We all know that the goal of investors is to profit, and in real estate that usually means “buying low and selling high.” However, in this current market where we are seeing anywhere from 20-50 offers for just one property, it is increasingly hard for investors to accomplish their goal of making an acquisition at a low enough price that they can turn it for a profit.
So, they’re getting creative.
Most investors know that Realtors can be their ticket into acquiring property if they can “grease” the agent (kind of like greasing a host at a busy restaurant for a prime window table.)
I’ll show you an example and explain how that works.
I receive probably 2-3 emails a day, minimum, from investors who offer to allow me to represent them as their buyer’s agent (so not only would I get the listing commission, but I’d also get the buyer’s agent commission). We call this “dual agency” or “double-ending” (slang), if I will somehow coerce the seller into accepting their offer.
Here is an example of one I got yesterday, where this investor is not only offering to allow me to double-end, but they’re also offering me a $2,000 bonus:
“Hello I am an investor who has over 35 years of experience of buying and selling. I am here and I am ready to buy and sell. I do not play games in escrow. I will get my deposit in on time, and I will remove contingencies before entering escrow.
I am only looking for entry level homes preferably, but I am open to purchasing homes up to 600k if it makes sense of course. I want the home to qualify for FHA when I go to resell the home. I will buy sfr, mobile homes built in 1977+, & condos. I can handle as much as you can bring to me and close on time.
I love off market opportunities, but I understand we don’t always get those. I want to be the investor that can give your clients a fair cash offer and close in 10-14 days. You can represent me and double end it or bring me something that you have an inside scoop on.
If you get my offer accepted I will give you a $2,000 bonus. I have a great team that consist of my family and we hold those family morals and values when we do business. Our family mentality is why we have been able to be in business for so long and built so many relationships. Let the —— be your number one go to investor. We are very easy to work with and always ready to buy.”
How this can play out with your client works like this: An agent who bites at this investor offer would place a call to the seller(s) and convince them to sell it off-market, convincing them that it’s much easier to sell it off the market with no showings, no repairs, as-is, and they can close escrow whenever they want to. It sounds very appealing. The agent gets the investor’s target price and convinces the seller that this is what they should sell the house for and justifies by telling them the cost of convenience – and no repairs – is worth it.
The math: If the house is worth $600,000, the investor may want to buy it for closer to $500,000, the agent receives 5-6% of $500,000, rather than 2-3% of $600,000 – plus the $2,000 bonus.
Agents are motivated by this all day long. Worse yet, investors may contact your clients directly because they see the public record filing of the divorce and lure them into selling off-market for cash, as-is.
The agents make more money, the investors make off like bandits – all at the expense of your clients.
My advice: With rare (very rare) exception, placing the house on the open market, making it available to all ready, willing, and able buyers, is the way to procure the highest possible sales price. In this market, homes are selling for well above list and appraised value. There is absolutely no reason a house should be sold off-market right now. Fast escrows and bidding wars are the norm.
Sure, it’s a headache to deal with showings and possible repairs, but the cost of convenience for a divorcing couple will surely set them further and further back financially. The equity in their real property is often the source of funds they use in order to pay off debts (including attorneys’ fees) and rebuild their lives.