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Updated about 6 years ago on . Most recent reply
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My deal finder / agent tells me my offers are too low
Hello BP family,
Virgin multifam buy-and-hold investor here.
I’m trying to buy a 2-4 -unit with conventional financing (already pre qualified) in Allentown, PA. My offers are based on healthy cash flow; min. $150/door. I’ve sent offers on six different properties, most of them in the same zip code. Asking prices are in the $110k-$140k range. My deal analysis results show $75k-$80k max would give me a positive cash flow, so I’m offering $70k-$75k to leave some room for negotiation.
I’m sending these through my deal finder/broker, who’s also a major broker in the city, and an owner of a late prop mngmnt company I want to use to manage my properties. I’ve had a good rapport with them via email, phone calls, face to face meeting, and they’ve shared a wealth of knowledge about their market with me.
All six of my offers have been rejected (which is fine), though I only found out about getting rejected after specifically asking my broker what the news was on my offers (I was expecting her to call/email/text me as soon as offers were rejected). What bothers me is my broker sending me the following email:
“In general our market trades within 5% of the asking if priced right. Clearly there are variables to each but I can tell you that you will never find a 40% reduction on price on anything on market. It will never happen. Sometimes we can shoot for 10,15,20% reduction and will get activity and communication going but 40% is going to get rejected every time.”
Firstly, buying the properties I’ve bid on at 5% under asking price would leave me with a negative cash flow, which means I’d be belly up in no time.
Second, even if what she says is true, I feel like my broker’s job is to “fight for me” to get the price I want, not tell me not to offer low.
Should I not work with this broker? Should I find a broker who’s mostly a buyer’s Broker? I’ve researched this market well and it makes sense for me in so many ways that I want to stick with it.
Thanks for all the help and advice!
Most Popular Reply
Think about your agent’s business the way you’re thinking about your own real estate investing. A screaming deal for you, where you want to invest your time, is a no brained deal at 75% of market value where you walk in and are making strong cash flow from day one. You’re selective and willing to look around because you know not everything is in your wheelhouse and you’re not willing to just give away your money to the sellers. Why shouldn’t your agent have a say in how he spends his time (which to him = money) and focus on the most profitable activities in his business - finding clients and getting deals closed. A dream client for him is one who is qualified, flexible, motivated and willing to pay market. Within the scope of any particular deal he’s obligated to fight for your best interests but in expecting him to happily submit a dozen or more unrealistic, low ball offers you’re essentially asking him to diminish his profit (tons of time with you in exchange for a single commission) so you can maximize yours. Not a good deal if he has other possible uses for his time.