What are some key questions to ask an agent when touring a house?

Question

Hi, everyone! So my investment partner and I are touring this multi-family HomePath property today with the agent. We're looking to make our first investment, so I want to make sure that we ask as many questions as we can in order to get the most out of this visit and meet-up.

I'm working on getting my real estate license now, but I don't quite know all the information that an agent would know or have access to, so it's a little hard for me to think of solid questions or things I'd want to know. Do you have any advice on things we should definitely check for, make sure we know, what you might consider to be a no-go, etc.?

Any and all advice and tips are welcome. Thanks so much :)

William Daley · Answer

@Nina Ricci No problem! Happy to help! I started educating myself approximately 4 years ago and actively started looking for a property in early April. I initially started out looking at multi-family properties with the intention to house hack, but found that there was limited availability in my area, in my price range. This made me realize two things: that many decently-maintained multi-family properties (mainly duplexes) were priced at a 5-8% cap rate to maximize the seller's profit, and that my market is relatively saturated with cash investors.

This lead me to reassess my investment strategy and reevaluate both my short- and long-term goals. Admittedly, my current strategy is unconventional and probably won't jive well with most traditional investors and their strategies. That being said, I knew that I couldn't compete with cash investors, I needed a place to live and I wanted to learn how to renovate a house myself - so I was essentially looking for a live-in flip for my first venture. Therefore, I changed my strategy by identifying properties in desirable areas that cash investors might not be interested in because the profit margins were below average standards, but had enough margin and potential added equity that it made financial sense for my first investment.

I had my realtor set up a search for SFH that needed some repairs, but were located in desirable areas - based on school districts, employers, market appreciation, transportation and a few other criteria - and promptly found a newer construction HUD home in a market that's currently going through a small revitalization. The beauty of this scenario is that HUD homes initially only accept owner-occupied bids for the first 15 days after listing before they are opened up to investor bids. So after a thorough analysis, I settled on bidding as an owner-occupant. This decision enables me to purchase well below market value (without competition from cash investors), create immediate equity and also provides me with a place to live while I renovate the property.

This is where my investment strategy won't jive well with most investors - I have to live in the property for a year in order to satisfy the mortgage requirements. Obviously that means I will be making mortgage and interest payments for a year until I can turn it into a rental property or sell for profit, which isn't ideal to most investors. But for me, that's a cost of learning the business and also a cost I built-in when establishing my break-even point during my initial analysis when determining my bid amount.

Though this strategy may deter other investors because it's not income-producing from the start, I knew that I needed to get creative with my strategy if I wanted to break into this highly competitive market and industry. Lastly, I see this property as a great learning experience that will allow me to hone my skills on a manageable project that also leaves me with enough capital to potentially purchase another SFH to flip and sell or rent within the same year.

If you have any questions or want to chat, feel free to reach out.

William Daley · Answer

@Nina Ricci I'm a relatively new investor, and I am currently in the process of purchasing a HUD home, though I walked through multiple multi-family properties before making this decision.

For me, the most valuable step I took was finding a realtor who is also an investor. His experience and knowledge have been instrumental in evaluating different markets and investment properties, while also helping me further define and enhance my investment strategy. These realtor-investors have skin in the game and, therefore, are able to provide a wealth of knowledge to investors of all levels.

As for questions to ask your realtor, these will vary based on the type of ownership (owner occupied, foreclosure, etc.) and the type of property. Listed below are some of the initial questions I ask the realtor. Even though I complete my due diligence before walking through a property, I still ask the questions as confirmation of my own findings. As cliche as it is, there's no such thing as a stupid question - especially when you're starting out. Every walk-through is an opportunity to learn, so ask as many questions as you need to. If you're working with a realtor who understands your goals and needs, this won't be an issue and they will be happy to assist and help educate you.

I would recommend bringing a tape measure and a marble to each walk-through. The marble test is rudimentary - and there are better tests out there (see 4-foot long level test) - but the results could indicate uneven floors or a potential structural issue. Also, your realtor should give you an MLS listing with some of this information on it, but it may still behoove you to ask the questions below.

• What's      the sellers motivation for listing the property, especially since it's owner or tenant occupied?

• Do you      have a copy of the Certificate of Occupancy?

• Are      there any township/municipality certifications needed for occupancy or      renting the property?

• When      would they like to close?

• How do      you feel about the price for this size property in this area?

• How      long has the property been on the market? (If it's been on the market for awhile, ask the realtor their opinion of why it hasn't sold yet - price, location, condition, etc.)

• How      many people have seen the home in the past 30 days?

• Have      there been any offers?

• How      much are:TaxesHOA fees (if applicable)UtilitiesInsurance (estimated)
• Taxes
• HOA fees (if applicable)
• Utilities
• Insurance (estimated)

• Taxes
• HOA fees (if applicable)
• Utilities
• Insurance (estimated)

• What      issues does the property have, and do you have the seller's disclosure?

• What      comes with the property?

• Is      the property up to code with electrical, plumbing, windows, smoke alarms, etc.?

• Are      there restrictions to interior and exterior renovations? (if applicable)

• What      type of fire blocking does the building have? (if applicable)

• Where      is the electrical box located? (Check the amperage capacity.)

• Where      is the water heater? (Go check the faucet furthest from the water heater      to see how long it takes the water to heat.)

• When      was the last round of renovations?

• How      old are the appliances:HVACFridgeStoveDishwasherWasher/DryerWater Heater
• HVAC
• Fridge
• Stove
• Dishwasher
• Washer/Dryer
• Water Heater

• HVAC
• Fridge
• Stove
• Dishwasher
• Washer/Dryer
• Water Heater

Hopefully this helps. Good luck on your walk-through and with your investments!

Russ Draper · Answer

Honestly my experience with most agents is they don't know all that much about the property.  Their job is to sell it, they work for the seller.  You will want to have a very good inspector if you decide to move forward on the deal to find anything that could be wrong with it.  Any major expense that you can't cover would be a no-go, so perhaps foundation or major structural issues.

William Daley · Answer

@Nina Ricci Well the purpose of HUD is to make sure that everyone has access to fair and equal housing, so they heavily favor owner-occupants during foreclosure bidding which is why I was able to submit a bid before investors could. If this was a REO (bank-owned) foreclosure, it would be open to everyone as soon as the property was listed on the MLS.

For the most part, foreclosures are priced to sell quickly due to the owning institution incurring holding costs the longer the property sits on the market. In general, cash buyers will typically have lower bids during foreclosure auctions because they can close quicker and the owning institution incurs less risk since they are paid in full up-front.

In my particular case, the property was priced well below market value to sell quickly and to encourage competitive bidding from owner-occupants. So, even though I wasn't bidding against investors, my bid still needed to be in a certain price range to ensure I was in the upper echelon of bidders.

What is your current strategy?

Nina Ricci · Answer

@William Daley Oh okay, so if you bid as an owner-occupant, you're essentially expected (?) to have a lower bid amount/"well below market value"? Just trying to clarify on that, because your strategy seems very similar to mine in a lot of ways!

Nina Ricci · Answer

@William Daley Wow. Thanks so much for that. That's really, really helpful. When did you get started? And also, what were some reasons that you decided against going for some of the contending deals and went for the HUD property that you're in the process of purchasing now?

Nina Ricci · Answer

@Russ Draper Oh, good point. I'll be sure to grab a good inspector. And foundation or major structural issues--got it. I'll be looking more into that. Thanks, Russ!

Nina Ricci · Answer

@Seth Robertson Oh yeah, that's some good advice. I'll definitely be keeping all of that in mind. Thanks so much, Seth!

Nina Ricci · Answer

@Michael Guzik Ahh, thank you; that definitely helps, haha. Writing this down. Good luck to you too! :)

Michael Guzik · Answer

@Nina Ricci Good job on taking action and welcome to BP! My opinion is that most agents are completely clueless to the property they are showing, they know the basic facts but aren't very familiar with the area, specific questions or the culture/environment of the area. You are going to get better info from the seller themselves or just from driving around the area and looking at the house yourself. Not all agents are like this though, but most are. Always ask them what repairs need to be made, when was the roof replaced or done, who pays utilities and water, when do the tenants leases expire(if they even have one) and just ask any questions you would ask if you were a future tenant. Good luck it seems you are on the right path so keep going!

What are some key questions to ask an agent when touring a house?

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