All Forum Posts by: Michael Archard

Civil Engineer licensed in MA and NH specializing in getotech and foundations 

I have always offered 4% agent commission on the sales of my flips and personal residences (7 deals and counting) and have been able to get over asking price on 5 out of the 7. I have been told by a few real estate agents that offering a higher commission (i.e., 5-6%) will result in a higher sale price, and pay back the increased commission and then some. I have even seen some data that tries to support this, but the data was supplied by an agent and was not normalized by property value or asking price (the higher priced homes tended to have the higher commissions offered). 

I'd like to hear from both agents and non-agents to hear what proof may be out there to justify this strategy, or is this simply a ploy used by agents to make a few more bucks?

Thanks,
Mike 

 Thanks, Lien. Feel free to reach out if you have any interesting 3-4 family leads in the greater boston area! 

Hi BP,

I have an interesting legal dilemma here. I listed a flip for sale a few months back and accepted an offer (over asking) from a very strong conventional loan buyer. Unfortunately the appraisal came back low and the buyer walked away citing her mortgage contingency (there was no appraisal contingency). What's interesting is that the buyer had already told us she decided to increase her down payment before the appraisal came back citing "the final loan application was for a lower loan amount than the P&S loan value."

My question is does anyone think I should pursue the entire deposit via litigation? I am currently holding the deposit hoping for a small settlement outside of court and have already sold and closed on the the condo to another buyer (at a loss). A side note is that my day job as an engineering consultant for arbitration/litigation disputes puts my legal risk tolerance higher than most, but I'm trying to avoid litigation unless it makes sense. The buyer is currently balking at any and all settlement offers (we are only asking for $5k of her $48k deposit). 

I know I could not make the buyer put additional cash into the deal, but we structured the PnS to allow the buyer to restructure the loan (ie., the buyer was not tied to the original loan terms and could decrease the down payment to avoid denial of financing). In our negotiations, the lender confirmed the buyer could have restructured the loan to decrease her down payment from 10% to the minimum 3% allowed, but there was still about a $5k delta (original loan was $432k and restructured loan at 3% down would have been $427K). The situation points to the the buyer likely put in an additional 5%-10% downpayment for more favorable loan terms prior to the appraisal (see Buyer X first and second offers below). 

The elephant in the room was the buyer changed her mind and wanted out as soon as the appraisal came back low. She was not willing to renegotiate or appeal the appraisal via Reconsideration of Value. She had a very inexperienced agent and closing attorney which did not help us keep the deal together. The buyers agent actually pushed back when we asked for an official loan denial letter, which rose red flags making it look like they had to ask the lender to be denied.  

A few nuances here related to the numbers:

• List Price: $449k
• First Offer Received Buyer X: $465k w/ $95k down (with appraisal continency) 
  
• Final Accepted Offer from Buyer X: $480k w/ $48k down (appraisal contingency removed)
• Bad Appraisal: $440k (should have been appealed with ROV due to errors but buyer declined; average age of comps was 11.5 months and no inflation was added to adjust values, also appraiser used incorrectly small square footage)

• Buyer's Original 90LTV Loan: $432k ($480k w/ $48k down)
• Buyer's "Final" Loan Application: ???? unknown
• Buyer's Possible 97LTV Loan Restructured: ($427k w/ $13k down)

It is my understanding if the buyer had committed to a new loan application with a loan amount less than $427k, prior to the appraisal coming in, she could not have obtained a loan denial from the lender in good faith. Please let me know if I can elaborate or if I'm missing anything. As I mentioned we are trying to settle outside of court, but given the way things are going (and my professional experience) I'm not afraid to go the distance if needed. 

Thanks!

 Thanks, Colleen. This makes sense. 

Hi BP,

I've been looking around for a 4 family property to FHA owner-occupy in the greater Boston, MA area. I have seen mostly 4-unit properties but occasionally come across a single property with multiple structures (i.e., 3 family and single or two 2 families on one lot).

My question is specific to the appraisal process, does anyone have any insight on the appraisal process? I know every appraiser is different but I am wondering the general approach. Are the comps of two structures, say a 3 family and single family on a single lot, based on 4 family structures in the area or are they based on the combined values of individual 3 families and single families?

Thanks,

Mike

Investment Info:

Single-family residence other investment.

Purchase price: $50,000
Cash invested: $240,000
Sale price: $340,000

New construction of single family home featuring significant site improvements included bedrock removal and landscape design