Ok, so I had recently wrote about the house that I wanted to flip in East Nashville....well that dream was crushed a week ago, when I found out from the other Real Estate agent that a contract had been written on the property. Here's what happened:
We were going back and forth negotiating on price. We were off by a measly $2k. On Friday I emailed the other agent the counter, and got a response that she would talk to her sellers and get back with me. No word from the other agent on Saturday, so I emailed her Sunday to get an update....no response. So Monday I did my daily drive by of the property and saw not one truck...but TWO in the driveway, and paint swatches on the front porch. I started freaking out. I emailed the agent and she responded that her clients were not willing to budge from the price. So I promptly called her back (no answer) and emailed her to let her know that we would write up an offer for the $60k price her clients had previously threw out there. An hour or two later I got an email saying that they had received an offer on Sunday for $62,000, and that she thought we would not come up so they accepted the offer. Now that is pretty much the same $60k we were going to agree to, b/c I asked for no commission while the other offer asked for 3%. Needless to say I was crushed by the news.
This brings me to what I wanted to talk about. This agent was taking almost no commission from the sale, the owners had hired her b/c she was their friend. Now I am not saying real estate agents related by blood or friendship are bad, but they can be. This also goes for real estate agents that take a reduced commission just to get the listing, the old adage you get what you pay for is extremely true. Had the other agent called me and said, "Look we have another offer on the table and I just wanted to give you a heads up before we proceed with the negotiations in case you were interested in putting in a higher offer," guess what would have happened...she would have been in a multiple offer situation and probably gotten much more for her client in the long run.
So what to ask real estate agents when listing your property or using them as a buyers agent? Well yes ask them what kind of marketing they are going to do, how will they promote your listing, and all the other questions you can find on the internet. But....also ask something they won't see coming....what is one of the hardest or weirdest transactions you have completed and what did you do to make it go smoothly...or maybe when you get an offer on our house what are the steps you take when receiving it; i.e. what is the process you go through. What you want the agent to say is...I will call you and let you know we are expecting an offer, and then I will communicate with any other agent that has showed the property and let them know we are expecting and offer. Why you may ask? Well more often than not, someone that has seen the property that said that they are not interested may have changed their mind, or it may push someone into writing an offer if they were on the fence; and most of all....it could result in a full price, over asking price, or higher offer. I have had this happen more times than not after calling the other agents.
One such occasion was a flip I was doing, we received an offer below asking; I called the other agents, one of which said her clients were not interested before the call, but after calling her they suddenly wanted to put in an offer. After hearing this I called the original agent and let her know that we were expecting another offer and if her client wanted to amend her offer we would let her. My clients were willing to take the higher offer from the second agent b/c they thought the first one (50k below asking) would never increase the price. Well guess what kind of offer we got back, $25k over asking with a moved up closing date; all of this for an additional 10 minutes of work MAX. So they could have gotten an agent willing to reduce their commission by 1% resulting in a savings of $4,500!!! Or paid the extra 1% (which they did) and make an extra $70,000 more after the extra commission......hmmm which one?!
Don't think that the multiple offer situation will not happen in this "economic downturn" or "soft real estate market" it happens everyday. And having an agent that is prepared, and knows what to do, can result in a sale for more than expected. Now having an agent who knows how to handle multiple offer situations is not limited to listing agents. Buyers' agents should know what to do as well. Ask a buyers' agent what they would do if they knew there were multiple offers coming in on a property. Would you just go in with the most you would be willing to pay? Do you have another option? You do, and probably 1 out of 25 agents know of the other option (if not less). I call it an escalator clause, but that may not be the correct term. What it means is that you put an offer in lower than asking price, but with a clause that will escalate the price above any other offer price they may get, up to a certain price...I just lost you didn't I? In other words say there is a house for $200,000 and you were going to put an offer in for say....$180,000 (your "low balling" them)....but your agent gets a call from the listing agent that they are expecting other offers (yeah sure they are). Don't scramble and put in your highest and best offer...add this clause that says....We are offering $180,000 but should you get another offer for more we will "escalate" our price $2,000 more than the highest offer up to a purchase price of $205,000. What you have done is if the other offer was for $190,000 you have just got the house for $192,000 instead of putting in an offer of $205,000 saving you $13,000. Now the other agent has to show you the higher offer for the escalator clause to work (extra verbiage needs to be added but you get the point).
So this brings me to an end. I don't know how some agents are still in business when they cannot negotiate or know how to protect their clients' best interest. I just got burned, and I feel as if I was in some horrible break up. I find myself still thinking of the house and comparing it to every house I walk through, I still drive by it sometimes. So kids....when looking for an agent to buy or sell a house, ask them the tough questions, and if you don't get the answer your looking for move on. Just b/c some agents reduce their commission does not mean that they are better or that you are getting a better deal, more than likely you will lose money in the end. That is all....I'm off to find my next dream flip...hopefully they have an agent that knows what they're doing.
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