A little over two weeks ago I wrote an offer on a Real Estate Fixer Upper in the Portland Metro area. My Long term Client ( a real estate Investor ) who is always looking for good deals was in the mood to buy again. He consistently buys 1-3 properties a year. He is funny because he always has grandiose plans of rehabbing them but often resorts to flipping them instead.
Sometimes he does a little work on them but often times does nothing. Because he pays cash and does no inspections I am usually able to find him some pretty good candidates. The trick of course is understanding that there is a pretty good chance he will want to flip them immediately.
Hence it keeps me on my toes because I know he wants to make some money ( his profit requirement is at least $15,000 to $20,000) and, cover all of the closing costs as well. With purchases usually running in the $250,000 to $300,000 range it means that I will generally be selling it for $50,000 more than he paid. So I really have to know the product.
So this great property that we wrote an offer on had some pretty stiff competition. And even though our offer was strong it was not strong enough. They had accepted another offer. The Listing agent though offered us a sneak preview on another property that his client had just listed with him that very morning. The agent had not had enough time to get back to the office and put it in the MLS so this was an opportunity for us to get a jump start.
The Property was a long way from where this Listing agent normally worked in but it was right in my back yard in an area that I do most of my business. My client and I quickly made our way to the property and immediately knew that this property was significantly under-priced.
Within the hour I had written a full price offer with a 10 day closing and no contingencies. The offer was accepted by night fall and hit the MLS the following day as a Pending Sale.
After Closing my Client true to his nature did a little bit of dry rot work and bought a few fixtures to doll it up a bit and then after receiving a bid on the full rehab called me up and said " Let's Flip Her ".
That evening it went on the market and by noon the following day I heard that there may be an offer coming in. By 5:00 pm of that evening we had two offers to look at and one that would follow a little later. The first offer was a no brainier. It was above full price and all cash. The second offer was someone hoping to cash in on all of the media hype of it being a Buyer's market, they were devastated to hear that their offer was not accepted.
The third offer is the interesting one. The agent had called me several times to voice his clients enthusiasm for this home. It was everything they wanted and felt that it was well priced. That is when the last call came in. The Agent had checked the sales data and seen that my client had just purchased the property a few days earlier for about $45,000 less than the current asking price.
They wanted to know what the Seller had done to the property to justify the price. I was astounded. What possible difference could that make!
Of course my response to the agent was the price is the price. The fact that the previous Seller had left money on the table does not mean that this Seller will. I further volunteered another analogy. Real Estate Investor's often buy and sell foreclosures at large mark ups. What is the difference in that?
They just could not come to grips with it. And even though they new they would be competing against two other offers, in the last moment changed there offer for far less than they had originally intended. Of course we had a much better offer on the table to accept. It just seems sad to me though that the mentality of this Buyer and their agent was that they wanted to get a good deal but somehow were unwilling to do so if someone else got a good deal.
What say You? Does this all make sense to You? How would you handle it and what side would you take on this one?
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