What Would You Do?

How many times have you driven by a property and said to yourself, I think I would like to own that property? Most of the time we do nothing but go about our daily routine. As you casually drive by the property the next time, you notice that the property is listed by a less-than-active commercial real estate agent. You call on the property, kicking yourself the entire time, and you discover that the property is listed for a price that is beyond any realistic proforma value and that the owner is from out of town. You decide to preview the property, basing your decisions on your knowledge of the market and the property type. You determine the price you would like to own the property, and you begin to ask the agent questions about the seller and his or her needs, wants, and motivations. The results of your questions reveal the agent has no answers and really doesn’t care about the seller’s goals and objectives. The sign is up, and the property will sell—one day!

What would you do? You decide to make an offer at the price that makes economic sense within the market and with your long-term expectations. You present the offer and the agent does not respond. After several weeks, when you follow up, the agent tells you that the seller was insulted and will not counter your offer. You scratch you head, but you do not change your price. You know that you never pay a penny more for a property than it is worth!

What would you do? It is now a year later, the property is still on the market, and the seller continues to use the same agent but has reduced the value of the property by $25,000. Do not get overjoyed—the property is still overpriced and the less-than-experienced agent is still in charge. You feel the property still fits with your expectations and long-term goals, so you ask the agent if you can set a meeting at her office and include the broker. You further explain that you are unsure how the value was created, and you believe that it is your responsibility to identify those issues or methods in creating the value. If acceptable, then perhaps you could change your offer for the property. You meet with the agent and the broker, and you ask if they could teach you how the value of the property was generated. You ask for the basic assumptions, such as what and how they see the property being improved to meet the needs of the area, both today and in the future, what rents the new owner could expect, what they believe would be a justifiable occupancy, and whether that occupancy could be achieved within that time period.  You are told that the seller set the price. The broker just shakes his head in agreement.

What would you do? Leave the scene of the accident? Stand up and tell them they are idiots? Shake your head and tell yourself that you are the idiot? If you stay in the meeting, you will need to ask more questions and try to get the agent and the broker to understand your offer and your value. You stay, like an idiot, and you ask “what if” questions to engage your audience in general investing concepts and money. An hour later, you shake your head, excuse yourself, and head back to your office, thankful for the education and your ability to say no. Case closed, and now it is time to move on. There is no cure for stupid—yours or theirs!

What would you do? It is now six months after your last brain-dead challenge, and you get an email from the agent stating that the seller has decided to sell, and he must sell the property within the next three weeks. Motivation? The agent states that three offers have come in on the property, and they are significantly higher than your offer. The agent asks if I want to increase my offer. I explain that I was happy that the seller had come to his senses, but I would not change my offer. She could submit my offer again, and if my offer had to be cash, I would pay cash. She says okay and that she would present my offer, but she does not think it looks good for me because she had other offers. I explain I never pay a dollar more than the property is worth. Offer submitted. I hear nothing.

What would you do? It has been two months since I last heard from the agent, and I never heard if my offer was accepted or rejected or if the seller had countered my offer. I never heard if the property sold, but it remains in our local MLS. Should I call her? Does it really matter? The property should have sold by now, based on what I was told and based on the knowledge that the seller wanted to sell the property within three weeks. I drive by the property, which is next to the post office, and there is the for sale sign, confirming the MLS information.

What would you do? What should the agent do? What should I do?

Sometimes things work out, and sometimes they do not. I learned you cannot cure stupid, you cannot bring someone up to a level of education without teaching them, you cannot change a seller’s expectations without a conversation, and you cannot change the fact that you wasted your time and efforts. When do you stop pursuing? How can you help the agent if the agent does not know there is anything wrong?

 

What would you do?

 

Mark Johnson

P.S. I received another email from the agent explaining that she has another offer and I should raise my price and submit it again. I said no thanks.

2 Comments »

  1. I think that the brokerage/investment business is a numbers game. Overturning rocks is what we do, no matter how futile the next actual rock may be perceived. I think that you did not waste your time, but moved yourself forward to the next successful deal. I would keep chipping at it, as lucky always beats smart.

  2. If I really wanted the property, I would tell the agent that I would submit another offer, but only if a Broker representing me presented the offer directly to the Owner.

    This could start a dialogue with the Owner to better understand the motivation and his needs. Of course this would need to be a Broker who understands the art of counseling.

Leave a Comment

Add your comment below, or link to this article from your own website. You may also keep track of comments via RSS.

Please be polite and stay on topic. If this is your first time to leave a comment, please note that your comment will pass through standard moderation. If your comment is approved, your succeeding comments will be automatically published.