional safe havens. I think you're right in that the rust belt probably offers value for cash investors chasing yield. I sense some weariness from local agents and property managers with the whole investment thing. It's good for business until it stops being good for business.
1 Reply
Lee S.
Northern, CA · Member since 2014 · 674 posts · 444 votes
10y
I became an agent so I didn't have to waste other agents time not knowing if/when they would be compensated for the work they were doing for me (comps/offers). The reality in my area is there are no deals on the MLS, even to make houses that need a gut rehab work for investing I would have to offer 50-60% of their listed MLS price. I'm not willing to trash my reputation as an agent by submitting an offer like that. I have my eye on one house but I will wait, if the price drops another 30% (it's been listed for 200+ days) then it's in the ball park where I feel I can at least start negotiations. If someone buys it before then I wish them good luck.
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Derek Jones
Real Estate Agent · Sacramento, CA · Member since 2015 · 338 posts · 135 votes
10y
Not sure exactly where you are looking to for properties but to give you some numbers. In the month of November in Sacramento for all homes sold under $150,000 the average sales price was 97% of the list price. Some sold for more and some sold for less. But knowing the market offering 80% or less is a waste of time.
On a side note, you may want to get another mentor.
"offer no more than 50-60% of the ARV and no more than $100 earnest money."
That may have worked for off market deals or between 2009-2011 but now a days investors are a dime a dozen. If I was the listing agent and saw an offer with $100 emd I wouldn't even waste my time drafting up a counter. I'd automatically think this buyer isn't a serious buyer and is likely to back out or try to change the terms during escrow.
Since you have a formula for how much you should offer. Why don't you look at those 100+ homes and run them through your formula. Then run the comps on each home and see if the comps support your offer. If list price is $130k and comps are $125k but your formula came out with $105k, then cross it off the list and move to the next home. Out of the list of 100 homes you'll probably only end up submitting maybe 5 a month.
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James W.
Investor, Entrepreneur · Greenville, WI · Member since 2015 · 138 posts · 27 votes
10y
Originally posted by @Michael Olesky:

As usual, @Bill Gulley is preaching the truth!
@Lamont Mitchell, perhaps a better use of everyone's time would be for you to give your agent a letter of intent with your price and terms along with your POF that your agent can submit to the listing agent. If they like your LOI they'll tell you to submit an offer. Using a form letter that you just need to change the address and offer price you should be able to crank out 100's of LOI's a month.
Do you have a sample LOI?
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Lamont Mitchell
OP
Real Estate Investor · Sacramento, CA · Member since 2015 · 26 posts · 9 votes
10y
I appreciate all those who've given their positive feedback without ridiculing and being abrasive in their response. It amazes me how some people think that putting someone else down is a way to help them learn. Bill Gulley said "I need to learn how to sharpen a pencil." How can professionals respond so unprofessionally? I assume all of us are past grade school and child like antics seems out of character for those claiming to be seasoned professionals.
I posted this forum in hopes of learning from others. Not to offend anyone, but it seems some may have been offended by the question regardless of my intentions. Nevertheless, the inforamtion I've gathered from everyones post has been helpfult. Thank you.
James thanks for your response. No, I don't have a LOI, but the realtor or agents we work with might have one.
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Ed Neuhaus
Real Estate Broker · Austin, TX · Member since 2014 · 99 posts · 26 votes
10y
Learn how to write the offer yourself. Represent yourself, ask the selling agent to rebate the commission typically used for the buyers agent to the seller, so the seller can take less money. The Realtor does not have todo this, because they have listing agreement that says they don't. But if you come in like a pro and know how to get it done, the realtor will be fine with it. Just make sure you know how to get it done. Most realtors don't want to babysit the buyers.
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Jeff Bridges
Investor · Hyattsville, MD · Member since 2012 · 822 posts · 441 votes
10y
Originally posted by @Lamont Mitchell:

I appreciate all those who've given their positive feedback without ridiculing and being abrasive in their response. It amazes me how some people think that putting someone else down is a way to help them learn. Bill Gulley said "I need to learn how to sharpen a pencil." How can professionals respond so unprofessionally? I assume all of us are past grade school and child like antics seems out of character for those claiming to be seasoned professionals.
I posted this forum in hopes of learning from others. Not to offend anyone, but it seems some may have been offended by the question regardless of my intentions. Nevertheless, the inforamtion I've gathered from everyones post has been helpfult. Thank you.
James thanks for your response. No, I don't have a LOI, but the realtor or agents we work with might have one.
I think you failed to understand his message. He was stating that shooting out 100 offers a month only requires the knowledge of sharpening a pencil. It's more targeted opportunities that expand the focus beyond the merely x% of asking price that lead to generating a profit. He wasn't telling you to go learn how to sharpen a pencil:) That seems like a perverse interpretation of his response.... Maybe review it one more time without the misconception that he was going after you....
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Patrick Connell
REALTOR® · Bastrop, TX · Member since 2013 · 324 posts · 191 votes
10y
We are all adults here and you've gotten a lot of good advice from a lot of experienced people. In the same vein of being an adult, you can't ask for help and then complain about the format it comes in. It's no ones responsibility here to worry about anyone else's feelings or how they perceive something, this is business plain and simple. It's already been stated many times, but if you guys have burned through 10 agents, the problem wasn't the agents. Figuring out why you guys were the problem will be important to your success. And, while I can't speak for every state, the law does not generally require an agent to do your bidding just because you're the client. My job is to help people buy and sell property, not do their bidding. If their request is not in line with their goals, I tell them no,-'s if they don't like that, then they can find a chump who will.
4 Reply
Randy Johnston
Residential Real Estate Broker · Beaverton, OR · Member since 2014 · 335 posts · 149 votes
10y
Originally posted by @Lamont Mitchell:

I appreciate all those who've given their positive feedback without ridiculing and being abrasive in their response. It amazes me how some people think that putting someone else down is a way to help them learn. Bill Gulley said "I need to learn how to sharpen a pencil." How can professionals respond so unprofessionally? I assume all of us are past grade school and child like antics seems out of character for those claiming to be seasoned professionals.
I posted this forum in hopes of learning from others. Not to offend anyone, but it seems some may have been offended by the question regardless of my intentions. Nevertheless, the inforamtion I've gathered from everyones post has been helpfult. Thank you.
James thanks for your response. No, I don't have a LOI, but the realtor or agents we work with might have one.
Lamont, if the only thing you gleamed from the post by @Bill Gulley is his phrase "you need to learn how to sharpen a pencil," then you really missed out a lot of good advice.
The theme of responses on this thread appears to be; 1-your offers are too low and listing agents aren't interested in wasting their clients' time by asking them to respond. 2-earnest money of $100 will get you nowhere . . . if you don't have "skin in the game," a seller will not consider you a serious buyer. Seasoned listing agents understand that your $100 emd means that you are probably making multiple offers hoping for a hit. 3-spend more time getting to know your target neighborhood, to make reasonable offers requires research on your end. 4-dump your mentor . . . he/she is doing you no favors by suggesting that you waste your time, and your Realtor's) throwing out offers all over the place, when it can be put to better use finding off-market deals, networking with other investors, and learning the tools of your business.
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Lamont Mitchell
OP
Real Estate Investor · Sacramento, CA · Member since 2015 · 26 posts · 9 votes
10y
Wow!
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Michael Olesky
Investor · Indialantic, FL · Member since 2013 · 111 posts · 76 votes
10y
@James W. @Lamont Mitchell
Here is an example of an LOI from the fileplace here on BP. You should probably google "letter of intent to buy real estate" and your state to see what is customary in your area as things are different from state to state.
https://www.biggerpockets.com/files/user/halloffam...
Best of luck!
Mike
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Lamont Mitchell LOI in a resi rehab is a WASTE of Time in CA OR WA markets..
LOI's are for buying bigger more complex deals.. like if I am buying a potential subdivision I might write an LOI to see if the seller would even consider an offer. its non binding and really only gets the conversation started.
bottom line is Cash is kind time is money and you need both to get smoking deals.
IE you need money and you need to move fast
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James W.
Investor, Entrepreneur · Greenville, WI · Member since 2015 · 138 posts · 27 votes
10y
Originally posted by @Michael Olesky:

@James W. @Lamont Mitchell
Here is an example of an LOI from the fileplace here on BP. You should probably google "letter of intent to buy real estate" and your state to see what is customary in your area as things are different from state to state.
https://www.biggerpockets.com/files/user/halloffam...
Best of luck!
Mike
Thanks Mike!
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Ryan Harthan
St. Petersburg, FL · Member since 2011 · 57 posts · 30 votes
10y
I'm a realtor but only work for myself... Sometimes you know when you hit that send button you're going to get a call telling you to go F yourself... But I've always said, if it doesn't hurt you a bit inside to hit the send button you didn't offer low enough...
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