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Updated almost 15 years ago, 01/25/2010
Unhappy RE agent
Hi you said in a previous post of mine what to tell a realtor to get an accurate ARV.This was a reply by one of the realtors.This was her 1st reply.
Hi Robert,
Thanks for the offer, but I don't think I'm the realtor for you. I am a full time associate broker who has been successful for many years and business is hard enough without working for a guaranteed NO Commission. I'm sure you can find someone to take the offer. I have taken enough time already to help you for free and don't look forward to doing more of it. The offer you are giving is unrealistic in todays market.
I know you want to succeed and I wish you a lot of luck.
If you want to pay me for my time, I would be glad to help you in your efforts.
Thanks Robert,
Maria
Here`s her second reply,before I even replied to the previous one.
Robert,
I just wanted to add to my prior response to your email. I did not mean that your offer was unrealistic in todays market...it's pretty much unrealistic in the world of real estate. On behalf of all my fellow realtors, I can say that it is truly insulting that you feel that someone would be interested in your offer. You have a lot to learn about the business and realtors.
I would not be interested in your pursuits even if I were paid by the hour.
Truly insulted,
Maria
I have no idea why she`d be insulted.Below is the Original Email.
I will be using you for the purchase of the property,if I purchase it.Need to get the ARV and written work estimates before I know whether or not the numbers are good.
This is how I want you to determine the ARV,I need to know what you can sell it for fixed.
I will be listing it with you for the ARV you give me on a 90 day listing. But if it sells for less than 95% of that value, you get no commission. If it sells for less than 90% of the ARV,you get no commission and pay for the buyer's agents commission. If it doesn't sell in 90 days,I relist with another agent,and you pay all the commissions.So please give me an ARV that you know you can sell it for after it is repaired.After it is repaired it will be like new.
Thanks
R.Miller
RE Investor
Is that insulting the way I wrote it?I don`t see it as being insulting but if it is I`d like to know.Thanks
Well, Robert, I wouldn't work for you. And doubly not after your second email.
You need to learn how to figure your own ARV- FMV if you want to be successful.
Agents are GUESSING at possible sales price. They have no control over when the buyers might appear, or how much the buyers want to spend, or how much the buyers want to negotiate.
You are also asking the agent to guess what the house might look like after you do repairs. Believe me, there is a whole lot of difference in the jobs done by different flippers.
Any buyer in this market who offers full asking price is nuts, and they all know it. In a hot market, you'd probbaly get offers routinely 10% under asking, and in this market, you can't be insulted if offers are 20% under.
If you don't want to sell for the offered price, you don't sell. You don't expect your listing agent to make up the difference.
A quick read of your first inquiry sounds like you expect the agent to not only give you an ARV, but the cost of repairs, too. You can not 100% count on strangers reading every word very carefully, because many people don't.
I wouldn't have made any comments to you, just a quick "no thank you, not interested." I thought the agent was unprofessional and you are unrealistic.
Wording is everything when you are negotiating. Your email to her sounded to me like you were saying she was going to have to come out of pocket if she didn't sell the property at your asking price.
Real Estate Agents work on a commission or percentage of the sale, which I am sure you know. So when the sales price goes down their commission goes down as well. 6% of 260,000 is more than 6% of 25,000 so you don't have to change what she makes of the sales value it is done automatically when an offer for the home is accepted by you. It looked like you were saying if she doesn't sell the property, you would re-list with someone else and she would have to pay the next agents commission. That doesn't sound reasonable in any market.
She WAS rude to you though. She should have just clarified what you meant or declined the offer politely. I guess with frustrations rising due to this rumored "economic crisis" people tend to get a little cranky.
I suggest you move on, chalk this up to a learning experience and get a mentor or someone who is willing to sit down with you and go over your offers and contract negotiations until you are familiar.
There are some real experts on this site that may be willing to help you. Or at least point you in the right direction. Hope some of this helps.
Myka
Another thing you could try is actually trusting the agent and simply telling them You don't really have that much experience, you are an investor and you possibly want to list your property with them. Ask them what they need from you.
Do this with several agents til you find one that is in tune with what you want and is willing to WORK FOR YOU.
The last two deals I did was with a lady who was part time, and a retired nurse. She didn't really care about commission, she just needed something to do in her spare time. Both deals she only made $500 each. She knew I didn't have a lot to work with at the time and she knew that I would use her again so she was cool with the whole thing.
It took for ever for me to find her, now... SHE IS MINE FOREVER!!!! HA HA HA HA AAAA. (Just kidding)
It appears to me that Robert is mixing up things here for us.
First we are lead to believe that the 230K and the 176K were for the same property.
Jon suggested a way for him to get a good figure out of the 230K realtor, but then we find out that his emails were sent to the realtor that gave him the 176K BPO And it was for a different property than the 230K BPO.
reread what he said
Mixing things up like this will cause us to give you information that does not help you at all. I can see why the realtor was upset and unprofessional. The advice given by Jon was intended for the 230K realtor and you sent it to the 176K realtor. Any advice given is specific to the posted information and may not work for any other situation. Especially since we now see that this is also on another property and the 230K and 176K BPO's were not for the same properties.
We do need good information from you to give good advice to you.
I certainly could be confused (ask my wife and kids) but I think the $176K property and the $230K property were in fact the same one. I think you're right, Jim, that there were two different agents involved. The first one gave the $230 CMA and then a second one gave the $176 CMA. My scheme was aimed at the first one and the (now verified to be) overly optimistic ARV. I think you (Robert) were asking this second agent for an ARV on a different property. Simpler, and more likely to produce a good outcome to say "I'd like a listing price for the property that would bring a contract under 90 days." Unless your market is totally dead, and if it is, why would you be trying to flip, there is SOME price that is very likely to bring a buyer within 90 days. That price, IMHO, is the one you want to use for your evaluation. At $40-50 a DAY for hard money for a $100K a flipper can't afford the overly optimistic "lets test the market and see what it will bring" approach.
I do believe that robert was moving past things and attempting to move forward. But he is having a problem with wording. Which is why he came to us in the first place and showed us his emails that he sent.
I think his major problem is the wording that he is using. He will get better with time if he takes the criticism of peoples comments for the better of things. His post that I reprinted also shows his problem if the 230K and 176K were for the same property, because it clearly says it was two different properties.
This is all that I am trying to get across to him so he does not have this problem in the future.
I hope you(robert) understand from all the responses that Jons way will work, but it must be properly worded, or you get the results that you did.
Even if you do properly word it, there will be those realtors who will still respond that way to you, so all you can do is to move on and try again. Persistance does pay off and you will find that one good realtor for you if you continue to try.
good luck/
Great advice Jim. Wording is everything! I have a habit of when I reach a deal, I get the other party/ies to repeat back to me the deal. This way everyone involved is on the same page. I usually like to get everything in writing ASAP. This also ensures that everyone is on the same page.
You will only learn how to word things by either messing up, or learning from those that have already been there.
Keep asking questions, your learning NEVER ends!
Robert could have also structured his compensation to the Realtor differently. Flipping the coin, Robert could have offered a small commission if the property eventually sold for the low figure (or range) and increased the commission as the sales price increased. Then both Robert and the Realtor would have made more money as the final sales price increased instead of the Realtor working for nothing if the price dropped below a certain figure.
The approach I just offered would require Robert to have a good sense of what the realisitic price would turn out to be. Prices change. Learn how to plan for price fluctuations and to incentivize people working for you.
The $230k and $176k prices were for the same property.This CMA I was asking for was for a different property.But I have moved passed it and working on determining arv myself.Thanks for all the help.
First, the way the email to the agent was worded, it was highly condescending and somewhat insulting...
That said, a real estate investor should always strive to control all aspects of his/her deals. In my opinion, if something goes wrong, it's NEVER someone else's fault...it's always the investor's fault.
For example, if I lose a deal because my buyer's mortgage broker screws up, it's my fault for not insisting that the buyer use my broker. If a house doesn't appraise, it's my fault for not knowing comps before I bought it or not convincing the appraiser to get it to appraise. If a contractor goes over-budget, it's my fault for not knowing what the project should cost or for not managing him better.
I NEVER blame anyone else for any problems with my deals...and having that attitude forces me to do things that keep my deals on track and keep me from losing money.
How does this relate to you question?
If you take this attitude, if the ARV that the realtor gives you is inaccurate, it's your fault, not hers. So, how do you control this aspect of the deal to ensure you don't get screwed?
The best suggestion is that you should demand to see all the comps that the agent used to arrive at that ARV, including any listings of properties that expired or were withdrawn. Then you can review the listings/comps yourself and determine what the ARV and the listing price should be.
You come up with the ARV and you set the listing price...not the agent. If the house doesn't sell, you have nobody to blame but yourself, and that's the way it should be.
(and, of course, when you make a lot of money, you get full credit :)
Control all aspects of your deals. Period.
Ok now I did my own ARV on the property that had 2 CMA`s done one for $230k and the other for $176k I determined the ARV myself and the average price per sq.ft. in that area is $130/sq.ft.,I decided to be a little conservative and went with $125/sq.ft.My ARV came to $221,500.That`s the easiest way to determine ARV right,by going with average price per sq.ft. on similar houses?If so then this is still a good deal.All comps were sold within 3-6 months and the furthest one away was 0.9 miles.So I think I`m pretty close on the ARV.
Originally posted by Bill Gulley:
OK, I'm done! Bill
A couple of issues with this analogy. For starters, you are not buying a brand new home in almost all cases. It is used and the bank was not the original purchaser but rather the party that lent on the transaction with the property acting as collateral. Why should the bank take on express liability when their original intent was not to be the seller of the property to begin with? Considering they are already losing thousands or tens of thousands in lost interest payments, etc., why should they be responsible for warrantying a property they know very little about outside of its original appraised value?
You have to be careful using a $/sq.ft. approach to valuation. If one house is 10% larger in sq.ft. than a comp, but has exactly the same finishes, beds, and baths, the difference in price is going to be much less than 10%. Similarly, if a house is 10% smaller, its not going to be priced at 10% less. Best to try to find comps that are very close in size, then make a small adjustment. An appraiser will make an adjustment for size, but the adjustment will be much less than the overall $/sq.ft. based on sales price.
You need to find houses that are in the same neighborhood, are the same style, have the same number of beds and baths, are close in size, and have similar finishes. I messed up on my last deal by comparing my ranch with basement house to trilevels. The trilevel footage is counted differently than a ranch with basement and a ranch with basement with the same finished square footage as a trilevel will be priced quite a bit less. The deal ended up working out OK, but looked like it was going to die when the appraisal came back $10K less than expected.
I completely agree with Jon (usually do :)...
I don't like determine ARV based on square footage, but instead, just focus on similar houses (year built, style, beds, baths, finishes, land, etc) within a small radius sold within the past few months.
Yeah the comps I used are very close to the same type,size,etc.The actual sq.ft. is 2700 by my contractors measurements,but public record is 1776.So the ARV is probably a little higher,but I decided to go with public record.That`s probably what an appraiser would use right?
Appraisers generally actually measure the place.
If public records are off by 1000 sq.ft., something weird is happening. Could basement square footage be getting included? Ground floor, second floor, and basement footage all have different values. Or, could some unpermitted work have been done to add that 1000 feet? Go drive by your comps and see if they look different than what's implied by the public records.
In one of my farm areas, its very common for public records to show 900 sq.ft 2/1 with a full basement. In reality, these are almost always fully finished in the basement with two more beds and baths. One that wasn't finished would have a lower value than typical. Not at all unusual to have a second kitchen in the basement, too.
well the basement floor in this house is dirt,so i`m not sure if that counts as being unfinished or not,but I think public record excludes the basement,that`s why it`s only 1776 sq.ft. instead of 2700.
Pretty sure a dirt-floored basement would be considered a crawl space. Is that common in your area and do people use it for living space? Seem like it would be similar to an unfinished attic - useful for storage, but not really part of the size of the property at all. I've looked at a couple of houses here where the crawlspace was fairly large and had shelves arranged for storage. Useful, but it doesn't really add to the size of value.
If that basement space is considered valuable, then you need to compare to properties with that space. This is something you're going to have to actually have a look at the comps to know. If that's valuable, and you use comps without that space, then you will be shortchanging yourself.
If you could legally dig some of that dirt out and pour a concrete floor, you might have an opportunity to add some significant value.
Yeah it`s a full sized basement,meaning you can walk around without crouching.Yeah I`ll contact my contractor and ask him how much extra it would cost to pour concrete and then that extra 1000 sq.ft. would be added to the value.That`s a great idea(don`t know why I didn`t think of it).Thanks
Still might not make it completely legal, im not exactly sure but there needs to be windows and such to be bedrooms..
This post makes people like me to be alert and to be aware
of things...
If you wanted to turn it into proper living space, I assume you'd have to conform to your local codes. Typically that would require 7'6" of height from floor to ceiling, at a minimum. Bedrooms require two means of egress, which means the door and an adequately sized window. A 4'0" x 4'0" slider will do the job, as long as you have a window well behind it that's also 4' deep (wall of basement to far wall of window well). Lots more details, but those are two biggies. Finishing a basement's a big job in itself. Pouring the floor and cutting windows adds a lot of work. Might be worth it, if it ads enough value.
In any case, my point was to be sure the comps are truly comparable. If they have a 1000 foot finished basement, the value will be quite different, and its not really a comp. If they just have a crawl space you can't stand up in, then the value may be different, too, if the standing space is considered valuable in your area.
Robert,
I love this post and wish you abundant success in 2010.
Strictly from a standpoint of ethical conduct and what is appropriate behavior this agent wouldn't have my business on any given day - regardless of the numbers.
Anyone so maladroit in communications to send in email - for the public to see - this kind of message is operating from pure anger. It has nothing to do with the business. In fact, this is highlighted because of the ending of the first message and the 180 we see immediately following.
I imagine this was sent with her e-signature and as such is a horrific show of a lack of basic common sense. In such cases, I have a very clear rule:
Never, ever send emails that are insulting or provide feedback which leans more negatively. It's a can of worms one can avoid by behaving in a manner focused on long term relationships.
No doubt, she may not accept your offer - that is her prerogative as a party to the proposal.
However, there is an ethical manner in which one communicates with others - regardless of the industry.
One may certainly diverge, but my own leanings are upfront expectations. Instead of dancing on the periphery you stated what you wanted in a succinct manner - kudos.
At best, this agent is incompetent and engages in ongoing marketing because she is unable to retain solid referrals.
We can disagree about the nuances of the ARV and financials but anyone that explicity states they would refuse even if "paid by the hour" is not operating from a standpoint of reason.
While her underlying contention was the structure guaranteed no income she even rejects the polar opposite.
Robert, this isn't unhappiness but rather open hostility. It simply has no place in any business operation.
Do not include square footage of finished basements in your computation of values based on square footage; appraisers use the square footage of the above grade space as the living area, and the basement space is valued at a different figure per square foot. $125 or $130 per square foot for a basement will almost never be used by an appraiser.
So now when you looked at comps, you have to be clear on the square footage of those comps, and the price per square foot. Yours is not 2700 square feet above grade, so you should find comps that are also at 1776 square feet or thereabouts.
In the end, you need this house to appraise for real close to your ARV, or else your ARV number is meaningless.
I agree with Tony,
It must be a win-win. Instead, ask them for a low conservative ARV that they know will sell, then give them a bonus commission if they sell it at a higher price. It reduces your risk and creates a much healthier relationship.
Blaine Washburn
North Star Realty
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