“There would be no commission cost on the purchase.”
It gets included in the cost of the house- it ALWAYS ends up being paid by the buyer - one way or the other.
. Ya think the realtor is working for free??
@menloparkmom, I think NRE is saying that the commission cost would be same whether Coralbrook owns 2 houses concurrently or consecutively.
ya but when she closes on the next house the realtor has to be paid at that time.
The money has to come from somewhere.
Money is fungible, so you can look at it like that if you wish.
But CB is not writing out a check to pay the commission. It is not a separate line item for her as part of the transaction. This falls on the seller. And the market price of a property is independent (or should be, in theory) of what the seller’s transaction costs are.
So I wouldn’t consider it to be a carried cost.
In either case, it would not be an extra cost incurred because of carrying two houses at once. You are either going to pay it now, or pay it later.
The only difference is CB will have to take a larger loan, because all of her money is tied up in the current house, and will have to pay an extra month or two of interest on it. It has nothing to so with the commission the seller is paying.
Plus, you as the buyer really have no idea what commission is being paid. You don’t know what deal the seller has with the agent. It could be zero if the agent was related to the seller, for example, or if the seller was the agent.
“Plus, you as the buyer really have no idea what commission is being paid”
in this case the selling agent , who may also the the listing agent, has worked with CB in the past and was the one who contacted CB about the properties when her prior deal fell through.
I’m sure cb will “negotiate” with her, in order to get her costs down. She would be dumb not to do so. Savvy clients “negotiate” commissions with agents all the time.
“This falls on the seller. And the market price of a property is independent (or should be, in theory) of what the seller’s transaction costs are.”
that is naive, unrealistic thinking- of course the transaction costs are figured into the selling price!! My hubby is a long time broker here in Calif- you dont think buyers and sellers negotiate the overall price of a property, taking into account the commission costs??
They do.
And in some counties in Calif, the buyer pays the commissions, in some the seller does.
I know part of your negotiating strategy is to have a super-short escrow to get the best deal possible, but one possible strategy would be to make an offer with a longer escrow. Then you’d be halfway done with the current project by the time the new one closed. Or, get creative with the terms – agree to release contingencies and deposit early but don’t have escrow close for 60 days.
My W is a long-time broker here in MA. Out here the seller always pays. And what the commission is rarely factors into a transaction.
Sometimes a really aggressive buyer will try to get the agents to take a lower commission to close the deal, but it rarely works. If a property is priced too high, the buyer must lower the price, the agent doesn’t lower their commission.
I own a lot of real estate. When I price out a building I want to buy, I don’t care what the commission is. It’s worth what it’s worth - if the seller doesn’t agree with me, the deal doesn’t happen. I don’t care what the commission is.
A seller who prices their property thinking “I want to clear x so I will set the price at x+6%” is the one being naive. This property will not sell unless the price luckily worked out to what the market thinks it’s worth.
On multi million $$ properties out here in Calif ,no agents get 6% anymore .
There is no set % - it’s all negotiable .
Buyers can choose to ignore the commission costs , but not too many do in Calif these days .
Coralbrook, @nottelling 's suggestion is a very good one.
- or -1% on $500,000 = $5000. I hope no one is twisting themselves into a financial pretzel for that only to have it eroded within a couple of weeks over carrying costs. I have known many a wheeler-dealer whose margins were such that it's the carrying costs (i.e., the lender) that proved fatal.
^^That might work in a buyers market , but not in a sellers market , like we currently have here in California .
Yes, I get that. But, there seems to be some desperation to sell for the properties Coralbrook is being offered. Where I am, I don’t understand the notion of being tied up in escrow for a year.
No, I think the “desperation” is on corals part because she knows that these properties have a lot of upside and she wants to grab them before they hit the market and get bid up. She doesn’t want to get into a bidding war. Which is what is happening out here all the time.
And of course corals agent wants to sell them as well.
I went to re-read her post. Seller cannot satisfy buyer over some sewer problem and it has been a year. I can’t see that as a seller’s house. But, I’m just an armchair observer.
Hmm , you could be right. I did not go back and reread the posts as I’m writing this from my iPhone
I’m sure cb will investigate the sewer issue before proceeding.
And I agree with nottelling: If cb can draw out the time for the escrow, and push out when the closing is, her carrying costs will be lower and the current project will be closer to finished.
Nevertheless, it’s kind of like rollerblading on one skate. If everything goes right, it’s great, but there’s not too much room for error.
CB’s last project, which lasted 8 months or so, racked up $33K in carrying costs, or about $4K/month.
Even if the carrying costs are a little higher for another house at the same time, it seems like it would be worth it to get a property now and not have to spend two or three months looking for another project, while not making anything.
$4/month sounds about right for a $500k house. We can start a CC investment club… 
Just kidding. 
UPDATE
Wow, everyone has been busy today analyzing whether I should buy another house or not
I have been beyond busy running around today. It is now 6pm on a Saturday and still working, making phone calls, etc. Not a glamorous job!! Shouldn’t I be at a cocktail party somewhere in a really cute dress with perfectly manicured nails and a great hairdo?? You should see me… I am covered in drywall dust after just leaving my current Liberace House project
I viewed two properties today that are ‘pocket listings’ from a prominent agent in the La Mesa area.
New one -
This is a 1921 house in an area called ‘Artist Colony’ with outstanding views toward the east. House is a bunch of little buildings all chopped up. Ceilings are low. Huge .6 acre slightly sloping yard with gorgeous granite boulders. Killer for me… significant freeway noise while outside. You can’t see the 8 freeway, but for some reason you can really hear it. I think it is acoustics coming up the hill. This house is being sold in a nasty divorce and she has a ‘Coming Soon’ sign out front. In this case, I could have offered with a 60 day escrow to let her move out of the house. I just didn’t ‘feel’ it. Not worth the risk, so I am not going to make an offer
9608 Sunset, 91941
Old one -
I had to go back through all the posts to find where I discussed this property earlier. This is Property #14 mentioned in Post 177.
I want this one bad… still working the details and analysis. Will get more info out soon