Agent steering us away from short sales, foreclosures, etc
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Real Estate Investor · Vancouver, WA · Member since 2012 · 78 posts · 22 votes
14yMy $0.02. Tthe reason is any good agent knows, it not just about todays deal. It's about the next two or three deals she does with you. She knows at if she does her job right you will keep coming back. Remember if you help enough peaple get what they want, You will get what you want, and the money will always follow
29 Replies
- North Wilkesboro, NC · Member since 2012 · 44 posts · 3 votes14y
Sounds like I would be looking for a new agent. One who wants to work with you to find the property that you want. No idea why you have to put the utilities in your name to do an inspection.... Sounds like a lazy agent.....
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes14y
In terms of short sales, the reason the agent doesn't want to do them is that they can take a long time, and it's probably pretty common that -- even if the approval does eventually come through -- the buyer will have moved on to another property. She probably is concerned that she'll be wasting her time and/or dragging out the commission many months.
Of course, that's no reason not to show you these properties if you want to see them -- find another agent.
- Carpenter · Lansdale, PA · Member since 2012 · 11 posts · 1 vote14y
I would agree with the previous posts... the agent should be looking in YOUR best interest... also I have heard just what J Scott said.. Short sales are ironically long sales
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes14y
Are you paying cash or getting a loan??
If the loan is under 50k you will have to search for a lender that services their own loans or there is no money in it for them to just originate it.
I wouldn't care if it is 60k if you are getting financing.I would care about the potential rent and condition of the property you are getting and the area for 60k.
As far as utilities even with short sales you have to sometimes put in your name to inspect if they are off.Utilities are not expensive at least here to get turned on for one day or two to inspect.
What the agent is making has nothing to do with them helping you or not.
They should have told you they were not interested in the beginning and couldn't help you.
At 40k sale the agent is maybe getting 2 or 3% commission 800-1,200.
Then you deduct business costs from that and their broker split.They might get 600 bucks net.If the deal takes 3 months to close that is 200 bucks a month before gas expense and shotgunning offers all over the place.
Just from a business analysis the agent would be making a very,very poor use of their time and return per hour.I am amazed that brokers/agents just accept doing anything and seeing what sticks.
You can't run a very profitable business model like that.I hope you find your 40k property to get started.
I would counsel this agent to learn more knowledge and skills so they can work on much larger deals to sustain themselves.
- 14yT BrownPittsburgh, PA · Member since 2012 · 55 posts · 2 votesOP
Joel Owens -
Thanks so much for your thoughtful reply -- really sheds a lot of light on the situation!To answer your questions:
1. I've already been pre-approved for the loan. They know that we're only purchasing around $40k, but they're offering us a fixed rate in the low 3s for a 15 yr and high 3s for a 30 year (20% down). IDK if this has anything to do with it, but we have sterling credit, only $10k in debt (all that's left on our mortgage), lots of liquid savings, and make a very good living for our COL. We could pay for the house outright, but we want the advantages of leverage, and we plan to buy more houses, so we'll need the down payments.
2. The type of houses we are looking at (SFH, 3 bed, 2 bath, 1-car garage) rent for $800/mo here. The market is very, very favorable for us now. I looked at a nice house in a nice residential neighborhood yesterday - asking only $65k. This is not a short sale, and I looked at two others in the same price range also in nice neighborhoods. Yes, they need updating, but the one I liked the best had beautiful hardwood floors throughout, and had a pretty nicely updated bathroom. Most of the work would be cosmetic. Coming from other markets, I'm sure this seems ridiculously low. I visited a friend in San Diego a couple of months ago and she was living in a tiny bungalow in bad shape, but in a cute neighborhood close to the zoo, and she said that their landlord wouldn't sell it for less than $400k, so I can see how a house that's only 10% of that must seem like a tear-down in a slum, but it's not. :-)
3. Our agent has been in the business for a long time, knows our area very well, and has many, many listings in our area, ranging from $39k up to much more expensive houses. She sold our last home for us two years ago for $220k, so I chose to contact her. She's extremely aggressive and she knows our area so well - that's why I picked her.So here's my question to you - why would any agent take on our business? I have told her that we want to build what I jokingly refer to as "our real estate empire," so there's potential long-term business in it for her, but, given what you've said, I still don't know why any agent would do it.
Thanks again for your response!
Trina - Real Estate Investor · Vancouver, WA · Member since 2012 · 78 posts · 22 votes14y
My $0.02. Tthe reason is any good agent knows, it not just about todays deal. It's about the next two or three deals she does with you. She knows at if she does her job right you will keep coming back. Remember if you help enough peaple get what they want, You will get what you want, and the money will always follow
- Rental Property Investor · Lake Hopatcong, NJ · Member since 2011 · 37 posts · 3 votes14y
Great responses from everyone! I would suggest finding a short sale specialist. If you can find one that has much experience with investor buyers - even better. The typical buyers agent isn't all that interested in a short sale, as others have said, from a pure business standpoint - it takes more work, more time, and many times an OO buyer will eventually back out anyway and choose another property because of time constraints. Add to that an inherent reduced purchase price (and reduced commission) and its no wonder agents arent interested. A short sale specialist is more willing because they have the experience and knowledge to get the buyer to closing - possibly quicker and cleaner. They know who to call, what to say, what steps to take, etc. And with an investor buyer, there is the upside of future deals. With an investor buyer its also less likely they'll back out - since they aren't moving in, they're a little more flexible on the length of time to close. Sell the agent your 'investor' status.
- SFR Investor · WY · Member since 2011 · 115 posts · 15 votes14y
...could be...she is working with you because of your past relationship...she maybe would really like to steer you to a little higher priced homes, especially if she is working with you for more an one deal.... she may just be saying, (without saying) she really doesn't work at this price point, she works in retail sales, not investor sales....
agree with J Scott, the short sale could be more trouble for her than it is worth.... especially if she is unfamiliar with expediting the sale.....in the meantime, you might have picked up two or three other properties...
...maybe look for a listing agent who has a lot of properties in the price range you are looking for....maybe their website says they specialize in dealing with investors, or foreclosures, or distressed properties... (other key words you'll pro'lly figure out as you search their websites....)
I was in a similar situation, finally just looked up the listing agent for one of the properties that I had been trying to get the higher end agent to show me....parted ways with the higher end agent... we were both better off...
interesting to me was that my behavior changed when I used the 'investor-grade' agent....I knew he wasn't making much on the deal, I kept conversations to the essentials (anybody who has read any of my posts know how nearly impossible that is for me...)
i thoroughly researched the properties before asking to view them... Only viewed four properties, bid on two, closed on one.... agent couldn't have made much money at that price point, but his total time was very minimal... and I did buy him a nice tactical flashlight like mine!
I'm not saying this is the way to do this, just this is what worked for me. I've only bought one property so far...
- 14yT BrownPittsburgh, PA · Member since 2012 · 55 posts · 2 votesOP
Thanks, Scott Williams, Jean K., and Tim M.!
Jean K. -
Right now I need to look at a lot of properties because I need to understand the market. Without actually looking at them I don't think I can understand when something is a truly outstanding deal. I have looked at dozens, if not hundreds, of properties online, but that doesn't tell me everything I need to know. I have bought 3 houses for myself so far, and we always look at many, many houses. By doing that, we have known instantly when we found the diamond in the rough. Our last house we bought for $170k at the height of the market and sold for $220k two years ago, without doing anything but cosmetic work. I think it's really true that you make your money when you buy.After reading some of the extensive discussions and blog posts here on getting your real estate license, I am considering taking the real estate licensing course at our local community college and becoming a licensed agent so that I can do more of this on my own with confidence.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes14y
Hi Trina,
It's all about the use of an agents time.I agree with Scott to an extent "if that is the business you focus on as a broker/agent".
For instance I do commercial only with triple net and apartment investing.My average transaction closed is in the millions of dollars.It doesn't make fiscal or financial sense with my knowledge and ability to find people a little house to buy. I would be reducing my income hundreds of dollars per hour.
Just like an investor wants the best deal to purchase the broker/agent should be trying to build the best business possible for themselves.
I totally understand what you are doing and wish you the best success.I get contacted sometimes for people wanting to buy little houses in Atlanta.I am upfront and tell them that is not what I do and I can't help them with that.
800 in rent for about a 50k to 60k house is what investors are looking for in the outlining counties here as well.
They are out there but they go quick.I am starting to see new home builders put up new homes and see advertisements which I haven't seen in about 3 to 4 years.
California is a speculative state based more on betting for appreciation so you can't look at that market in many areas from a cash flow perspective.Investors will just over bid you there for the appreciation play only.If it breaks even or loses 100 a month they are fine with that.
I get contacted with investors from New York,California etc. where they do not like the CAPS there or what their money can buy for investing versus other states.
Getting you license might be a good idea if you want to just buy property.You have a bigger payoff in your price range than another agent would searching for you.
If you land a deal that eventually nets you 50k in equity than it was worth the search as a buyer.If you are an agent getting 600 bucks for that time not so much.You would have to string 10 sales together to be at 6,000.
You would have to do over 8 closings a month just to make 100k a year.I just don't see that as a sustainable business model for a broker/agent without burning out.
- 14yT BrownPittsburgh, PA · Member since 2012 · 55 posts · 2 votesOP
Thanks again for your reply, Joel Owens. I really appreciate someone with your experience and expertise taking the time to help a complete stranger.
I had an initial consultation with an RE attorney today who was very helpful, and who pointed out that as a licensed agent you have a fiduciary responsibility that you don't have as a buyer. I think I'll just take the course and skip the test.
He also suggested that I ask my realtor if there's a short sale/REO specialist in her office that she can team up with, if this just isn't her thing. That way I'll get the best agent for my needs and she can focus on what she does best.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes14y
You wouldn't have a fiduciary duty to the seller except to disclose you are a licensed broker/agent.
You might be better off to just take some real estate negotiating classes.
- 14yT BrownPittsburgh, PA · Member since 2012 · 55 posts · 2 votesOP
Just wanted to give you an update that I called our realtor today because she hadn't gotten back to us with more houses to look at in the last week. I told her it's ok if she's not interested in doing this kind of deal, and suggested she team up with someone else in her office who specialises in what we're looking for, but she was emphatic that she still wanted to work with us. We signed a 60-day contract with her, so we'll see what she can do in the next 53 days.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes14y
Originally posted by T Brown:
... We signed a 60-day contract with her, so we'll see what she can do in the next 53 days.Please re-read that contract, and tell me it doesn't say exclusive or something like this agent is entitled to be paid a commission for anything you buy in that period (whether the agent was involved or not) ...
- Wholesaler · Stockton, CA · Member since 2010 · 23 posts · 5 votes14y
I'll probably get slammed for this, but here goes.
Why are you using an agent at all? I have lost more deals than I ever found from them. In the last 30 years I've met only 2 agents who actually had an inkling what an investor wants. And that includes the commercial agents who should know better. (Thinking about a listing yesterday for a 33 unit - realtor says 6.7% cap rate; using his numbers I come in at 1% cap rate.)
If you find something you're interested in that is listed - go to listing agent, not an agent you're using to find property. Only bring in a second agent if you're getting a run around .... "well, if you'd rather not show it to me, I'll call an agent friend and she can split the commission with you ..."
You can try educating agents to work for you, but I've found that they aren't interested ... they're car salesmen pure and simple. (How and when am I going to get paid?)
Better yet, put up bandit signs ("We Buy Houses") and get owners to come to you or check out craigslist etc. Walk your target neighborhoods and talk to people - they'll tell you who's having problems and want out. (After you get going, you can farm this out to assistants.)
My $0.02 worth.
Mary
- Investor · Hyattsville, MD · Member since 2012 · 822 posts · 441 votes14y
Originally posted by T Brown:
We signed a 60-day contract with her, so we'll see what she can do in the next 53 days.What did you expect to accomplish by signing a contract agreeing to look for houses? I only heard of contracts where you sign a contract to list your particular house, not go shopping for them. The only contract you really should be signing is the one on the offer you make on the house you have researched and chosen as investor grade (agreeing to pay them commission on the sale). There is absolutely no pressure or reason to be limited to a particular agent, especially one that was apprehensive in the first place about working in your particular market requirements. I liken it to signing a contract with a car dealer agreeing to buy any car in the world, as long as its through their dealer network. I only see the benefit going toward the agent, who you're now at the mercy of with showings, making offers, etc. They are now rewarded by being lazy and not being responsive since you can't go anywhere else to get showings....
- 14yT BrownPittsburgh, PA · Member since 2012 · 55 posts · 2 votesOP
Thanks, Mary Cronin, for your 2 cents. :-)
My original thought was that having an agent who knew the market well and could arrange all of the showings for us would save us a lot of time. Instead, it may cost us 60 days because, as Steve Babiak guessed, we're locked in with her until then. Lesson learned...
- Wholesaler · Stockton, CA · Member since 2010 · 23 posts · 5 votes14y
Make lemonade :-)
Look at nearby markets for the next 60 days that are not included in the contract.
Mary
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes14y
Originally posted by T Brown:
...My original thought was that having an agent who knew the market well and could arrange all of the showings for us would save us a lot of time. Instead, it may cost us 60 days because, as Steve Babiak guessed, we're locked in with her until then. Lesson learned...
So you avoid buying anything on the MLS for that period - in fact you shouldn't even look at MLS properties during that period - because this agent isn't doing things to YOUR benefit (as should be rather apparent to you by now).
Now, based on your contract with this agent, does this agent get paid a commission if you buy something non-MLS? If so, then just don't bother buying anything during that term.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes14y
I have an issue with this agent saying they still want to work with you.
Sounds like what they are saying is "You are not the priority but if I come across something maybe I will get some cash for it off of this buyer"
I think that is a very bad business practice.If I agree to work with somebody I give them my full effort and attention.
If I can't work with them to start or believe they are unrealistic I tell them right away.I believe when selling or buying a property nobodies time should be wasted.
I wish other brokers and agents would just be upfront about things.It gives the profession a bad image.
- Investor · Chesapeake, VA · Member since 2011 · 47 posts · 15 votes14y
Hi T. You just nailed it in your last post. Find an agent that just got their license and is also investor friendly. They will LOVE your business and should be very happy to accommodate you. Interview them...they are working for you, NOT the other way around. It's not that much work for an agent(used to be one) to just put in your preferred property criteria and have the listings sent to you. You can do a great deal of preliminary research on the properties online and narrow it down to your top 5-10 choices. Then make an afternoon of it as you look at them. Buy them lunch and talk about your goals for investing. You might make a point of doing a couple of deals first that aren't short sales, just so they can get paid sooner. You just need to build a good rapport and make your relationship mutually beneficial.
Now, as far as the agent you just signed an exclusive contract with. Check over the contract for an escape clause. This could be something as simple as stating that if one party is dissatisfied with the service provided, then you can terminate the contract. It could also state that it can be terminated by mutual agreement. If there isn't an obvious escape clause, then I would just start by telling them that you want out of the contract NOW. If they say no, then tell them you are going to talk to the agency owner/broker in order to terminate. You can also let the agent know that you are not going to buy anything within the term of the contract, so what's the point. Do not let yourself be intimidated by an agent that you no longer want to work with. If none of this works, then threaten to get your attorney involved. That might get their attention and let them know that you are serious. There is no reason why you should have to wait for 60 days to find a property. You might just miss a great deal.
Good luck. - Syracuse, NY · Member since 2011 · 53 posts · 47 votes14y
Tell her that since she's not showing you the properties you are interested in, you'd like to terminate the contract. If she won't terminate it, go to her broker.
Buyer's agents are more for residential properties, so the agents will spend a lot of time taking you around to houses and finding you the right neighborhood and still know they are going to get paid when you buy a house.
I wouldn't recommend using a buyer's agent at all to buy low cost investment property, and especially not a new one. You'll get lots of attention from a newbie but if they don't know what they are doing they can end up costing you deals.
You are better off doing your own research and buying from the listing agent. There's just not that much money there for an agent to spend a lot of time helping you, and if it's a good deal there will be a lot of competition among the buyers. Frequently it's the listing agent's buyer who gets it, so the listing agent can double-end the deal and make the most money.
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