All Forum Posts by: Mike Rethis

Quote from @Allison Park:

Thanks for this info.  We ended up lowering the price to the appraised value and basically splitting the difference.  I was working with an agent and unfortunately a lesson learned for me.  She did not come for the appraisal or the inspection.  The buyer actually bid $5K above my sale price and my agent made it sound like she let them know that if it didn't appraise they would need to make up the difference, but it was clear she did not set that expectation because they came back to negotiate it. I will definitely make sure that the language is included in the contract going forward.  I would not have accepted the offer if I had known they would not cover it.

 The listing agent doesn't show up to the inspection, that's the buyers agents job to go with their buyers.

However, appraisal is a must for the listing agent. They should be bending over backwards to make sure they represent your best interests and get you the best deal. Unfortunately, it seems like you had a lazy/inexperienced listing agent. How naive of them to take a buyers word for it. For next time, you know what to look for in an agent now!

The next time you're hiring an agent, you can always send me a message and I will give you some tips on what to look for when choosing one. 

I too find myself losing out on a lot of opportunities due to the fact of using hard money. If you have the cash, that's always the best. But there's advantages for either way depending on your situation, plan, and goals.

The 70% rule is just a guideline. Every deal is different, and every person is looking for different margins

After Repair Value (ARV) - Rehab Costs - Purchase Price - Fees (holding costs, closing costs, selling fees) = Net Profit (before taxes).

Are you ok with the net profit based on how long it's gonna take from start to closing? 

Its also gonna depend on how much work you have to do. If you have a project that you're doing all the flip work and you are projecting $5k a month, is that really worth it to you? Or are you making $5k a month just to manage contractors? That's a big difference

I know flippers that will only take a deal with $100k spread, and others that are ok with $30k-$50k.

Did you have multiple offers, or was this your only offer?

You can try and negotiate somewhere in between the $9,000 difference and have the buyers come up with extra cash at closing to make up for it- but chances are they are gonna want it at appraised value; especially if they're the only offer. This is also gonna depend on how strong the buyer is financially if its even possible for them to pay the difference.

If you get multiple offers on a sale in the future and the price goes over asking, make sure the offer includes some type of language waiving a portion or all of the appraisal gap.

If you tried to fight the appraisal already and didn't get anywhere, you don't really have much recourse. It's not typical the appraiser will admit they are wrong and bring it up. Also, is it even worth the headache?

Are you working with an agent?

In the future if you're representing yourself in the sale; meet the appraiser at the property and give him the comps you came up with to justify the price. highlight any inferiorities to your property on the comps so they can see.

If you're working with an agent and they're not doing this: drop them immediately. It's not enough to just show up to the appraisal as an agent. They should do everything they can to make the home appraise! Some agents don't even show up they have the appraiser use the E-KEY.

If you have any questions reach out, I'm happy to help!

Quote from @Jay Hinrichs:

Quote from @Mike Rethis:

Quote from @Jay Hinrichs:

Quote from @James McGovern:

Quote from @Bill B.:

If you have other/better offers you take those offers instead. If their offer is the highest/best, you are being paid, or at least offered, that much more to work with them. It should never come up unless their clients are constantly offering you much more than other agent’s clients. Maybe they are bad negotiators and that works to your advantage. 

 Highest offers with a painful agent after inspection periods is the challenge. How do you know which agents are going to be painful at the end?

 you dont a good agent repping a buyer is going to go to bat for them not U keep in mind many sellers lie about all sorts of things.. not saying your that way but it is common the industry. If you want to buy rehab and flip homes.. then this is part of the process. if you to thin skinned to deal with it then maybe flipping is not for you.. U think @Russell Brazil or @Steve K. are not going to be there at the final walk through to make sure their clients are protected ????

 I agree. The buyers agent is acting as a fiduciary for the BUYER. If the buyer wants to back out, it's the agents job to make sure they protect the buyers interests over their own. When I represent buyers, it's extremely important to me that they're 100% satisfied with their purchase. It always comes back to you the right way when you do right by your clients.  

Which is why it is so important to have a competent agent representing the sellers side and limit the risk in any way possible of that being able to happen in the first place.

I get it.. I also understand the OP frustrations.. I have had them as well when home inspectors simply do not know the code and we are butting heads.. Or its worse if the agent thinks they know some detail that again is not correct.. it puts you in an awkward position of arguing with the agent when the buyer is there.

I had one a few months ago were the buyers were uber picky on one of my new builds I mean we go above and beyond and so they come for their walk through and start in again on I mean TINY things that no other inspector buyer would point out I mean somethings cosmetically are to industry standards and we are not painting the moa lisa.. I got hot and just said OK I am done I am not signing and you can tell your movers to take your Van full of stuff out of my development and go find another home to buy..  The agent then calls my wife who is the listing agent .. I am the owner .. And she calms them down and me and well we closed.. But geesh I get the OP frustrations and it can happen to the best of us.. Had another one were me and agent were throwing F bombs at each other while the buyers while was crying

For sure! It's never fun when buyers get overly picky, especially over something so simple like a GFCI outlet. Not to mention at a final walkthrough when the inspection negotiating period is already well passed. The buyer just wanted to get out of the deal, and that was their route of getting out. 

I'm sure you would agree; it's never a dull moment in Real Estate! I bet you were ecstatic when that deal finally closed lol!

Quote from @Jay Hinrichs:

Quote from @James McGovern:

Quote from @Bill B.:

If you have other/better offers you take those offers instead. If their offer is the highest/best, you are being paid, or at least offered, that much more to work with them. It should never come up unless their clients are constantly offering you much more than other agent’s clients. Maybe they are bad negotiators and that works to your advantage. 

 Highest offers with a painful agent after inspection periods is the challenge. How do you know which agents are going to be painful at the end?

 you dont a good agent repping a buyer is going to go to bat for them not U keep in mind many sellers lie about all sorts of things.. not saying your that way but it is common the industry. If you want to buy rehab and flip homes.. then this is part of the process. if you to thin skinned to deal with it then maybe flipping is not for you.. U think @Russell Brazil or @Steve K. are not going to be there at the final walk through to make sure their clients are protected ????

 I agree. The buyers agent is acting as a fiduciary for the BUYER. If the buyer wants to back out, it's the agents job to make sure they protect the buyers interests over their own. When I represent buyers, it's extremely important to me that they're 100% satisfied with their purchase. It always comes back to you the right way when you do right by your clients.  

Which is why it is so important to have a competent agent representing the sellers side and limit the risk in any way possible of that being able to happen in the first place.

Don't mess with the fire marshal...

I know an investor in NB that got a warrant out for her arrest for not completing the punch list that a fire marshal created for her- it was a huge headache.

Especially in buildings with more units, the fire marshals are much more strict. I agree with Sam to see how much they will work with you. Also is the fire marshal citing relevant information? If not, you may have better recourse.

Quote from @James McGovern:

Quote from @Bill B.:

If you have other/better offers you take those offers instead. If their offer is the highest/best, you are being paid, or at least offered, that much more to work with them. It should never come up unless their clients are constantly offering you much more than other agent’s clients. Maybe they are bad negotiators and that works to your advantage. 

 Highest offers with a painful agent after inspection periods is the challenge. How do you know which agents are going to be painful at the end?

There's a lot you can tell about not only the buyer agent but the buyer and it starts before they even put the offer in.
-How quick were they to put the offer in after seeing the property?
-How many offers were there total?
-Did they put a timeline on the offer?
-Did they ask a lot of questions, have 2nd/3rd showings, etc?
-Any other behavior you can pick up on to indicate interest
Then they put in the offer:
-Are they the best PRICE or the best DEAL? Sometimes the best deal isn't the highest price. The contingencies are just as important
-Did the agent write an outline of the email in the offer and tell you why they're a good agent to work with?
-Did you do your due diligence with the buyers lender? Did they call you first?
-Did you do your due diligence with the buyers agent?

Everything that happens throughout the process from the home being listed to the time the offer comes in to the negotiation of the offer can give you an idea of how the deal is going to go. It's much easier to make the situation more favorable for yourself if there's multiple offers on the table.

I understand you use an entry only listing service. I strongly consider finding an agent that is knowledgeable of these aspects and paying them more for the full service. Once you find somebody that is capable of representing you the right way in these scenarios, you will not only make more money but you dramatically decrease your chances of hiccups throughout the process. The most successful investors have a go-to full service agent. From your price/marketing/pre listing --> offer/negotiation strategy, the littlest things make the biggest difference in the sale. Good listing agents also know a lot of the buyer agents from previous deals/scenarios and can give you an idea how easy the buyer agent is to work with.


If you would like to chat, I can give you some dos/don'ts and what to look for in somebody.

Commissions have always been negotiable, but I always recommend flippers to offer buyer agent commission. Not only flippers, but in my experience sellers that offer BAC tend to do better than the ones that do not (as far as net proceeds). It's also very important to know the wants/needs/position of your buying audience.

I find that buyers are much more willing to get into a bidding war, and over bid on a property as opposed to paying their buyers agent. Even if it's at list price, it makes the deal so much easier in the buyers eyes. Since buyers traditionally almost never had to pay commission to their buyer agent, the conversation is much easier and familiar for clients to understand when you say "you have to bid more than 5 other people to get this deal if you really want it". Instead of "let me explain this lawsuit you never heard of for 20 minutes and that's why you have to pay me now". Most brokerages also now have a checkbox on their representation agreements where the client can opt in/out to being shown properties that don't offer buyer agent commission. That can decrease your buying pool.

As a flipper, your ideal buyer should be somebody represented by an agent buying your home. It ensures a smooth selling process with less chance of the buyers backing out and having to go back on the market again. The commission paid greatly outweighs having to go back on the market and potentially getting less than you listed it for the first time.

Some individual markets are better for this than others, but if you have an agent with a great strategy on the list side (professional photos, staging advice, etc) and you pair that with listing the property at a low price; you increase your chances dramatically of getting a bidding war and not only offsetting the commission but potentially making more than originally planned. I just did this with a seller in West Hartford and we had better success than either of us even anticipated.

Yes, I am an agent so you may think this is a biased opinion. But, if I was listing my own flip, I would offer buyer agent 100% of the time. Even if I lost my license today and had a flip tomorrow I would still pay both the buyer and seller agent fees.

Everyone that has replied has brought up really good points and I agree with all of them. Check out "Investors Edge". I have never worked with them, but I have had a presentation from them; that would be one of your cheapest option assuming everything they say to you is true. 

Do you know investors and contractors? If not, you need to meet some. If you know investors and contractors, find a great deal an investor is willing to joint venture with you on. If you have constant access to great deals that you have access to and he doesn't, have him front the money and you manage the process and even get in there and help the contractor with your labor. All he has to do is put his money up, and sit back until it's time to sell. Show the investor your skills that make you the right guy to partner up with, and explain to him why you're the right guy for the job. Find a way to put skin in the game without having the money. That's your only hope to putting no money down.

Hi Maria, 

I'm based in central CT. I also work in home remodeling/building and can put you in touch with the right contractors dependent on the area.

Are you using somebody you have a relationship with or are you looking for a hard money lender to fund the deal? 

If you're going with a traditional HML, your lack of experience is going to cause some out of pocket expenses for you. Although it varies between hard money lenders, expect to pay something along the lines of between 10-25% of purchase price, and they will usually fund something like 100% of renovations up to 75% ARV (rest would come out of pocket). They are also going to charge you something like 3-5% loan origination fee. Like I said this will vary dependent on the lender, experience, credit score (not as important as traditional financing but can help). They might also have other criteria they are looking for like licensed contractor(s) doing the work. You can get preapproved with hard money lenders to find out what they will potentially lend to you. It's going to come down to how good the deal is; how

Expect to put the property in an LLC no matter what to limit your risk, but you will have to personally guarantee the money that someone's willing to give.

If it's somebody you just have a relationship with but has enough trust in you to lend to you, the terms can be different and it's gonna come down to what you can negotiate with them. Ask them how much they are willing to give to you if you can show them a strong deal. 

No matter who it is, It's going to come down to how strong the deal is; bring a good deal to the table and the money will come. They're going to want to vet the deal themselves, so show them how much money you can make and why you're so confident. Highball all your numbers and leave room for error and unexpected expenses. If possible, partner with people that bring important skills to the table for your first few deals to learn the game. Get the right people in the right places and the rest will work itself out; but it wont come easy. Managing contractors is a nightmare! Take it from me - I have to work with them daily. Working with realtors for valuable market insight and contractors for scope of work might be a good option for you starting out if you don't have experienced flippers you can work alongside that know this stuff. 

As far as presenting a property, think about it if you were going to lend to someone and you wanted them to show you why this deal is so great that you can't pass up on it! Here are some tips for presenting your case:

Property Details - Property address, size, style, and other comprehensive data that would attract someone that wants to make money. Is there anything special about the property? Is it a popular area? How are the schools? Anything you can present to strengthen your case helps. 

Scope of Work - Prepare a detailed scope of work outlining the renovations or repairs you plan to undertake. Include cost estimates for materials and labor. Add 20% to give you some comfortable room.

Comparable Sales - What are alike homes going for? Is the market strong in the area? Are many of the homes going over asking price, generally by how much? What's the average DOM? Look up how to do a CMA if you're not going to have a realtor help you with your purchase. This is gonna be one of the most important factors and you have little room for error as this is how you're going to get your ARV.

Budget and Timeline - Present a budget detailing all anticipated costs associated with the project, including acquisition, renovation, carrying costs, and contingency funds. Also, provide a timeline outlining key milestones and completion dates. Nothings gonna go perfect, so anticipate some extra time.

Exit Strategy - What's your out plan? Are you going to refinance, or sell the home? What are you going to do if you don't get appraisal you were hoping for if your goal is to refinance?

Refrences - Is there anyone with a proven track record that may help rest your case as far as skills you're good at to get the job done? 

Insurance and Taxes - This will go along with budget and timeline but is important to note that you're going to pay this for the time you hold. 

Credit History - This may help a little if you have good credit, but it shows you know how to manage money correctly

Proof of Funds - Do you have the money to pay any out of pocket expenses like a down payment that the lender is looking for? Can you cover your interest only payments for the life of the loan?

There's surely some other things you can show to further present your case, but this will be the important information almost every lender is going to want to know.

I also should mention the chances of you finding something on the MLS is very slim in your case. Don't count it out completely, but generally the market is way too crazy for flipping on the MLS unless you get lucky. You also have many expenses that other flippers aren't going to have (paying contractors, interest on your money, etc). You're going to have to find creative strategies that not as many other people are doing. 

If you would like any more information, you can send me a message or give me a call. Happy to help!