Don’t Get Played! Spot The Real Estate Agent FOMO
Greetings, aspiring property wizards! When dabbling in the arcane arts of real estate investments, it's only natural to have a cauldron full of questions and doubts. After all, there's no magical reward without a touch of risk. If you're not questioning things on your first deals, you'll likely face more unforeseen hurdles than a Quidditch obstacle course. The more unanswered questions you have about the deal, the more susceptible you become to the dark forces of fear, uncertainty, and doubt. When buying a home for you and your family, emotional considerations usually don't lead to the best outcomes – it's like trying to cast a spell with your eyes closed!
That said, most people approach their first investment deal with the same emotional thinking they used to buy their home. It's like trying to brew a profit potion with love potion ingredients! Generally speaking, investment property is about creating a product that appeals to the greatest number of potential renters. While you might enjoy shocking pink bathrooms and turquoise bedrooms that look like a unicorn's dream home, that color scheme would likely drive away many potential tenants faster than you can say "Abracadabra!"
It's precisely because of these emotions that real estate agents can present negative property attributes as selling points. They're like master illusionists, making less-than-ideal features disappear with a puff of smoke and a wave of their wand. Some classic examples include "Small house, big charm" (translation: "It's tiny, but cute!"), "Fixer-upper with great potential" (aka "Hope you're handy with tools!"), or "Unique floorplan, perfect for personalization" (which really means "Previous owner knocked down some walls, good luck figuring out where they were!"). A good buyer's agent doesn't pressure you into buying the property; they simply show you why it might be a good fit for you. The seller's agent, on the other hand, is there to paint the rosiest picture possible – they're basically trying to turn that haunted house into Cinderella's castle with words alone!
It's precisely for this reason that we need to be extra careful, fellow property alchemists. Unlike an online order from a retailer that most of us are used to, property isn't a product that can be returned or exchanged. Bought a pair of shoes that look gooier than a troll's feet when you got home? No problem, just return them. In real estate, we play by the "buyer beware" rule. Once the paperwork is signed, there's no going back – you can't just say "Oops, I meant to buy the castle next door!" In these situations, emotional decisions can masquerade as business decisions. If you're not going to live in it, don't fall in love with it and don't let the brokers' persuasive tactics influence you more than a siren's song.
Let me share a cautionary tale from my own adventures in the realm of real estate. I recently ventured up to a small town, a couple of hours from my magical abode, to explore investment properties. Troy, NY is a gem of a little town on the Hudson River, north of New York City. It's like a hidden treasure chest waiting to be discovered by savvy investors. I found a property in the town's historic district that seemed like a decent investment. It was a wonderful Victorian brownstone with a couple of apartments over a store – picture a gingerbread house, but made of bricks and without the risk of being eaten by a witch.
The building had essentially been vacant for many years and had suffered significant fire damage. This project would have cost far more to renovate than to acquire, but there were some amazing interiors very much worth saving. If you are like me and love old houses that were built to last (we're talking "still standing after multiple centuries" kind of lasting), this property would have been very appealing. Even better, the price was quite reasonable. That said, something wasn't quite right; this property had been on the market for nearly a year – longer than it takes to grow a proper wizard's beard!
I had mentioned this property to a local broker while visiting a different listing, hoping to build a relationship with a local professional. I was having some trouble contacting the seller's agent, and since he knew the guy, I figured (incorrectly) he might be helpful. Pro tip: sometimes, the local wizards don't want to share their secret spells!
While the seller seemed motivated to sell, no bank would lend you enough money on a vacant burnt-out building. This would have to be a cash deal. If you borrow money from a bank, the underwriting process requires the buyer to perform significant due diligence. After all, the bank does not want to give you a mortgage for a money trap that they will need to foreclose on in a few months. It's like giving someone a loan to buy a dragon – sounds cool, but probably not the safest investment! Knowing this, both agents pushed very hard to waive site inspections and go to contracts. With the experience of a few deals under my belt, I knew well the troubles that skipping inspections could get me in. I leaned in. I got a husband-and-wife architecture team that specializes in historical restoration to do a walkthrough of the building. They were like the Ghostbusters of old houses, ready to uncover any spectral (or structural) issues.
Our property tour started in the upstairs apartments. These apartments looked like they were built for rich families in the 1880s and lived in for a handful of decades. Nearly all of the interior finishes were original, and the apartments looked like they were not lived in since the 1960s. The architects and I marveled at the eight-foot oak pocket French doors, clawfoot tubs, pedestal sinks, and white marble fireplace mantles carved with roses and angels. This place was really amazing. It would need a lot of work, but the result would be an incredibly beautiful and unique property, unmatched in its architectural detail. It was like stepping into a time machine, only without the risk of accidentally becoming your own grandfather!
This was all part of the agents' plan to make us fall in love with the building and try to blind us to its defects. They were casting a glamour spell, hoping we'd be too dazzled by the shiny bits to notice the cracks in the foundation.
Having seen the apartments and peeked at the roof, we began to make our way to the first-floor commercial space. The roof is a building system that is costly to replace and is frequently a significant liability from years of deferred maintenance. As we entered the burnt-out storefront, we noticed an old linoleum tile floor. I grabbed my measuring tape and dropped a line. 9x9 tile, "strike one" I thought to myself, knowing there is a high probability that these tiles contained asbestos, another significant liability to remove. It's like finding out your new house comes with its own collection of cursed objects – not exactly a selling point!
As we step down the century-old stairs, the familiar musty air of old building basements surrounds us. It's like entering the lair of a particularly messy dragon who hasn't cleaned in a few decades.
Panning the flashlight across the basement, we see a couple of modern furnaces, water heaters, utility meters, and circuit panels. As we explore the warren of rooms, we enter a larger space in the back of the basement where we find the old boiler. This thing was a monster, the size of a compact car and covered in the sticky residue of old heating oil, "strike two." Old boilers like these also frequently contained asbestos, another significant liability to remove. This deal was on shaky ground, the building needed a lot of investment in things that did not increase rents or drive revenue.
As we continue to explore the basement, I noticed a thin old copper pipe that was connected to the boiler, disappearing into the ground. In worst-case scenarios, buried tanks that have leaked require significant remediation and disposal costs since the tank, as well as all contaminated soils, need to be removed. This is the soil under the building's foundation. The building had an abandoned underground oil tank, "strike three." It's like finding out your new castle comes with its own moat... filled with toxic sludge instead of water!
When we first came down to the basement, the agents were talking about the amazing upstairs apartments and how nice they will be after renovation. As things became more obvious, the FOMO (Fear Of Missing Out) push started. "We've had a few offers, and we will not accept less than $250K", "You won't find another house with all this historical character at this price", "We will only accept cash offers without contingency." These were the distractions the agents used so I would lose focus on the severe problems this property faced. They had reeled me in and hooked me with the upstairs in hopes that I would be blinded by my emotions.
When building your business and portfolio, you need to stay focused, think clearly, identify your opponents' motives, and stay relentless in your pursuit of the goal: finding great deals and making smart investments. This doesn't mean walking away from every property with a potential problem, but it does mean going in with your eyes wide open. Don't be afraid to walk away from a deal, especially if it feels rushed or has hidden problems the seller's agent is trying to downplay. Remember, in the world of real estate alchemy, sometimes the most powerful spell is the ability to say "No, thank you" and walk away!
So, my fellow property wizards, arm yourselves with knowledge, keep your wits about you, and don't let the siren song of beautiful properties blind you to potential pitfalls. Happy hunting, and may your investments always turn into gold!
If you've found value in these insights and want to continue your journey of real estate wisdom, we invite you to subscribe to The Property Alchemist.
Don't let your real estate dreams remain just dreams. Empower yourself with the knowledge and insights that can turn your investment visions into concrete reality. Subscribe to The Property Alchemist today and take the first step towards becoming a master of real estate alchemy. Your next successful project is just a subscription away!