The Deal the Realtor Left to Rot

19

Once upon a time there was this 3 bedroom, 1 bathroom rancher set back from a busy road in an extremely desirable area of town. The home, purchased for $289,000 two years before at the peak of the market, was barely worth what the owners had paid for it. But the owners, a lovely husband and wife, had found themselves having to move away and sell the home.

The realtor, wanting her clients to come out ahead on the deal after they paid her commission initially listed the home for $329,000 at the start of 2010.

This home, with its striking red door, caught our attention the minute the “For Sale” sign went up but we didn’t pay much attention to it until a few months later we noticed the sign said “Price Reduced!”.

We pulled over so I could call the realtor. The realtor explained that the property was now reduced to $319,000. We made arrangements to see the property the next morning.

We went and viewed the home, and while it is in good condition, showed very well and was one of the lowest priced homes in the area, it’s only a 3 bedroom and 1 bathroom home. Having a second bathroom is pretty important in this market. But the price, for that area, was interesting. I asked a lot of questions and discovered that the sellers would probably go to $305,000 because the realtor had agreed to cut her commission so they could still make money on the deal. Turns out, she’s the one that sold them the home at the peak of the market.

I told the realtor we could probably do something around the $300,000 mark – maybe $305,000 – if the seller would be willing to carry a second mortgage on the property for us.

After a long chat, we left, and she agreed to contact me about the second mortgage option.

A few days later, I actually sent HER an email to follow up because I hadn’t heard from her. She said that VTB’s are hard for people to understand. I wasn’t sure if that meant that the sellers wouldn’t do it or if she had even talked with them about the option. Either way, it didn’t sound like $300,000 was a go for them.

The market really started to move in late March and early April but still, the home sat there. On April 8th, the price dropped to $309,900. I didn’t hear from the realtor before the price dropped but I didn’t think anything of it since I had made it clear that I was only going to play at $300,000.

How the Realtor Lost the Deal

Here’s the kicker though … and here’s where the real estate agent really failed to make this deal happen:

In May the list price dropped down to $299,000.

My phone didn’t ring. My inbox didn’t fill up with emails from her. I didn’t hear a thing. Of course, we follow the market closely so we knew it had dropped, but most folks wouldn’t know that. Yet, she never bothered to call. She had my business card, we had exchanged phone calls and emails. She should have had my contact information. But I didn’t hear a single thing from her.

By this time we had our hands full with 3 other deals so I wasn’t about to chase this one down. Instead, we kept an eye on it.

But then something sad happened last week … something I have seen happen so many times … the sellers changed real estate agents and the new agent listed the home at $284,000 with the caption “PRICED TO SELL”!

So this poor home that we would have considered buying at $300,000 is now probably going to sell for $278,000. And at that price, it’s under it’s market value. But it will sell down there for the simple reason that the market has slowed down again and now everyone looking at it is wondering why it’s been on the market for nearly 6 months when it’s in such a good area!!

The sellers are going to take a loss, the realtor that tried to sell it won’t make a penny, and the whole story could have ended differently if only she’d made one single phone call.

There’s a Japanese proverb that says “Money grows on the trees of persistence“. Or, put another way, money rots on the trees of laziness.  I can’t say for sure we would have purchased it … but I know Dave, my husband and investing partner, was pretty keen on this home. And if she would have called I can guarantee she would have had an offer in her hand at the very least.

Instead she lost the listing, and she lost me. I won’t ever deal with her and I certainly would never recommend anyone I know use her.

This is a great failing on her part, and she’s not the first to make this mistake. My Grandma’s words ring through my head reminding me that this home wasn’t meant to be for us which is why she never called. I couldn’t agree more. Even now, at such a low price, I am tempted but not that tempted, for the simple reason that it’s going to be tough to rent out with only one bathroom.  So it wasn’t meant to be for me, but who was looking out for the sellers?

I’m not just going to point this lesson at realtors who fail to follow up … Joshua Dorkin posted a video this week about an investor on the BiggerPockets forum that was losing a deal because a very persistent buyer couldn’t get in touch with them about the property they had posted.

In the short term a single phone call could mean the difference between doing a deal or not doing a deal. In the long run it’s your reputation and your deals at stake.

The secret to success really is simple: FOLLOW UP. Don’t let your money rot on the trees of laziness.

1st Photo Credit: Julie Broad
2nd Photo Credit: IStockPhoto 001abacus

About Author

Buy and hold real estate investing in Canada since 2001, Julie Broad is now a full time real estate investor and investing educator.

19 Comments

  1. Great article, Julie!

    Unfortunately, this is the case with the majority of the Realtors that I come into contact with. Most don’t answer their phones or even bother to call back when I leave a message about one of their listings. It makes no sense to me, and I stopped trying to figure it out a long time ago.

    Steph

  2. Thanks for your comments Steph!! Well the good news for those realtors and investors that do answer their phones, return calls, and follow up is that there is a lot of great deals to be done in the industry!! But I’m with you – I just don’t get it!!

  3. Another good one Julie!

    Oh, the power of a simple phone call. There could be an entire course on how to pick up the phone and simply dial. That lack of habit as Stephani mentions is all to often the case with many realtors.

    • Thanks Matt!
      You know – I don’t like using the phone. I have this weird aversion to it. When it rings, I jump and want to throw it away. So I understand it when people aren’t on the phone right away for everything. But even though I feel I have an allergy to the telephone I still return calls … I sometimes even answer them … and I always follow up when I have made contact with someone. I just don’t know how you can be in real estate and not do this, but I guess I will be like Steph and stop trying to figure it out.

  4. Following up is key not just in real estate, but in pretty much any business. You were following along and saw the price drop, but many people wouldn’t have paid such close attention. Following up is to to reminding those who may forget.

    • Thanks Rick … and you’re SO right. I just heard my husband Dave on the phone with a representative of a network we belong to. He was discussing a health care plan they have as we need to get a new package. I heard my husband say “Thanks for following up. You know that is such a rare thing to find someone who actually follows up after a discussion … and I am not just talking about insurance. I mean in all industries.”

      So the secret to success is pretty simple and all of us on here are doing it … right?!? 🙂

  5. Great story, Julie!

    I feel the pain of the seller. I’ve been in the seller’s shoes before. It was back when I made the decision to start liquidating. The first agent I used for this one particular property suggested pricing at the high end of the spectrum. For me, I just wanted to get this thing sold as the market had just started to go down – I was ready to cash out and move on to other things.

    Though, the home sat. And, sat. And, sat. It averaged only 1 showing per week for a period of almost 6 months. Plus, it was vacant as I had no plans to continue being a landlord. It was burning a big hole in my pocket, about $2,000 per month. Pretty big hole, eh?

    In any case, this property became a nightmare and I became a motivated seller. The agent I was working with told me the market had turned overnight and we just have to keep waiting it out. Well, I couldn’t wait any longer. The agent told me maybe I should just re-rent this and wait another 5 years for the market to turn up. No way!

    So, I got another agent involved – one who understood that I needed to sell asap. Now, this agent shared with me a little secret she’s used that’s worked time and time again despite the market. She told me, the key is to price the home at the bottom end of the market. Why?

    Well, she told me the main thing is to generate activity and generate interest. If there’s no activity and no interest, it’s going to be really hard to sell. Basically, just getting people through the door to look at the home was the name of the game.

    And, guess what? It worked. We had a bidding war between buyers, multiple offers (just like the agent told me would happen) and the home was sold for a few thousand dollars less than the list price of what it was listed at with the first agent I used.

    Crazy, eh? But, it worked. And, to me – that’s all that mattered.

    So, I can really relate to the seller here and what they went through. Having the right team in place is key. It sounds like the seller here just didn’t have the right team in place either, it’s too bad as you were right there ready to go as a buyer.

    Personally, I don’t know what the deal is with some agents not returning calls. I’m thinking they just have so many things they are doing and forget, failing to see the big picture. Who knows!

    I enjoyed reading your story Julie, thanks for sharing!

    • Rachel – Seriously you are the most valuable commenter in blogging history! You ALWAYS add so much value with your comments and this story was no exception!!

      I find it interesting to read it from the sellers viewpoint … and even more interesting to learn what strategy worked in the end!! I’m glad your story had a somewhat happy ending. Having a property burn a $2,000 hole in your pocket while a realtor does a poor job is so sad.

      The low end pricing strategy can be very effective. In Toronto, Canada that strategy is very common in the popular areas. In the hot market it was ridiculous because houses would go for $100,000 over asking price and boost up the market prices of homes all around it because people get into such an emotional frenzy when others are competing against them for the house.

      A good book to read to really get into this psychology is Influence by Robert B Cialdini. It’s a bit scientific but it’s an excellent read. Actually Steph had a book club a few months back on this book that’s worth checking out. http://www.flipthiswholesaler.net/2010/05/flip-this-book-club-influence-by-robert-cialdini/

      Thanks again for your story Rachel. You’re awesome.

      • Late to the party, but I still arrived 🙂 This was a great post, Julie and its soooo true about follow up (and lack thereof). I recently had the same experience with real estate attorneys and the craziest thing was that all of them had been referred and my voicemail even stated that I was referred by such and such. Still….no calls back. Well, one call back but it took about 4 days and by that time I already had the issue solved with an attorney who actually returned phone calls.

        And yes…there HAS to be an award for most valuable blog commenter 🙂

        • I guess lack of follow up is an epidemic!! Even attorneys when referred by someone aren’t returning calls!! If I don’t want to return a call I at least have my VA do it … no matter what the person calls about!

          Shae – you’re always invited to my parties even if you show up late. 🙂

  6. I couldn’t agree more with you Julie….course I should, cuz it’s our story! he he

    I often wonder how some people I meet are so successful (as realtors, investors, entreprenuers, dentists even!) while others (which seem just as bright and hard working) just seem to fail. I now know, it’s often as simple as persistence and following-up!

    Cheers

    • Great angle to take the post to Alex! It’s true … I spend a lot of time talking about the bad property managers, real estate agents or even insurance agents we’ve dealt with … and unfortunately I have plenty of stories about them all … but another post should talk about how to find, celebrate and appreciate the great professionals that we all need to have on our real estate teams!! Thanks for the great reminder.

  7. Jennifer Beadles on

    I really enjoy reading posts from everyone as I gain a lot of insight from these stories. I am a real estate agent and investor, and I have to agree with the fact that answering your phone can make you a lot of money. Sounds simple and it is!

    I do have to make the comment that sometimes real estate agents don’t understand seller seconds or lease options or anything creative. They also do not want to admit when they don’t know something and want to be in control of the situation. The majority like things to fit inside the box so they can get paid quickly. I use seller sections and creative financing where ever I can and am always having to explain myself to other agents.

    It is very unfortunate (especially these days when financing is tough) that agents are not willing to look at all options for their sellers, which is really what our job is all about.

    In regards to pricing yourself under the competition, it usually works like magic. The difficulty is convincing the seller of that. Often times sellers are so emotionally attached to their home they do not understand its true value. They can easily get offended if you tell them their house is not worth what they ask. I will never take an excessively overpriced listing because it does a diservice to the seller. Chasing down the market costs thousands and wastes everyones time.

    I relate sellers issues with the stock market. If you bought a stock at $50 a share 10 years ago and today you need the money but its only selling for $40 no one is going to give you $100, no matter how long you have owned it!

    • Jennifer – Great point about agents not understanding creative terms.

      VTB’s are actually in the real estate manual here so when they study to become a real estate agent they learn about them. Now, I realize they aren’t that common so I actually spent 20 minutes talking about them and how it would work with this agent. We were with her for nearly an hour. I know she understood the concept because she thought she could possibly buy the house she was renting and get a VTB from her friend that owned it. Now – all that said – she may not have been a good person to explain it.

      You bring up a funny point about the price point about something people have owned. I am reading a book right now called ‘The Paradox of Choice’ by Barry Schwartz (spelling?) and in the book it talks about the endowment factor which is basically how much more we value something once it’s ours. And I suspect the longer it’s ours the more we value it. So you make a great point!!

      Thanks for your great comment! Your clients are lucky to have a real estate agent who is out there learning and understanding the perspectives of investors and home buyers!! And who won’t take an overpriced listing!!!

      – Julie

  8. Richard Dale-Mesaros on

    Hi Julie,

    We typically have eight or so houses in play, here in NH and we always try to price ourselves a bit below market to sell our houses quickly. Sometimes, despite diligent comps and even driving by the comps we’ve used, we find we still too high, so quickly bring down our asking price and the minute we get to a certain price point, we get activity. We recently had a house for sale, swore blind it would sell for right around $120k and it didn’t get good action til we got down to $90k. Good job we only paid $31k for it and put $30k into it….

    I’m surprised a house at $300,000 would work for you as a rental – how much could you have rented that house for???

    Regards,

    Richard 🙂

    • Hey Richard,
      I have to give you a big pat on the back for asking a very important question!! Normally for a house like this to work I have to get about $2,500 to $3,000 per month rent from it. Rents aren’t that high here.

      When I hear numbers like yours I often wonder why we continue to invest in Canada but we like it here and the market is fairly stable economically. So instead of moving away or buying far from home we decided to find an area where there was a big demand for rent to own homes … and doing that allows us to get $1,600 to $2,000 a month rent from a home like this (although without the second bathroom I know this would be a trickier one to rent out) plus a $7,500 to $10,000 option fee deposit up front. The tenant covers the minor maintenance and we oversee the property management instead of hiring an outside company. All of those things add up to about $400 – $500 a month positive cashflow a month for us on a place like this PLUS the option fee. There’s not much long term wealth creation in this strategy for us, but we have some awesome holding properties already so our focus right now is on generating monthly cashflow. This works well for us.

      Great tip on price by the way. We find this with rent too … if you advertise a rent at $1400 and don’t get any calls within 24 hours drop it down right away and keep dropping it until you get calls… don’t wait too long or it will go stale.

      Thanks!!

  9. Julie,

    MORE words of wisdom from You – GOOD job again! Personally, I find that many people, if not most, simply lack the virtue of perseverance! A trait which YOU clearly possess! Keep UP the great work! Sincerely, Trisha

  10. Martin Dorgan on

    This was a great article to read Julie! It’s a shame the original agent didn’t stay in contact. Ou well, her loss!, but unfortunately her seller’s took a loss for her not staying in contact.

    Of course there is the other side of the coin scenario! If you look at the original price $329,000. and compare it to the market value, and then the original reduction $319,000., and then the further reduction down to $309.000. that tells you it was either over priced to start with? Or the agent “Bought the listing” to start with. Neither of which was a good starting point. And obviously it was either the change in market conditions that forced the price changes, or it was a mistake made by the seller’s and their agent to REACH FOR THE SKY! in their pricing. I would blame it on both parties!

    The reality finally hit the owners in the face, and they dropped their price. But thats after too much time had passed. The home stagnated on the arket, when it could have stayed ahead of the market price, rather than chase the market! By continually lowering the price.

    I just finished a discussion with one of my co-brokers(hubby & wife team), and the bottom line is that most agents do not maintain a data base of potential, present or past clients, BIG MISTAKE! HUGE MISTAKE! to quote “Pretty Woman!”. I know that when I get a listing, I price it within market value at the time! I try to price within the lower tier of the market value, because I know it leverages many more potential buyers! My listings are emailed to every agent withing my MLS system, placed into a blog posting and advertised throughout three Professional, National Broker/Agent Networks, added to LinkedIn, Facebook, and broadcast through Twitter, posted to my multiple websites which are syndicated to many, many, real estate portals. So I know the property gets lots of exposure. But I go beyond that and send ithem to Relocation specialists, and relocation contacts that I’ve made. These days the property has to be seen by everyone possible, including Internationally, I’ve got that covered too.

    Today’s market demands that Broker/Agents “Think Out of the Box!”, So if a home could be potentially rented, advertise that possibility as well. Or if its a niche property proliferate that posibility by advertising within that niche.

    Motivation! Is the key to selling homes, is the seller motivated? Is the chosen agent motivated? If the answer is not clear, get it clarified! Because the otivation expressed, is usually the key to everthing you do to sell a home in specific scenarios!

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