A Real (Estate) Disaster - Why Hiring The Wrong Agent Is A Disastrous Idea
Disclaimer: the chain of events depicted here are via the perspective of a client, along with the coinciding dismal communication from their agent (so I never got any of the story from the buyer's agent because they were missing from the transaction for the most part).
Think it doesn't matter who you hire to represent you as a home buyer? Think there's not a gap wider than the grand canyon between a great agent and piss poor representation? Well, in most real estate transactions, there is admittedly little most people would notice - a great agent may communicate better, have better processes, and keep things easier, but a bad agent can navigate most transactions without too many major issues. But...BOY OH BOY can things go wrong from time to time as a result of working with the wrong agent.
This year, we've been fortunate enough to help several first time investors begin their portfolio of investment properties - while high rates, prices, taxes, and a deterioration of landlord rights (I'm looking at you, California) in many states have taken some of the shine from real estate investments, several states still offer tremendous opportunity (I'm looking at you, Wisconsin & Indiana). We have investment purchases dialed in in several areas, but we had a buyer that didn't want to use our resources. In the buyer's words, "I like to go my own way and figure things out for myself". It was with that mindset that the buyer found their agent and went under contract on a property sight-unseen.
The first red flag? The property had tenants that needed to be evicted, and enough damage done by said tenants that an appraiser noted about $30k worth of work that needed to be completed for the property to qualify for conventional financing (keep in mind in this case $30k is about 25% of the property value). So the buyer's agent negotiated with the seller to have the property brought to an acceptable condition, right? Wrong. They recommended the buyer pay for repairs through a property manager they knew - sinking ~$30k into a property they did not own that was tied up in probate.
From there, the red flags kept flying - addendum after addendum extending the close date, with contract verbiage that buyer would be responsible for evicting tenants upon sale...then, the big one....
Buyer's agent allowed a property manager into the property to complete unauthorized (by the buyer nor the seller) repairs AND allow new tenants in to occupy the property. Upon finding out, the seller rightfully became hostile, could suddenly close right away, and forced the buyer to perform based on the most recent close date addendum (giving the buyer days to perform after months of seller-related lag time). What's more, the seller demanded an additional $7,000 of (what I see as extortion) money to make up for the fact that tenants were allowed into the property without seller/owner clearance.
The buyer was forced to pay cash and the buyer's broker offered him a loan to help cover some of the costs...with 10% in fees.
When we recommend an agent it's because we trust them to guide you as a buyer. While we like working with people we know and like, what's most important is that we trust them. In this case, our buyer ended up paying a steep premium for a property and starting his investment journey quite negative on the ROI spectrum.
Can a buyer opt to not have an agent? Or find one on their own? Absolutely, but we don't recommend it. Most of the time, the repercussions won't be terrible, but the potential for disaster exists when you accidentally stumble into a situation that involves parties who are either unethical, incompetent, or a combination of the two. Buyers, especially first time buyers, and even more especially first time investors, need a team of experienced professionals in their corner to help navigate what can be the biggest investment of their life.
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