Over the past few weeks, I have been reminded that just because someone holds a real estate license, they are not necessarily qualified when it comes to buying or selling multi-family housing.
I saw evidence of this over and over during the boom years. Countless Realtors sold their clients over-priced properties that didn’t cash flow.
I see many of those properties re-listed now. The MLS information almost always reflects a short sale or foreclosure, which makes me angry. I truly believe if the buyer had competent representation, the foreclosure could have been avoided (because the property would not have been purchased at that price in the first place).
Many of those types of agents have been shaken out of the business this year. As a result, most of the Minneapolis and St Paul duplexes that sell today make financial sense. However, I don’t think anyone can sound the all clear alarm just yet.
The other day a property came on the market that I thought might be suitable for a client. As I studied the MLS listing, however, I noticed while it stated that the tenants were responsible for their own fuel costs, the seller was also reporting annual heat and electric expenses of thousands and thousands of dollars. Certainly a mixed message there.
I called the listing agent for clarification. It seems the property owner had called the power and gas companies, gotten the annual totals for both units and reported them to the agent. While the tenants were in fact responsible for paying for everything but water and sewer, the data reported the owner was. As I’ve explained before, if the landlord pays for heat, the property has a different value. The listing agent didn’t understand.
I also recently received an e-mail from an agent who had property their client wanted to do a 1031 or Starker exchange with. The agent did not explain what the property was, so I called with the hope that it would be multi-family housing. It was a chunk of land. And it was the agent’s understanding that a 1031 exchange was a straight up trade of one piece of property for another. Nope.
When getting a real estate license, the educational background for the state test is broad and general. After that, it is up to individual agents to pursue continuing education courses and expertise in an area they’re interested in. Commercial and multi-family properties, as well as land for development, each have their own unique sets of challenges and rules.
It is absolutely essential that you work with an agent who understands the nuances of the investment you’d like to make. After all, not every foreclosure is the result of predatory lending.