Realtors

How to Negotiate (And How NOT to Negotiate)

by John Rice

I just came out of one of the most frustrating negotiations I have ever encountered.  An agent brought me an offer on one of my listings that not only was contingent on the sale of the buyer’s property, but also had a pre-closing occupancy agreement.  Long story short, this all meant that the buyer wanted to move in before the closing AND there was a slight chance that something could go wrong with the sale of her house….meaning we could have a real mess on our hands unless everything worked out just perfectly.

Naturally, my clients and I were concerned most about what could go wrong and how it would work out if  did.  That is where some negotiation skills on the part of the other agent could have made us more likely to go along with it.  If you’ve read many of my posts, you know my dad is a lawyer.  He is the best negotiator I have ever seen.  Many people (like the other agent) think negotiating is about strong-arming the other party to do what you want, or wearing them down like a used car sales person.  My dad taught me that negotiating is really about removing obstacles so the other party can say yes to you.

If I was this agent, I think I would have first put myself in the shoes of the other party and asked myself what are their obstacles going to be?  Like anybody, the sellers were nervous about what could go wrong, more than they were drawn to what could go right.  If I were the other agent, I would have given me a pre-approval letter from the buyer.  Heck, I might have even given me the pre-approval letter from the buyer’s buyer that the whole offer hinged upon.  I might have given me a copy of the contract on the other house to show me what type of financing that buyer was doing and how much of a down payment they had.  I might have told me that I would keep tabs on the financing of that buyer and offered to call that loan officer for an update before the buyer for my listing moved in…..just anything to show me and my client that this was more than just a half-baked plan full of nothing but good intentions and wishful thinking.

I didn’t get any of that.  All I got was repetitive comments that deals like this happen all the time (which they don’t), and that the buyer made a full price offer.  The full price offer didn’t really carry much weight since we’d only get that price IF the deal closed, and absolutely nothing if it did.  Just shows the agent didn’t think about removing our obstacles in order to get us to agree to what she wanted.

We tried to work with this deal, but ultimately the agent wouldn’t agree to do much that would answer the “What if” and “How” questions. This agent made it about winning and we all came out losers.

Negotiating With Realtors: If They Bluff, You Know They’ll Come Back

by John Rice

Realtors are so predictable.  It’s almost like watching a rerun of a show and you know just what is about to happen.  Sometimes I wonder if there was a class I missed on cliché bluffing phrases to use during negotiations.

I got an offer yesterday on one of my listings.  The original offer was pretty low, but these days everybody always has to try I guess.  One of the things that struck me as odd was that the buyer wanted to close in 25 days…..right between Christmas and New Years.  Nobody wants to move that week unless…..you have to.  Then I did my usual deal where I google the buyer’s name and look them up on Facebook.  Seems this buyer has a couple of small kids.  School starts on January 3rd.  I really think they picked this date to be in the house before school starts.   Naturally, I am wondering what are the chances of this buyer finding not only another house they like as much, but one with a seller willing to be out during that week?

The other agent and I trade a bunch of texts, and came $2ooo apart.  Then the agent gives the old “I strongly suggest your seller reconsider this offer given the market.”  I really don’t know how to respond to this politely, so I usually suggest the agent look at the comps and determine if our number is in line with them.  That is what I did this time.  I even asked the agent if he thought the house was worth the number we were currently stuck on.  His non-response answered the question perfectly.

Now for this one, we are only $2k apart, but I have had agents tell me this with an offer that is so low that anybody in their right mind knows it is a ridiculous offer.  I usually check out the agent’s production from the past year to see how much they really know about “The Market.”  My recent fave was an agent who made a verbal low-ball offer on another one of my listings.  He kept talking about how his guy had cash and how foolish my seller was to not sell his house for less that it was worth “In this market.”  Well, turns out that agent had sold all of two houses in the past year…..hardly an expert on “The Market.”

Sorry I drifted there…back to the offer.  Just as predictable, the agent told me that his people were going to look at their second choice house the following day.  He did the old “If anything changes, let me know” drill.  I thanked him for all his hard work and effort.  Why did I do that after being treated like a second class citizen for representing a seller in a buyer’s market?  Because I wanted to make it easy for him to come back to me.  See, many people don’t mind losing the war if you give them a chance to win the last battle.  Good thing because while I was writing all this, he left me a voicemail that said to call him back because he now things we can work something out…….His people are now ready to meet our price, and we should have all the paper work done today.

If you’re not a cheeseburger, don’t pick a #1 agent

by John Rice

I just got back from vacationing in Florida.  Just about anytime I go anywhere, I always pick up those free real estate booklets.  I like to see what houses are worth and see what the local realtors do. 

What amazed me about this trip is how many of them claimed to be “The #1 Agent in this or that town, suburb, neighborhood, condo complex.”  What they are talking about is how much property they have sold.  See, we  call that “Volume.”  You just take the sum of all the sales you have made for a given time frame.    I guess where I am going with all this is that you, as a buyer or a seller, DON’T want this kind of agent!

Why?  The simple reason is that they don’t have time for you.  I’ve worked with some of our big producers here in Lex.  Only two of them are worth anything in my opinion.   When you are closing a deal a week, and are listing houses left and right, you are basically the McDonald’s of real estate.  May as well paint the golden arches on the side of your car and write “Billions and Billions Served” under it.  When you go to McDonald’s, lets face it, it isn’t about getting the best burger you have ever had  prepared just the way you want it.  McDonald’s is about efficiency.  They are cooking multiple burgers at a time.  Look in the kitchen.  They have an assembly line going.  Put 12 buns on a tray.  Toast them.  Drop the meat on the bottom buns.  Squirt ketchup and mustard on each one.  Throw 2 pickles on each.  Add a slice of cheese.  Bam!  12 identical cheeseburgers ready to go. 

Ever go to McDonald’s and ask for something like a plain double quarter on a Big Mac bun?  And if you have, what percentage of the time was it accurate?  My wife always gets a plain Filet O Fish.  She even goes as far as saying “ONLY THE BUN AND THE FISH!!!!”  Still sometimes she’ll open the box and there is a regular one with the cheese and tartar sauce.  Sometimes it will only have the cheese.  Only occasionally is it right.  Why is this?  Because McD’s is about volume.  To get volume, you need to standardize procedures.  You cannot take the time to slow down, yet alone stop to do something different.

A friend of mine worked with one of the top producing agents in town a while back.  I thought this was really funny, in a sad way.  The agent has a team to do flip all their burgers….I mean take care of all their clients.  Seems nobody on the team bothered to tell the seller that the home inspection was scheduled.  The seller was pretty shocked when the inspector showed up.  I’ve had similar experiences with this team before.  I’ve asked them questions my buyers have had after viewing their listings.  They don’t have time to bother with a reply.  I’ve also made courtesy calls to let them know when they have entered the wrong subdivision on a listing. They always appreciate that, but I do it for their sellers, not really for them.   Again, when you are juggling so much work, you just don’t have time to be accurate.  Real estate deals aren’t all identical like McD’s cheeseburgers!

So, I will probably never be able to say I am the #1 Agent in Lexington for my sales volume.  Sure, it would be nice more than double my income, but I’m not gonna treat people like a cheeseburger to do so.

Feeling sorry for sellers with sorry agents

by John Rice

I was just thinking about some of the sellers out there in the world.  Here they are, wanting to sell their house and get on with their life somewhere else.  They’ve decluttered, touched up paint, cleaned parts of their house that they’ve never cleaned before, and their Realtor has stuck a big sign in the front yard that they have to mow around.

Let me tell you about some of the faceless sellers that I have almost crossed paths with.  Just last week, there was a seller of a nice stone bungalow in 40502 that almost got his house shown to my buyer.  I say almost because after texting and calling, their agent NEVER called me back.  Now, it is a real pain in the you know where for me to have to track down an agent as if they were a disobedient teenager, but I feel sorry for these people since we’ll never know if their house could have sold that day or not.  I even tried this agent’s office, who assured me that the agent wasn’t on vacation or anything.

Another seller I felt sorry for was the one who had an agent that was enjoying her weekend on the lake when I called to show their house.  This agent did call me back…..just about 18 hours after I wanted to show it.  My buyer had moved on by that point.

And I really feel sorry for the sellers of one agent in town whose listings most agents try to avoid because this person is such a jerk.  I’ve heard other agents say that they have told their buyers about this person, and the buyers have said they’ll just skip the house then. 

How are these?  The seller whose agent asks me if my buyer can really afford the house when I call to see it.  Gee, that really starts everything off on the right foot.  The seller who just got done edging his beautiful green lawn, but has pictures of his house online with six inches of snow on the ground.  The seller with the really creative agent who uses the marketing remarks to tell you that it is a “Great House.”  Or the one whose agent thought that being a realtor automatically qualified them to be a photographer too?  All too common are the sellers whose houses have the wrong school district, the wrong neighborhood name, the wrong zip code, or even worse, have been on the market for 6 weeks and there are still no pictures uploaded.

I feel sorry for all these sellers because they picked a sorry agent and don’t even know it.

My worst day in Real Estate

by John Rice

I’ve been waiting to blog about this deal for quite some time.  See, I have an old friend who traded his house towards a new one.  I did a CMA and came up with a value for their old house.  Told them if I were to list it, I’d probably do it at about $235k.  We negotiated the price with the investor who would be taking it in trade.  I got a good laugh when the investor put granite counter tops in the kitchen and painted the place, then listed it for $269k.  The place had only appraised for $225k just a few weeks earlier.

Well, my friends (the previous owners) watched with delight as the days on market for their old house racked up.  We were always joking about the price.  Then we both got that sinking feeling in our guts when the place sold for $272k!!!!!!!  WHAT???????

I knew that the new buyer had rolled their closing costs into the loan and had traded their old house in on this one since I called the listing agent……so I KNEW that the house wasn’t really worth $272k.  My friends were pretty cool about it, but naturally they had a LOT of questions for me.   If they didn’t trust me, it could have gotten really ugly!

So, how did this happen?  Well, to begin with, let me tell you that the listing agent was also the buyer’s agent, and this agent has done a lot of work for the investor who is always taking these trades.  That right there should tell you that this ain’t no usual “Arm’s Length Transaction.”  Who do you think this agent favored in the deal:  The buyer that would be represented once or the investor that keeps feeding the agent listings?  Then, you throw in the fact that the buyers traded in their old house.  There are a lot of ways to shift numbers around here, just like trading in your car.  I knew that when my people traded this house, there was a potential to play with numbers, so what I did was to make sure we worked with real numbers.  I focused on what their old house was worth and what their new house was worth.  Then we treated the deal like the two separate transactions it really was.  But, the buyer who paid too much for this house used the listing agent who was buddies with the investor.  Those poor people didn’t have a chance!

I’ve been waiting for enough time to go by so that I could show my friends the price that their old place went for was not typical of the neighborhood.  In the year that has gone by, three similar houses in the same neighborhood with basements have gone for between $212k and 224k.  There have been 7 other sales within the neighborhood of houses without basements, all under $200k.  Wonder how the new owners feel about this??

You really have to look at the parties involved when you look at comps.  There is a house in my neighborhood that just sold for top dollar.  I was really excited until I looked to see who represented the buyer in the deal.  The listing agent was the one representing the buyer….and…..oh….the listing agent was also the seller!?!  I don’t really consider that to be a normal transaction since the person giving advice to the buyer was not only the listing agent but the seller as well.  Now I’m not saying he did anything wrong, just saying that it takes a really honest person to have not steered THAT deal in the agent-seller’s favor.

So, the bottom line is that sometimes odd things happen in real estate and you can’t assume that a sale price really reflects market value.  There are enough bad agents and stupid buyers to ensure that things like this continue.

Both of these buyers were like the kid in the picture about to take on the sumo wrestler……It isn’t really going to be a fair match, is it?