Should I call the Listing Agent or look for a buying agent?

Question

I am a new investor in the Elkin area of NC, never having done any deals.  I have found a HUD home that seems to be a very promising deal.  I currently have ZERO RE agent relationships.  Should I call the listing agent on this home or should I look for a buyer's agent to just represent me?  Also, I'm assuming I'll have to do a title search on this...is this a correct assumption or do HUD's usually have a clear title?   I live in a rural community that has no local REIA group.  I usually travel over an hour to get to a meeting and so far I have found no investors in my area that go to these meetings.  Apparently the local investors aren't a very sociable group...LOL.  Anyway, I was hoping the BP forum could help me with this one since I don't have any local support yet.   The details so far....the SFH is in a market with comps that are from $142K - $157K.  HUD first listed the property for 149K in Jan, reduced it to 134K in Feb, and reduced it again in Mar to 119K.  I'm thinking, after digging on info about HUD pricings/bids,  I can get it for a really good deal at under 90K.  I'm familiar with the house & believe it needs very little work, just cosmetics.  I'm really nervous about making an offer.  Will also be looking for financing.  The one company I thought I might could use, doesn't come out this far away from the city...grrr.   Any advice, please share!!

Thomas S. · Answer

If you have zero experience start with a buyers agent and once you learn the ropes you can go directly to a sellers agent and negotiate yourself.

I do not trust agents to properly represent my interests or negotiate as I would. For this reason I find it far more beneficial to negotiate myself with out using a second middle man. One road block (sellers agent) is more than enough but fortunately can be turned to your advantage.

The advantage of using the sellers agent directly is his motivation to close the deal without sharing the commission. You would be amazed how cooperative and informative they can be when they legally represent both sides of the deal.

Greg H. · Answer

@Dawn White

I am a HUD Broker and have personal purchased 300+ .  A few suggestions :

- There is absolutely no advantage to using the listing agent on a HUD home.  They have no input in the bidding process and absolutely no advantage over the next agent.  You can go on HUDhomestore.com and search for a list of agents with NAID numbers in your state that can place bids for you.  My advice is to select a buyer's agent

- Once the property enters the investor period it will stay available to investors.  The will be no highest and best or any other negotiations with HUD.  The bid is either accepted or "countered" with a net to HUD that would be acceptable.  Keep in mind the counter is not really a counter but more of an invitation to re bid for the next day

- Use an agent that has closed many HUD homes as there can be difficulty with financed properties, selecting a title company and such

- Finally, new asset managers have taken over in the last month or so in most regions(Sage Acquisitions) and based on what I have seen during this time your bid of 90K has no shot.  I am not seeing bids under 86% being accepted at this time.  Bids below that threshold are manually accepted and reviewed and I am not seeing this currently happen.  My guess is the best you are going to do is approx. $108500.  I track bids in my areas and this is current information not based on last year or how things were done with HUD in the past

Jeff Copeland · Answer

@Dawn White - Get yourself a buyer's agent. In general, the listing agent works for the seller, so why not have someone who represents your interests as the buyer? More specifically, REO listing agents generally deal in volume and focus on listings...not on showing houses.

To purchase a HUD home, you will need a brokerage that's registered with HUD and has an NAID number, and (ideally) and agent who has sold a few HUD homes recently. HUD homes are sold through servicing companies (such as PEMCO) via HUDHomeStore.com and the quirky red tape they sometimes require can be a pain to deal with, and it is completely automated and impersonal*.

(*For example - the HUD Home Store website will allow an agent to submit an offer without being logged in to the site. However, if they submit it without being logged in, the agent doesn't get any notification when an offer is accepted or the seller calls for highest and best...so you could have an offer accepted and never know about it! In this scenario, HUD simply waits three days and then moves on to the next offer or re-lists the property).

Experience is definitely a plus.

Regarding clear title - yes. Once the foreclosure process is complete, you normally have clear title. And HUD normally doesn't list properties until the title work is done.

In any case, clear title is usually a condition of sale in your state contracts - so your title company/closing agent should address this during the closing process and provide a commitment for title insurance as stipulated in your contract. And HUD allows you to choose a Buyer Selected Closing Agent - so you have some control over who closes the transaction and can seek out an experienced title company or attorney to work with.

Dawn White · Answer

Thanks for the advice but as I mentioned above, there are no REIA club meetings in my area.  I go to one pretty far away and from what I can tell by talking to the RE agents there, no one wants to cover my distant market.  I actually got a call back from the listing broker (not the specific listing agent) and am going to see the house tomorrow.  I have another (non-hud) in that same area that I am also looking at, and am hoping this agent will agree to show me that one as well.  Hopefully I will find a comfort level with him...we'll see.  My husband grew up around here and knows most everyone or at least a relative of theirs...I'm going to take him with me...he may be better at socializing with the locals.  Although I've lived here for 20+ years, I grew up in NY State and sometimes am not as welcome in small circles of this small town as a local is.  My husband wants to be part of my investing business but he works 2 jobs & never has time...this may be his contribution!  LOL Whatever works!

Thomas S. · Answer

Just be carful. sometimes with new investors excitement can overcome their ability to reason.

If you understand the numbers thoroughly and never waver from the formula that works you may be OK. Income investing is not about anything but the numbers.

Remember you are not simply buying you are negotiating. The asking price of a property is irrelevant.  Don't be swayed by the sellers numbers or their agents sales pitch. Walk in with a exact number that makes the property work and start lower.

I sure hope you understand how the numbers all work. You should have spent months analysing the numbers on hundreds of deals before being prepared to start. Most novices don't have a clue.

Bring back the numbers and the members can analyse this deal.

Gordon Vaughn · Answer

Hi Dawn, just ran across this thread & everyone is right about getting a buyers agent for many different reasons. But I couldn't agree more with Greg S's advice on what these agents provide. Most agents that I've ever known do not possess true negotiating skills, and most don't understand how to negotiate during an ever-changing market where how you negotiate changes along with it. Vet an agent that has the skill level and understanding of the "value nuances" of your neighborhood and what is considered marketable value for that area. Also, your agent should know how to identify market and value trends, determine zonings like flood before you submit, understand seller motivations, and be a good negotiator. You seem to already be educated and skilled with assessing investment value and rehab costs, so use your experience and intuition to determine if an agent knows his or her stuff. A HUD experienced agent is helpful, but it's not necessary to find an agent that does mostly Hud transactions. HUD is just one of many sources you'll be looking at to acquire good deals.

If you can't find an agent to fit the bill, like Greg S said in not the exact words, your own hands may be the best hands to be in!

Rick H. · Answer

I too am in the "get a buyer agent" camp.

In reality, the broker with the listing is called the listing agent. The broker who would make an offer for you is the "selling" agent (confusing as this might sound).

As you've alluded to already, you need to build relationships in the real estate community.

It cuts both ways: you don't know who the effective agents are and they no nothing about you; whether you can and do perform or how easy you are to work with.

So, consider these points when trying to build rapport (trust and comfort) with your choice of agents.

I'd focus on finding agent(s) based on business, not social, referrals. Perhaps start at a REIA club in your area.

Dawn White · Answer

Since the property price has been reduced 3 times since January, I'm thinking the investor pool must be open by now.  Unless the o-o round renews after each reduction?  Does it?  Should I not disclose to the listing agent that I am an investor, just so they'll let me see the house and place a offer?  I've got a call into the listing broker to get back with me...

Greg S, I can't say I've worked hundreds of numbers, but I have worked at least a few dozen and have been studying since March.  I'm familiar with the area, which I'm hoping makes up somewhat for a lack in experience.  I've watched several opportunities blow by while I've been working numbers and know I just need to jump in.  I'd like to use a lease/option exit strategy but am making sure it is something I can sell at a profit too...just in case.  Thanks for the warnings!

Ryan Matthews · Answer

They turned you away most likely because you declared yourself as an investor. HUD homes are generally for owner-occupants only because the whole point of HUD is to promote home ownership. After a round of owner-occupied bids, the listing agent will open up the 'investor pool' if a satisfactory offer was not received from owner-occupants. If you're not planning on occupying the residence as your primary then you'll have a tough time landing the contract. That's just been my experience.

Should I call the Listing Agent or look for a buying agent?

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