All Forum Posts by: Jon D.

^^^^
Exactly

You telling me that you'd turn down an $800 an hour deal?
How many tire kicking "buyers" have you taken on as "clients" that haven't over the last 2 years who still haven't purchased despite many showings?

I'd assume that. No free lunch.

Either you pay someone for every minute they're working or you have to pay them an even higher rate if certain time isn't included.

Negotiating off of an inspection is not rocket science and I feel like most closing cost credits are standard negotiation items (I mean our markets standard purchase agreement has a box for it and everyone expects to see 3% on initial offer). And maybe you do something that most realtors do, but again how would any buyer looking to retain an agent know that? My assumption until someone proves me wrong is that you get the inspection, you get a very rough estimate on what those things will cost, then you submit a revised offer justifying the revised price, and a new back and forth ensues.


I have a few clients who are realtors. They're actually honest with me with how their business actually works today. 1 of them who is over 70 years old admits she does almost no work (between Showingtime, an assistant her brokerage house provides, she doesn't show up at closings, etc.) and also admits because its practically no work she'll do it until she passes away. Not that is probably on 1 extreme, but still.

Here's a question for you... in typical buyers agent representation in a market like this (with constant multiple offer situations), what percentage of your time would you say is showings and bids vs. post acceptance? My guess is that 80%+ of your time is showings (if you actually do showings yourself and don't pawn it off on a staffer). So the business is tough right now because of this time spent on showings with constant unaccepted bids. 

Again while I'll say that the direction I'm thinking for a professional investor makes sense. If I need a showing I'll pay for it and if I keep going into bidding wars, I'll pay for it and if I burn enough time I'll owe more than the entire buyers commission would have paid, but at least I won't have someone who is pissy and moany every time I ask for something or makes a killing on 4 hours of work (when I did all of the heavy lifting).

The assumption of course would be that you're getting paid hourly for showings. That's sort of the point. If your working, you're racking earnings.

Take again the recent realtor situation. If he had taken my $x,xxx minimum with $xxx per hour deal I offered and we had closed he was probably a little better off than his 1/2 commission (with no minimum hourly rate) because the inspection stuff was a rare mess (requiring more of his time). Also if he had the hourly rate I would have rolled into the next one I bid on (and he'd likely have all or almost all of the commission), but he seems particularly sour grapes about this last one not going through at all.

In a nutshell he shot himself in the foot by not just going with what I suggested. Then I get the extra baggage of getting bad advice and also supposed to feel bad that I had to walk away from it after his efforts.

I would be completely fine with processing via retainer or as we go.

Tried google searching that in Twin Cities market and no luck. 


Honestly in this environment where I can imagine so many buyers clients are effectively time wasters with 10-20 bidders on the same home and never a deal going through... it seems to make increasingly more sense for realtors to jump at the option to get paid for everyone of showings and bid submissions that are deadends.

Rick lets give you an example. Lets say the property is for sale by Zillow itself and the listing agent for Zillow only accepts emailed purchase agreement offers with 48 hour response times, no phone conversation, and you can't communicate in anyway with the Zillow employee analyst reviewing the offer. How are you going to "negotiate" with them? (Note: This last one wasn't a zillow property, but the next that I'm considering bidding on is one).

Being honest you and me both know you're just going to submit their boilerplate purchase agreement either way and they're either going to accept or not accept the offer. You also know that several brokerage houses will offer you an assistant that will charge you less than $500 of your commission to actually check box/input the couple dozen items into the template purchase agreement. Also its not like you're needed at closing either so really the only time we're talking about is if anything weird happens during the contingency period.


I recently learned about your suggestion of submitting offer to seller with seller side agent cut (so they net more). Still considering that as an option, but I'd honestly prefer a deal with a realtor.

Also I mentioned above about the next place I'm thinking about bidding on is owned by Zillow. The "realtor" repping those Zillow properties in the Twin Cities is so systemized I don't think they would ever entertain (or even really have a mechanism to communicate) an offer with a cut in buyers side agent commission for a higher Zillow net. Not positive of it, but that is what I'd suspect.

Russell

I'd be content with a decent degree of mediocrity/average capability. I'm capable of doing a lot of thought on this myself (and if something comes up during the contingency period requiring special legwork I can usually do most of that work myself).

Also in my experience many of those claiming to be "top notch" rarely do much of anything different than others. They're probably just good at marketing and do the same template process as everyone else. And truthfully if they did do something special... I probably couldn't figure that out in advance of working with them which would mean me guessing wrong on several full commission realtors who don't do anything special before I'd find a "great one" anyway... much easier to just find a decent realtor and throw them a very high hourly rate.

I'm sure I'm not alone in being frustrated with realtors. My most recent experience I knew exactly what property I was after (like most investors its just a numbers game) and figured it would be a quick and easy purchase (depressed market no other bidders). My realtor didn't have to do a bunch of showings or anything so I engaged him in a rebating deal. I offered him a fixed minimum and if it something gets discovered as a time sink he can take an hourly minimum. He didn't want that and instead countered that he'd just rebate half and I accepted. 

Well a major item was discovered in inspection, etc. (unit has had an issue with flooding and likely fix is extremely expensive). Sure enough because realtor commission structure basically incentivizes him into working against me (I effectively get stuck with 2 sellers agents instead of 1 for me) and keeps trying to downplay it in order to get a deal done. I have to turn to a client who I know buys property likely with these issues and he tells me to probably run from this. I actually decide to make a generous offer reflecting some of the cost to fix, seller scoffs, and my buyers agent acts like a wounded puppy to make me feel bad for wanting to revise my offer in any way over a place that has an expensive flooding problem. Also if you think I just have a "bad realtor", I've met many and he's probably one of the nicer more reasonable ones, but I do feel like the realtor commission incentives even make a good realtor at least a little difficult to work with. Even if something like is fixable with a better commissioned realtor the problem is that I wouldn't know them out of the gate so its not like I could actually trust them until after a few transactions they proved they weren't just always very biased into me saying yes on a deal (regardless of whether its good deal or not).

Is it really too much to ask for letting a realtor take a high hourly rate out of the commission and rebate the rest? In the low chance a deal doesn't go through I'll just roll the hours spent on that one into the next one and the rebate to me on that one shrinks? Its really weird that realtors will agree to like $50-100 from another realtor to help do a showing while one of them is on vacation, but offer them a much higher hourly rate in a rebating deal and so many act like I'm destroying their industry.


I'm a business owner who pays current staff very generously. I also frequently bonus/tip extra when I know someone has given me more useful information than I'd expect or for putting in extra effort. I prefer to put much of my surplus earnings into investment real estate over the years and looking for a long term realtor that has a decent head on their shoulders and while I think all pay structures have their pro's and con's... I'd prefer much less conflicted than the current set up. Note: I'd also rather not get my own license... I am rather busy and I am willing to pay well to outsource certain items.

Any suggestions on finding a realtor that would agree to something like this is appreciated. If you are a realtor in the MN (Twin Cities) market and you're open to a relationship like this feel free to private message me.

I'm late to this thread, but the economist is right and actually quite self evidently right. It was just that the explanation/scenario wasn't presented the best. It's also not a unique situation to downturns and is something that is always happening in good times and bad.

It starts here. In MF where has the vast majority of construction been done? Almost all of it has been in A. Where does A draw most of its new category tenants (they have to come from somewhere, the tenants for new construction don't just appear out of this air)? B class apartments (exclude movement from owner to renter because there is also renter to owner). So while most people will stay in their class, a marginal minority has to move from another class into a growing supply of A property or it'll sit vacant. So at the margins some B moves to A, some C moves to B, and C is more likely to get filled by new population (from people aging into separate housing or from migration). Obviously there are some people who go from college to high paid job -> straight to A property, but by in large this is a normal ongoing process of transitioning up in class and what gets defined as A, B, C, etc. gets changed over time as a result generally improving housing stock.

What the economist is getting right is that A class is also where almost all of the vacancy is right now nationwide. 1st new construction normally doesn't count in vacancy data until the building as at least 1 year old. The owners of these buildings don't mind because they're focused on the valuation of these buildings for sale/financing purposes and the key to that is not filling the properties at any cost, but keeping rents of those that do fill the properties high so they can take their multiple on a high rent assumption.

The problem is that in downturn scenario the assumption that economist is making is that these A properties can't keep higher vacancy for long. They will eventually reprice to attract tenants and if they reprice enough, some marginal B renters who are less affected by the situation will notice that smaller price spread to move into a luxury A unit and will make the switch. Then B properties will get an uptick in vacancy that they'll have to solve by enticing a marginal few C tenants into their vacant spaces, etc.

At the end of the day its all about estimated vacancy rates for your area. If vacancy remains low then the process described above will proceed like it always has with high demand preventing price reductions in each class to facilitate move up renters. If vacancy is high because your metro overbuilt a little, some young adults delaying their entry into housing, or increased roommate activity then this facilitating of A <- B <- C will be met by lower rent and eventually (and friction makes this a slower multiyear process) the vacancy will fall most of all on owners who aren't motivated enough to cut rent to avoid some vacancy, but also will increasingly get shifted down to the worst C properties (which makes sense when you think of where long term vacancy ends up in metro's with higher overall vacancy rates... its always in the absolute worst neighborhoods). 

I figured I would bump one more time to see if anyone else wants to chime in to either agree with James logic or offer up any other alternative answers.