43 deals sent, 3 passed my screen. Broken buy box or wrong agent?

Question

Six months into a relationship with an agent who bills himself as investor-focused. I gave him a written screen: max purchase 180k, 8.5% cap on trailing actuals, 1.25 DSCR at 7.25% on 25% down, and I underwrite 8% management, 5% vacancy, 8% repairs and capex, actual tax bill, insurance quoted not estimated.

He's sent 43 properties. 3 cleared. Of the 40 that didn't, most died on expenses, because his sheets carry a flat 6% total expense load and call it "conservative." Two died because the "actuals" were a seller-typed rent roll with no tax bill attached.

He's now proposing one of two structures: 500 a month retainer credited against commission at closing, or 2,500 flat per closing on the buy side regardless of price. His argument is that screening for my box is real labor and he's carrying it unpaid.

I'm not automatically against paying him. What I can't work out is whether a 7% hit rate is evidence he doesn't understand my numbers or evidence my numbers are simply not present in this market at this price point. And if I pay a retainer, what exactly am I buying that I don't already get.

Rena Expert · Accepted Answer

A 7% pass rate tells you almost nothing until you split the 43 by source. If 40 of them came off the MLS, that pass rate is roughly what an 8.5% cap on true actuals produces on-market in most metros right now, and it says your screen is doing its job. If a meaningful share came from his own off-market pipeline and still failed on expense load, that's a different problem, because off-market flow is where an investor agent's value actually sits and he should be pre-screening it against your sheet, not his.

Ask for the split before you decide anything. It's one question and it resolves the argument.

The expense fight is worth having on one line only, and it's taxes. A 6% flat load is a listing-side habit. But your "actual tax bill" input is also wrong in a lot of states, because assessment resets or loses an owner-occupied exemption on transfer, so the current bill understates your year-two number. Which states and by how much varies, so get the county's post-sale estimate in writing before you underwrite it. That single line moves cap rate more than the management percentage anyone argues about.

On the two structures: a retainer credited against commission converts him into a volume sender, because sending you 30 more listings costs him nothing and protects the credit. A flat per-closing fee is the cleaner incentive, and it needs to be in a written buyer agreement his broker signs off on, since broker policy and state rules govern how a buy-side fee can be charged. Either way, what you should be paying for is list position, meaning you hear about his pocket inventory before the other three investors he works with. If the retainer doesn't buy that, you're paying for MLS emails you already receive.

joe_delgado5 · Answer

Split matters, agreed, but I'd bet money it's 40 MLS and 3 he actually worked. On-market at 8.5% on real actuals is basically extinct where I'm buying unless something is wrong with the roof or the tenant. My screen is 1.15 DSCR and I eat a thinner cap because I'm exiting in 18 months, so I see stuff you'd never look at. Different game though.

megan_doyle15 · Answer

What does "cap on actuals" mean as opposed to whatever the other kind is? I've only seen cap rate as one number.

luis_carrera · Answer

@rigging actuals means last 12 months of real collected rent and real bills. The other version is pro forma, which is what rent could be if you did things you haven't done yet.

@ledger the part I'd want is your screen on one page with the expense lines pre-filled, so his sheet and your sheet are the same sheet. I've been building mine for weeks and haven't sent it to anyone, which is its own problem.

samantha_ruiz · Answer

The agents I know with actual off-market flow don't run a screening service at all. They call whoever closed cleanest last time, in order, and the third call gets nothing. That's the thing you can't buy with 500 a month. I hit this ceiling at four properties, where I was clearly on somebody's list but not at the top of it, and the fix wasn't a fee. It was closing in 12 days with no financing contingency once, on purpose, so I'd be the first call after.

nataliehsu · Answer

Genuinely curious from the other direction: does an agent get paid anything for the 40 that didn't pass? Because as far as I can tell the answer is no, and 43 underwrites is real hours. I'm trying to figure out whether the investor side of this business is a volume game with a lot of unpaid analysis in it.

carlos_nunez · Answer

The seller-typed rent roll with no tax bill is the one I'd walk on, not negotiate. I'm in one right now where the T12 the listing side gave me had the water bill split across two line items and one of them was labeled "misc." Also seconding the reassessment point, my county's post-sale estimate came in over 40% above the bill on the sheet and it varies wildly by state, so ask the assessor's office directly rather than trusting anyone's screenshot.

aaron_fitz10 · Answer

If 40 out of 43 fail, maybe the market is telling you the product is wrong rather than the agent is. Are you set on single family in that price band? Everyone I talk to who hits 8.5% on actuals is in small multifamily or in a market three hours from where they live. I don't know which of those I'd want, which is why I'm still asking instead of buying.

raj_mehta14 · Answer

Probably the wrong thread for this but if the numbers never clear at that price, is buying the paper on those properties a different answer? I'm reading about notes and I can't yet tell if that's a real alternative or just a different set of problems I don't understand yet.

chriswalton8 · Answer

@ledger if you've told capital partners you'd deploy on a schedule, hit rate stops being an abstraction, because dead deal costs land on someone. Inspections and third party reports on the ones that die past LOI are real dollars. Who eats those in your setup? That question changed how I looked at agent relationships more than the commission structure did.

gregpowell66 · Answer

My screen has a rehab line and it's the one agents leave off entirely. I've walked "turnkey" listings with 8 to 12k of deferred work sitting in plain view, water heater at 14 years, one panel with cloth wiring behind the cover. Agent's sheet had a zero there. That's not dishonesty exactly, he just doesn't see it, because he's never paid an electrician.

43 deals sent, 3 passed my screen. Broken buy box or wrong agent?

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