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.

If You Don’t Remember Me, I Don’t Deserve Your Repeat Business

by John Rice

For as long as I’ve been a realtor, I’ve always liked to look at the listing history for houses on LBAR.   What amazes me is that most people don’t use the same realtor to sell their house that they used when they bought it.

I guess my fascination with this all goes back to my very first listing.  I met a seller at his work while he helped me load paint in my car.  He told me he was selling his house himself and wasn’t having much luck.  We kept talking, then he later  interviewed me and several other agents.  I remember going to their house and seeing several calendars on the fridge from other realtors.  I wondered why they didn’t use one of them?

I haven’t had this problem in the 6 years I’ve been a realtor.   Want to hear some of the stories?

I met a dating couple back in late 2005 at an open house.  We looked at houses one time and the soon-to-be-engaged-lady bought one that we saw that day.  I remember thinking that there was no way they would ever remember me since it all happened so fast.  The house had a dilapidated door to what was like an outside closet.  I tried to get the seller to fix it.  They wouldn’t (Keep in mind it was a seller’s market then and there had been multiple offers!)  Then I tried to get the FHA appraiser to make it an issue.  No luck there either.  In the end I bought a door and put it on myself.  I just wanted her to have a good door.

A few years later I am at an open house and my phone rings.  It is an agent who says some clients of mine came to his open house.  Turns out it was these people.  Guess they remembered my name after all?  They were now engaged and needed to combine households.  We sold the soon-to-be-husband’s house, then they bought a new one, then we sold the one I put the door on.  A couple years later, they decided they wanted a ranch on a big lot, so we got one and sold the first house they bought together.  That is 6 deals with the same people.

I have another client that I met while showing a listing of mine.   He was looking for a bargain.  This was about the time that all the foreclosures started hitting the market.  We looked at a bunch of houses.  Then one day a really good one came up that was in really good shape and in a great location.  I told him it wouldn’t get any better than that one.  There were multiple offers, but I got it for him.  I thought he and his family would stay forever, but they wanted to do it again just over a year later.  Good thing I picked such a good house because it sold pretty fast during the period after the tax credits expired.  I am now working my but off on one of the most difficult deals I have ever been in for this family.  We should close it next week.

I’ve also had a few other clients who have gotten transferred and called me out of the blue to sell their house for them.

All this is one reason why I don’t send post cards announcing day light savings, or basketball schedules.  I guess my attitude is that if my name doesn’t  come to mind when my past clients need a realtor, then I don’t deserve their business again.

Why I Never Worry About the Appraisal

by John Rice

I just got off the phone with a client.  Dude told me that his loan officer told him the house he is buying appraised for $5000 more than he is paying for it.  Didn’t even surprise me.  See, I make it a habit of not letting me people pay too much for a house.  I have never had a house not appraise for at least the contract amount, even a few years ago when it seemed every realtor was having that problem.

I once got a client a house that appraised for $80,000 MORE than the contract amount.  A couple of years ago, a client bought a house in Beaumont Reserve for almost $40,000 under the appraisal.  How do I do it?  I just understand how market value works.  See, when I have somebody ready to write on offer on a house, I always go to my computer and study the recent sales in the area.  I don’t just do the easy things like figure out an average cost per square foot.  I study the floor plans of the houses, look at the seller’s disclosures to see how old the roof and HVAC are, the lot characteristics, see what kind of flooring and finishes each one has…..and on and on, and on some more.  Heck, a lot of the time I’ve even be inside the sold comps!  I also like to use more than 3 comps.  The more you have, the more solid whatever number I come up with will be.  It’s like a science and gut thing that work really well together.

The closest I ever came to having a house not appraise was last summer.  The appraisal came in a couple thousand under the contract amount.  I was the worst combination of heart-broken and embarrassed I have ever  been.  I mean, I really take a lot of pride in my ability to know market value.  Once I actually saw the appraisal, turns out the appraiser had forgotten to include a detached garage that was on the property!  Once the value of the garage was added in, the house appraised for just over the contract amount and I got to keep my good record in tact.

So, my dude is happy with the price he paid on his house, and that is what it is all about.

Common Game Realtors Play to Get You to List

by John Rice

A while back, I talked to a potential client about listing her place.  I told her what I thought it was worth, just like I always do.  I want to be straight with people so they can start making their plans based on what is most likely to happen.

She wanted to get more for it.  Percentage wise, it was much more.  I had plenty of comps to back up my claim of the value.  Many of the comparable sales were nicer than her place and sold for less than she would accept.  Needless to say, she didn’t go with me.  She used another agent who listed it for much  more than it will ever sell.

Now, it may seem like this is going to be about the seller, but it is really about the other agent she picked.  I have no issue with the seller.  She isn’t a realtor or an investor.  She is just somebody trying to move and get the most for her place.  Totally respect that, since it was also my goal for her.

Every agent wants listings.  Why?  They want their phone to ring with other potential clients.  They also know that trying to get a client is the hardest part of being in real estate.   Heck, I want all that too, but not at the expense of my client.

What this agent did totally annoys me.  He would have listed her house for whatever number it took to get her to sign the contract.  I see this all the time.  Then the price reduction game begins, until they seller eventually drops the price to the point that it will sell.  What gets me about this is meanwhile, the seller is making big financial plans based on an amount of money that they simply are not going to get….all so the agent can get a listing.  Could have been my listing if I didn’t care so much about my people.

Want to know something funny?  I got a call from this seller today.  She thought she was calling the agent she listed it with.  She said she got my message.  I told her I hadn’t called her.  She said that she got a message saying that another unit in her complex had sold at auction and that we needed to talk…….Don’t know about you, but it sounds like he is about to try to get a price reduction out of her.

 I hope for her sake he is going to suggest the same number I had told her….That way she’ll get her place sold and can get on with her life.

Location, Location, Location is so Yesterday

by John Rice

I’ve got about an hour before I need to go show a listing of mine and then get with a client to go see a couple of houses, but I wanted to let you know what is going on with real estate in Lexington ky!

I’ve closed 3 deals, have 5 pending, have several buyers looking, and have a bunch of active listings.  I think I’ve got a pretty good idea about where things are at the moment,  having worked with both buyers and sellers a lot.   Glad I love my car since I’ve put over 5000 miles on it in the past 3 months…all local too!

Soooo, what is going on?  Well, I think we are at the tail end of denial and about to start accepting that the market has changed a lot in the past 8 months since the tax credits expired.  I don’t just mean fewer sales.  We all know that has happened.  What I mean is that there has been a major shift in buyer mentality.  If you’ve read my past blogs from this winter, you remember me saying (okay….complaining!) about the crazy buyers out there making ridiculous offers on houses who never actually bought anything.  Now that the weather has warmed up a little, the “Real” buyers are coming out.

These buyers are much more conservative and cautious than they were last year at this time.  We all know that buyers are expecting more and more.  They have come to expect staging and a good presentation.   Now they expect that AND a low price.  I guess that is the big change that we all need to adapt to.  You can no longer make a house look good and expect it to sell mid-range in the comparable sales.  Now, pretty much every buyer expects the bottom of that range as the max they will go.  I mean, I can’t blame them.  I would do the same thing right now if I were buying and you would too.  I think a lot of that is just because they want to have a little margin if prices drop any more than they have.  “Location, Location, Location” use to be the big thing in a buyer’s mind, but yep, it is now second chair to price.

All this leads me to something else that has been on my mind, which is how we as agents need to keep responding to what and how the market wants their real estate done.  It is hard to believe that a long time ago having more than one picture of the outside of the house was cutting edge.  Then agents thought that getting you to see yourself in the house was what it took.  Maybe it did back then, but when I see an agent write something like “Enjoy playing board games or reading the morning paper with your family around the table in this great eat in kitchen,” I know that the agent hasn’t grown past 1995.    I think it is time to start talking about money in the marketing remarks.  It is what is on everybody’s mind right now.  If the house is a good deal for the size, location, or condition, we need to tell that to the buyers……in fact, I am going to go make those changes right now on my listings….see ya later!