Am I underselling my house?

Question

Background:

- our house is surrounded by $550,000-$650,000 houses

- house does not have a foundation, it's a brick and mortar

- house is a fixer upper: needs plumbing, electrical,  roof, and more.

- it's a 1,200 sqft duplex, 3 bed,  2 bath, has a big attic, 2 garages.

- Location in a neighborhood that's going through gentrification and close to downtown L.A.

- family wants to move to a better neighborhood

- private investor offered $450,000 with no verbal deadline

- our next house is going to be around $550,000 +/- $50,000.

- house is not listed anywhere, not on the MLS or anything

- we are currently looking at houses

Problem/Question/opinion

- do we just take this offer because it's close enough and we don't miss out on this deal or do we post online and try to get other investors to make some offers?

- what would you do in this situation?

Nina Grayson · Answer

Account Closed

Kwan, thank you for calling and apologizing and acknowledging that you made a mistake.  That speaks to your character.  And you have now learned the greatest lesson in real estate investing - relationships are key!  I'm glad you now know the value of transparency in both respecting others and their time and business, the importance of the nucleus of real estate investing - relationships, and that you realize why it is imperative that you are careful in your business dealings so you do not open yourself or others up to liability.  You confirmed that you have a proposed offer and have not executed the offer nor are you exclusively contracted with an agent at this time.

I stand by all that we discussed on Sunday re your family's home.  I look forward to supporting you in your investing future.

Nina

Nina Grayson · Answer

Hi Kwan,  I had no idea you already had offers and an escrow.  This message is for you and all other investors.

Please be considerate when asking agents to give you their time and work with you an evaluating your home.  If you had no intention of listing your home for sale with me, and having me help you identify cash investors, just because you wanted to "see what another agent says," that's not a win-win, which is how this business works.  You took my time away from my income-producing activities.  Realtors and Brokers DO NOT WORK FOR FREE.  Just be honest, man!  I spent two hours with you this morning.  Not cool...

Nina

Gregory DeRosso · Answer

Just based on what's written. The surrounding properties are 100 - 200k above but probably in not a need of a complete rehab.  The investor is looking at the ARV once complete and based on the scope of work, there is enough meat on the bones to make a sizable profit. Take in account if you go all cash, you save the 6% average that you will pay an agent to list in on the MLS. You can post it online, but you'll get a lot of tire kickers too. See if the investor can come up 50k and save the headache and get it in writing.

Lien Vuong · Answer

Based on the narrative you've given you have no proper representation on your side. I would pay for a Broker's Price Opinion of an agent who does a lot of business in the area and ask them how much the valuation of your home is. The few hundred dollars you pay for that price range is worth its cost for all the money you're saving on the other side. That is the only way you know what your house's fair market value would be from someone who is unbiased and a professional in the local market.

You can work with the agent on the commission as they're representing both side (not really,  they're repping the buyers in reality) and will likely get the resale of this property also. That's a three fold deal for the agent $$$.

Based on what you said about the comps in the area and the state of your current home it is a very fair offer price and esp. given that it's cash. For most investors I work with they need around a 40-50% retail discount to even look at this property and this investor does not seem like he's following those metrics.

Make sure you review the offer carefully, hopefully it's on paper by now, and look at ALL the terms. Hire an attorney to scope it out for you and make sure someone is representing your best interest.

Good luck!

Lydia S. · Answer

Account Closed

I’m curious, you mention working with 2 realtors... have you signed a listing or purchase agreement with anyone?

If you signed a listing agreement, you are represented by that realtor and cannot obtain assistance from another unless you terminate that agreement.  You can only obtain ‘quotes’ as you call it, prior to signing an agreement, not after.  Does that make sense?

Account Closed · Answer

@Lydia S.

I do not have any listing agreements. Yes that makes sense to me.

Nina has a property she is working/worked on in my area so I reached out to her. She came by and gave me her assessment on the comps in the my area and target selling value of our property.

Account Closed · Answer

Just saw the post, I would of called you back sooner to apologize =[.

After speaking with you on the phone and talking to you today, you were good and I did mean it when I said I would like to work with you. I think to find a good realtor, people do need treat it like getting a quote and  meet a few realtors to see how they think/work (like what we did today).

Sorry about not disclosing everything. This house is not in any escrow, but has offers. I have learned from working with the first realtor that disclosing everything actually hurt me, so I try not to make the same mistake. I didn't know who to trust.

Not sure if you're sleeping yet but I will call you tomorrow morning to apologize again.

Account Closed · Answer

Thank you for both for the help and sorry for the extremely late update. I have been a little overwhelmed with everything.

- just realized the comps I found may not have be exactly the same and I will verify the comps my realtor found as well. My house is a duplex, has a tall attic that can be turned into a living space, and 2 huge garages that looks like half the size of the house. I did not take those 3 points into considerations, the things I looked at in comps were # of rooms, # bath, lot size, house size.

- first realtor is bringing in another investor that wants to see the property

- My other realtor (2nd realtor) that is helping me find a new house knew an investor and also made an offer for our house at $470k. Charges less 3% commission rather than the 5% commision from the initial realtor.

- will be getting 2 foundation inspections and an appraisal this weekend.

@Gregory DeRosso: We may consider listing, but my family hates the idea of tire kickers and we may be limited to cash offers only because traditional loans/bank appraisals don't like brick foundations. Plus the fact that we may lose the $470k offer if we wait too long, we may counter offer soon.

@Lien Vuong: thank you for the multiple perspectives! You helped me put in words why I was felt like I was being taken advantage of, because I wasn't sure if I had a fair representation. I will be getting an appraisal this weekend hopefully. The $600 is not cheap like you said but I guess it has to be done.

I only realized that realtor is getting 3 folds after you mentioned it, nice catch. Someone told me to just not look at other people's earnings if it's their fair cut because it'll drive you crazy haha. This realtor will be getting a nice cut if he gets the deal.

The metric may not be too far off from 40%. Our area is getting gentrified (even though everyone says that about their neighborhood). Also, they wanted to convert this duplex to a single family house and the 2 garages into an Additional Dwelling Unit. The ballpark figure they were shooting to get is $800,000+, but that has some serious leg work and renovation to get it done. This is a historical property.

Account Closed · Answer

Hi Gregory,

Thanks for the reply. I agree, the headache of tirekickers is a pain. What if only property investors with cash is allowed to come? That would help reduce the problem.I forgot some information, thanks for pointing it out.

There is a realtor involved and he is charging 5%. We met the realtor when we saw our neighbor's open house and he knew a private investor that would be interested in our house. He called us back in about 1 week of our initial meet up to have the investor come by. The investor looked at our house for about 1 hour, with no real inspection. Now, we have an acceptance and escrow documentation provided by the realtor. Thanks,Kwan Lee

Am I underselling my house?

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