(Well, actually the phone ringtone is “The Eyes of Texas”, but it feels silly to type, “‘The eyes of Texas are upon you‘ goes the cell phone”…)
“Hi, I’m calling about your listing at blah blah blah.”
“Well, that’s not our listing, but let me look it up real quick for you.”
“It’s your listing, it’s on your web site…”
“Our site has all the homes listed for sale in Phoenix, hang on just a second…” (We’ve been there, done this before.)
“While you are looking it up, can you tell me what “Owner Agent” means in the listing?”
“Sure, that means the seller is a licensed real estate agent. In Arizona that is required to be disclosed up front. OK, I have the listing information up now, how can I help you?”
“I just want to talk to the listing agent, I have a couple of questions.”
“I understand, there is a lot of info here, I can probably help you…”
“Look, let’s just cut to the chase. I am a cash buyer. You and I both know I can get a better deal working with directly with the listing agent. Can you give me their name and number?”
I make an attempt to tell the caller that the listing agent works for the seller (or themselves in this case) and has their seller / self’s best interest at heart, not you the buyer. But it’s swiftly apparent the caller won’t listen and only wants the listing agents contact info.
Now I could be all douchey and tell the guy to find it on his own. But he seems nice, albeit misguided. We chit-chat a little more while I’m looking through the listing info in the Multiple Listing Service (MLS). I tell him, “Look, I’m seeing some things here that I seriously doubt the listing agent will tell you…”
“Listen, I know you just want to sell me the house. And I’ll call you if I can’t reach the listing agent…”
[No you won’t, I think to myself.]
“So can you give me their number or not?”
“Sure, here it is. Good luck!”
What Did I See?
This particular home was listed for around $280K. The caller knew that. What the caller didn’t know was that the home was previously purchased in November 2011 for about $185K, by an LLC that is in the business of buying foreclosures, fixing / remodeling them, and “flipping” them — reselling them quickly for a profit.
Nothing wrong with flipping for fun and profit.
But do you think the agent / owner is going to tell this buyer that he bought the home three months ago, put $30 – $40K into it and is now trying to get $55 – $65,000 in profit?
My guess is no.
Will the lister / seller “waive” the buyer’s agent commission of $7,000?
Probably. They will at least reduce it, and pocket what’s left.
Is the buyer “getting a better deal” working directly with the listing agent?
Maybe, maybe not.
Personally, and professionally, I think that armed with the following information — that the buyer will never get — they could quite likely save more than the $7K in buyer agent commissions:
- The home is overpriced by at least $10K.
- The home is “over upgraded”. It has been upgraded above and beyond what is typical for this neighborhood. It looks nice from the photos, but over upgraded homes can be difficult to resell, and they rarely will garner what the upgrades cost.
- There is a $55,000 – $65,000 profit margin built into this home.
- Some of the neighborhoods surrounding this property are pretty hot right now. An unseasoned buyer (and through the brief conversation I had with this buyer, it was readily apparent they are not very experienced) could easily be lead down the wrong path by a less than scrupulous agent/owner. I’m not saying this particular agent/owner would take advantage of an unseasoned buyer, but I assure you some would. In other words, there is a distinct possibility the agent/owner could produce data showing the buyer there is a hot sellers market and use that misinformation to lead the buyer to believe they don’t have a lot of negotiation room.
But, the buyer wanted nothing to do with having their own representation. They are convinced that they can get a commission reduction and a “great deal” working directly with the listing agent. What they don’t even know is they are working with a relatively high volume flipper who is out for one thing — to maximize their profit.
The buyer may well “save” $7K in commissions, and think they’ve gotten a great deal.
Hopefully for their own piece of mind they’ll never come to the realization that by using a good buyers agent, one who represents THEM and their interests, they may very well have saved ten or twenty thousand dollars. Or more.
Think about it folks. Why would an investor disclose details (that they aren’t required to disclose) in order to get you the lowest possible price on a property that they are trying to maximize their profit on?
Find a good buyers agent. They will work for you, not against you. Don’t plunk down $280,000 and let yourself be represented by the other side. This owner/agent makes their living selling homes for profit. You don’t. Why would you voluntarily go into battle with such a disadvantage right out of the gate?
Photo Credit: Louis Docker, aussiegall on Flickr. CC Licensed.