I often stay late at work to talk to my co-workers and last night was no different. While I was speaking to one in particular, this co-worker shared an experience he had when he bought his first rental property. My co-worker wanted to buy a house during a buyer’s market, and he knew it was a buyer’s market. Even with that knowledge, the realtor he chose advised him against offering a lower price on a house he was seeking to purchase. About the same time as his conversation with his realtor, the seller lowered the asking price. My co-worker pointed it out to this realtor and my co-worker told his realtor that he wanted to offer an even lower price, now that the original price had been lowered. Once again, his realtor said he thought my co-worker should just offer the new, lowered asking price. My co-worker pushed and offered about 10K less than the newly lowered price. When the offer came back, not only had the seller agreed to the price, they had also thrown in another 7500 toward closing costs.
The main question to ask when buying a home is, “Are you buying for business or for pleasure?” If you’re buying for pleasure, the aesthetics, demographics, and comfort are most important. If, however, you’re buying for business, the bottom line is value. The value can be determined by how much you can get as a return on your investment. Will the return come in the form of rent, natural appreciation, or forced appreciation (fixing the place up)? For my co-worker, he was buying for business. He was buying a rental. His goal was to lower his monthly payment to maximize his monthly net income. In his case, the realtor was acting on his own behalf. The larger the purchase price, the larger the commission would be, so by advising his client to offer more, he was looking to gain more. A buyer needs to determine what they want in order to “hold to their guns.”
Buyer realtors don’t need to do much to earn the commission, especially in our modern real estate society of online databases of homes for sale. Seller realtors, however, usually have to earn their money. It’s true that a bad seller’s realtor can just post the property and hope for the best, but in the case of the seller’s realtor, they actually have to put effort into listening to every offer, get great pictures that present the property well, and advertise the property to maximize traffic to the site (the physical home site). In reality, a realtor is an unnecessary person in the transaction. On the other hand they are there to help you fill out paperwork in the proper order and they can act as a “guide,” explaining all that will happen in the transaction from start to finish.
In my transactions, if I can avoid using a realtor I do. I once sold a property within 3 days after I received the purchase agreement from the buyer. There were no realtors involved. All I had to do was ask the escrow officer what documents both parties needed to send in and we both did what we were supposed to do. If you find it hard to sell your property, have a realtor help. If you are just swamped and can’t look for a property yourself, contact a realtor. In my opinion, they are similar to a professional personal shopper for houses.
The moral of the story? Know if you’re buying for business or pleasure. If for business, you can afford being more patient in your buying approach and can offer low enough that the seller has to second guess the offer (remember, they can always counter offer). If for pleasure, then your approach is to snatch the property you want because it matches your aesthetic and comfort needs. Most often when buying for pleasure, the price will be higher and acceptance of your offer quicker.
You make the choice!
If you enjoyed my article, please check out my other articles on real estate investing, follow me, and upvote. My plan is to provide, in essence, a semester or two of information. I’m building the “curriculum” from scratch, so if you have a question, please ask. I’ve invested in real estate for over 14 years now. Thanks!
