Let’s talk about my BIGGEST PET PEEVE as an investor listing broker:
This is a typical conversation that happens too frequently not to get under my skin.
Buyers Broker: “I see your seller only paid $200,000 for this house 6 months ago and he is selling it for $325,000. THAT is why we are sending a low offer…”
What’s my response to the buyer’s broker?
“Have your buyer go buy a house for $200,000 and fix it up themselves, if it’s so easy!”
The value of a house on the market should NOT be determined by what the seller paid for it, so that is why there is “comparable market analysis”.
A. Risk Factor: If it’s so easy, everyone would be doing it. The fact that an investor is taking on the risk of buying a distressed house is worth something. The truth is most homebuyers aren’t willing to take that risk yet they want a move-in ready house that has been newly renovated with quality finishes.
B. There are a lot of costs to consider that the seller is paying for. A buyer may see the obvious money spent in the fix-up costs. After all, they found the house attractive enough to view and put an offer in! But have they considered all of the other fees?
1. Closing costs
2. Holding costs
3. Hard money fees
4. Fix up costs
5. Paying off liens
6. Buyers closing costs (in this market)
7. Auction fees (if buying at foreclosure auction)
C. This goes both ways. Not all investment properties are homeruns. This is especially true when they haven’t been purchased through Invest Now or Heaton Dianard LLC, where investors are guided through the process of buying, fixing and flipping an investment property from an experienced and knowledgeable team that has the expertise to help investors make decisions that they will profit from. Every now and then, the costs detailed above add up to more than what the seller is actually able to sell the property for or the same. Of course, the same goes for resale value using comparables. A house is worth what it is worth at market value. Do you ever hear a buyer’ broker advising their client to pay more for a house based on the numbers showing the seller is losing money or breaking even? Of course not! Yet they automatically expect a discount when they see the opposite. This is not a non-profit hobby investors are picking up. At Heaton Dainard, our agents use expertly use CMA to price a home right the first time. The last thing an investor wants is a home sitting on the market longer than it needs to be! A house is worth what an able and willing buyer is willing to spend with comparables to back it up.
Most home buyers aren't willing to deal with this: (these are some of our BEFORE shots!)
And now let's look at some photos of properties that some of our investors flipped:
Let's hear from the brokers and agents. Have you been guilty of this? What's your biggest pet peeve as a real estate professional!?