Realtors And The “Stubborn Seller” Phenomenon
A realtor from Wisconsin started this topic suggestion. “How about a discussion of effective negotiating tactics in a buyer’s market, especially in light of the ’stubborn seller’ phenomenon? For those who have to buy (for example, are moving and can’t find a rental that works for them), how should they negotiate? During my years in the business (which include a few booms and busts), the art of negotiating is as much about psychology as it is about numbers/data and that applies in a bust as well as a boom.”
A reply, “Step one: decide what you are willing to pay. Step two: offer that and use backup documentation to support your offer (market conditions, inspector report, your knowledge of what the seller paid for the place or owes on it).”
“Step three: if rejected, tell them goodbye and try the next one on the list. You’d have to be nuts to bail any of these sellers out now.”
One added, “Spot on. One thing I would add; don’t become emotionally involved in the deal. (it’s only another house, and looking at inventory there’s plenty others to choose from).”
And another, “I would amend that a bit: ‘Decide what you are willing and can afford to pay. Too many buyers in recent years were willing to pay what they could not actually afford.”
“The thing that sticks in my craw is the Realtors’ dogma, that it is somehow essential to buy a home. When purchase prices are as out-of-whack with rents as they are in most places in the USA where there are existing homes, the best shot at fair appreciation over time is to rent until purchase prices are back in whack. We are a long way from that time where I live.”
One said, “People don’t want to catch a falling knife with the prices in many areas doomed to go down more. In this market it’s not a matter of how to dupe the seller or buyer into selling or buying but rather what is the value of a property absent a mania or a false run up.”
“The builders of new homes will be more willingto discount the market right now in part due to the false hope given by the realtors/NAR in the news about a spring bounce for 2007.”
“I don’t think a real estate agent should encourage panic buying or selling just so they can make a commission . Also I don’t think realtors in the news/NAR/CAR should be giving false hope for a spring bounce in 2007. It would be better if realtors just said, ‘here is the bathroom.”
Another on renting, “It’s a ridiculous statement to say you can’t find a rental that will work. It’s, in fact, EASIER to find a rental that works than a house (IMO). If for no other reason, then the fact that it’s only temporary makes it work.”
And another, “There will always be sellers that *have* to sell (or risk foreclosure). I have yet to see a case where someone *has* to buy (because of relocation, etc.) I don’t get what yo mean by ‘can’t find a rental that works for them’…do you mean it’s not the ‘perfect’ rental? I don’t mind renting a semi-perfect rental house when the monthly outlay is 50% of buying (and I don’t have maintenance costs, etc. to deal with).”
One had a suggestion, “In order to get some deals done, realtors should start by doing the math between buy vs rent to those ’stubborn sellers.’”
“For example, a client wants to list property for $1M, HOA $500/month and $12K/year taxes, and realtor finds that similar properties are renting for less than $4K. The conclusion is obvious: you dont need a ‘buyer,’ you need a ‘miracle.’”
In a way, things are changing already. From the previous post:
‘While real estate agents said they’re seeing prices decline about 5 percent, they’re not surprised or even upset. What’s happening here, they said, is simply a long overdue change in the market. Prices have been rising for at least 7 to 8 years, many local real estate agents said. Normally, such cycles only last about 5 years.’
‘(Broker) Cathy Masi in Newtown, said she thinks it’s been more like a 15-year upward swing. ‘I’ve lived here since 1963 and been in real estate since 1965,’ Masi said. ‘This is the longest upswing I can remember.’
‘We got spoiled,’ said Realtor Sal Pandolfi of Danbury’
“‘While real estate agents said they’re seeing prices decline about 5 percent, they’re not surprised or even upset. ”
Of COURSE they’re not upset!!! Agents are not the ones who are going to lose their shirts as they watch their presumed-equity trickle away month by month.
They may not be losing their shirts but they sure are losing their ’street cred’ complements DL, chief NAR brand equity destroyer. If I were a member of this org., I’d demand new leadership.
Just ran the median asking price numbers for Sacramento:
sacrealstats.blogspot.com
One noticeable trend: Median asking price is up to 10% higher than median selling price.
Apologies Ben for the OT but want to make sure that the word gets out…
GDP Alert!!!!!
Holy Shiite!!! There is a more detailed article on the screw up in the GDP number on Bloomberg due to the auto calculation. These guys in the government are doing everything they can to swing the elections. All Bears with some skin in the game better start shouting because the GDP number would have been about 0.9% for the third quarter without the screw up and the market would have tanked. The market still may tank on Monday if the news gets out far enough and it sticks. The link to Bloomberg:
http://tinyurl.com/y6mprf
Anybody who cares enough to pay attention (and I assume most folks with serious skin in the stock market fall into that category) already have read this story. I doubt it will have much effect on the stock market, which has a mind of its own these days independent from Main Street economic reality.
I wouldn’t worry about it. The economy and stock market are going to take care of themselves with a major correction between the election and the end of January. The “pumping up” of the markets will end as soon as the elections are over, if they can even hold out that long.
Frankly, although I have been a long-time Republican, I have such strong disdain for all politicians at his point that I wish we could clean out all of them, with VERY few exceptions (Rep. Ron Paul). One of the only men who deserves kudos is David M. Walker, head of the GAO. A true patriot who puts America and the facts before votes (he needs none) or popularity.
sellnrun — absolute agreement about Ron Paul, who gets under the skin of both major parties about equally. He’s the only member of congress who 100% of the time votes to reduce the size and reach of government.
Funny you mention Ron Paul - I just send him an email saying he was one of the few congresscritters left who I would vote for, and I’m not even a Repub, and I don’t even live in Texas. In this case I think I was congratulating him for introducing legislation to reverse the decision by the Fed not to publish the M3 anymore. I also thanked him for arguing before Congress in favor of medical MJ, not just as a congressman, but a
Doctor as well. I’ve never heard him make any statements on issues that I fundamentally disagreed with, and that’s saying a hell of a lot considering how I feel about the Republican party these days.
I think this board is full of little-l libertarians (in Europe, we’d be called “liberals”) of all sorts. I’d call myself a left-libertarian, as I’m more interested in the personal freedom side of it than the property rights (which are not unimportant, just not the most important thing). But left or right, we all seem to agree that what the lenders were allowed to do and what the government all but encouraged them and the FBs to do was criminally insane.
…and though most of us are probably worried about the effects on the wider economy and/or our country’s fiscal situation, we will not be ashamed to profit from our caution later
Ron Paul ran for president on the Liberterian ticket in 1988.
Ron Paul is a Liberterian.
Even with the evidence in front of them, the nattering nuts of the new paradigm will deny it along with PPT. Their agenda is clear.
Had Enough?
And the above statement comes from the brain of a real estate speculator who would pimp his own mother to make a buck, Captain Credit. Any one here want to take advise from a sewer sump sucking speculator, the vey type of person that CAUSED this housing bubble crap to happen?
Had enough?
Best Way To Deal With Stubborn Sellers:
Buy it from the bank as a REO.
No emotions, no expectations, no hassles.
With the bank, it’s all about price.
If you happen to be a realtor right now, I’d consider finding a second job.
This may take a while.
These sellers still have large amounts of equity they’re sitting on.
You’ll need to see giant price drops before they’re sufficiently softened up. Those will come soon.
Banks are listing their REO’s with agents at market prices. It’s in the negotiation where the deals are made. Like offering 10% below asking price with an inspection contingency. In the inspection, you write every scratch that needs repair, make sure the fix up amount is on the high end, and ask for a rehab loan from the REO bank to do the repair. Also, the deal gets sweeter if you also get the new loan thru the REO bank. Also, ask for a 3 month delay in payments to do fix up. There are plenty of sharks
who know how to play this REO game, and no bank REO manager will put his job on the line giving away these properties. If they are going to give them away, his sister and mother-in-law will be first in line. Been there during RTC mark down.
They are listing at market prices. Because the market dictates it. You have droves of people at least here locally who think anything with an R.E.O. label is a deal and quite frankly the banks don’t have enough inventory yet to justify discounting it. People are jumping into the R.E.O.’s way too soon IMO.
I disagree with the aspect of giving it away in your post. WAMU and B of A were making the statement “giving it away” a understatement during the last downturn. The trick is to wait until the bank is breathing heavy from the load. Then the R.E.O. manager will have no choice and his marching orders will come from the top to liquidate. He’ll be on the front steps of Home Depot hustling to day laborers to save his job.
One of the things that I think will be key to success during this next downturn is to have the ability to buy volume and the ability to buy large caches of non-performing paper.
In order to get a bank to hold paper again on a R.E.O. it’s going to have to be a real dog. Most banks won’t take back paper on something they foreclosed on.
For moratorium on the note again not going to happen unless the property is a mutt. But if you need that a good hard money lender will do.
Been there done that myself.
Agreed. REOs and pseudo auctions are equals at the moment. Seller psychology is still buoyed by the recent uptick in prices and exptectation of an FRB bail out. Wait ’till things turn really friggin grim and seller psychology sinks to the bottom of the abyss and all hope of reaping price increases is permanently and firmly exorcised.
I agree with you from the seller psychology standpoint. From the realtors side, the answer is blatantly obvious to me. Quit listing houses with stupid wishing prices! And before listing anything, come to a verbal agreement that massive price cuts may be necessary to move the house. If the seller is not into it, then DON’T LIST IT! The greedy realtors are hanging their signs and names on these places in hopes that the “bucket of money and box of stupid” shows up and they get a fat commission check. For them to blame the sellers is a joke.
People are jumping into the R.E.O.’s way too soon IMO.
Agree…but this time things are bit different thanks to boosting factor of “Internet”…events will unfold much faster than in the previous RE meltdowns..imho.
If they are going to give them away, his sister and mother-in-law will be first in line. Been there during RTC mark down.
This may be true in the first or second wave of REO but, with all the properties that are out there who is going to buy all of these. Yeah I’m aware that there’s several investmest companies big and small waiting but imho there’s just to many houses out there.
Also were talking about purchasing through the banks, from what I have seen the banks don’t hold the paper, Fannie and Freddie and a host of others do so whats to say that once things get ugly these institutions wont panick sell due to goverment bailout? I have looked at plent of REO houses and to date not one institution is ready to deal yet, and this is in Florida Manatee county where prices ran up 300%. Personaly I think it’s way to early to try buying REO or auction property, the masses have yet to discover what’s happening out there.
My 2 cents woth.
The REO thing will take it’s course, but we may be surprised what comes from the industry next year. They may rediscover the rent or buy math and explain it people more forcefully. After all, they will need sales and right now the builders are gobbling sales up with massive price cuts. Lots of folks have a low basis in their home and can easily slice 40% or more off.
I also hope the realtor/poster who started this thread will reply along these lines.
“Lots of folks have a low basis in their home and can easily slice 40% or more off.”
I disagree–low basis will not make the haircut easy. Letting go of fantasy paper-gains is an emotional issue, not a financial issue, and it will not be done easily regardless of basis.
I would agree that it is “possible” for those with low basis to recover from the denial, as opposed to those with negative equity who really can’t afford to sell for less (e.g. no cash to bring to closing); they really only have the options of clinging to their negative equity if they can meet the payments, or handing it over to the bank.
My expectation is that it will primarily be the banks (REO) and builders who are setting comps the next couple of years (e.g. the non-emotional sellers), while owners with low basis will be emotionally “stuck”. clinging to their imagined equity.
“Lots of folks have a low basis in their home and can easily slice 40% or more off.”
If I were a RE agent, a low cost basis would be one of my qualifying client attributes before listing a property. If they don’t have any equity cushion, I would’nt waste good money trying to market their property.
Excellent point!
Ditto.
As a business person, yes you would. As a real estate professional who has not had a sale in 6 months, your standards might have some leeway.
Susan is MIA today. Out looking for GFs?
They cannot emotionally nor perhaps even financially slide 40% off. They have factored that equity into their net worth, made it part of the retirement plan, and/or will be looking at the next house they buy and want all the cash possible out of this one.
When newbie homeowners in bubble markets with depreciating home prices realize its cheaper to rent than buy, they are going to feel bitter and cheated. What’s more, when they realize they can’t afford the ‘true costs of homeownership’ and they can’t break-even by selling, they are going to ‘flip out’ and walk en masse a la California Casey. Right now, I’d be learning how REOs work and which financial institutions are likely to have the most of them.
That’s what I’m doing and I know of brokers who are getting ready for the same thing here in Arizona.
I think those early into the wave of REOs are going to catch the knife. The time to buy there is when banks are capitulating after a long drawn out period of trouble clearing the inventory off the books.
That won’t be soon.
Here’s two positions :
‘We need to separate the investors from the speculators,’ said John Tuccillo, former chief economist for the National Association of Realtors and now an industry consultant. ‘The flippers are getting out, but the real investors with deep pockets still see tremendous value in some of the price drops around the country.’
‘There’s a large group of people who are really stretched out,’ said Richard DeKaser, senior vice president and chief economist for National City Corp.. ‘They should be in a home that’s half as expensive as the one the have. They are finding themselves with a reset mortgage where all of their spendable income is going to the house and they can’t afford to go out to dinner.’
but the real investors with deep pockets still see tremendous value in some of the price drops around the country.’
Yeah? Like where? “Tremendous value” to real investors means price is less than 100 x monthly rent.
- ‘but the real investors with deep pockets still see tremendous value’
WTF! We are not seeing this in So Cal. When things get negative - the folks with money get negative.
Not so, I’m starting to slowly and surely get calls from “old friends” from the last downturn. Checking in, testing the water, updating contact info discussing strategy. Seeing which way the wind is blowing. Not a lot but a few. They made a lot of money selling off their spoils from the last downturn. They are beginning to ramp up for another run.
We are a long way from the bottom, based on the absence of bearish sentiment that says “real estate is the worst possible investment,” accompanied by affordable prices except for the fact that nobody can get credit. But I expect there will be “some folks” all the way down who are trying to convince fools that a bottom is within reach, whether blatantly (Lereah et al) or subtily (MrIncomeStream). These guys need GFs to keep them going…
Oh no, Subtle my a$$ don’t hang that bs on me we are a long way from the bottom. The reason I’m getting calls is because it’s being heavily played in the media.
I tend to agree with the poster above that the internet is going to accelerate it to the bottom a lot faster than what a lot are predicting as I’ve stated before. But in no way am I indicating we are close to the bottom. As I have said before untill the R.E.O. situation plays itself out
we are no where near the bottom.
Appreciate the clarification, MrIncomeStream!
“When things get negative - the folks with money get negative.”
Wrong…..
When things get negative, people with money get interested. When things get REALLY negative, people with money make lots of profit.
Exactly. When less informed investors begin hating the asset class of your interest and solid market research indicates there is real potential for future growth in the asset class that’s when you ramp up, enter, and maximize your gains.
The last downturn required major builders to file BK (KBH)
and Charles Keating type Banks closing their doors. That’s when the RTC was formed. This downturn is being accelerated by the internet, but we need some more bleeding before the public really gets it.
Sobay posts ” WTF! We are not seeing this in So Cal. When things get negative - the folks with money get negative. ”
When we do take the big dump out here and we will, the party is over period. I truly believe we are past the “tipping point” in the So Cal area and are in freefall. You cannot really say what anything is worth out here. I do know it is going down and fast!
I think a person could buy a house and get a “deal” knock off ten’s of thousands of dollars yet by the time it closed say 60 days later be underwater. Once this is generaly understood it will be like many times before…. zero, nothing, no activity a total lack of transactions, could go on for months and months…. slowly twisting in the wind.
We are still very much in the polite faze of this on comming mess…. it will get ugly and stay very ugly for a long time.
Wow, I have not seen that criterion in decades, literally. And I do love to see it. Just a few weeks back that jerk Suze Orman was advising her viewers not to buy a house for more than 20 times the annual rent (i.e., 240 times the monthly rent). Well, DUUHHH. At current interest rates I think it might be OK to pay up to 140x monthly rent, but of course that assume rents will not be falling, and we are already seeing rents falling in some areas.
Those with a lot a cash and little debt are the ones who didn’t buy into RE durring the run up, for all the reasons that this blog has clearly identified. They are skeptics, don’t buy into the latest fads, and know how to value assets. They have been though this cycle before and will wait and buy RE only when it is UNDER VALUED. We have a long ways to go. It might take 3 or 4 years but it’s worth waiting for.
We’re only in the second inning of this World Series RE Crash. To be thinking of buying anything now for any price would be a bad call. Of course, I’m basing this opinion on my experiences here in the OC (where we still have a wait ahead of us before prices get down into reasonable range!).
When I first moved into my old home in Mission Viejo back in 1995, one of the first neighbors I met was underwater on his mortgage by $ 180k and was astounded at the price I had paid for my house at the time ($221 k versus his $ 405k). It took him 7 years before he could break even.
Yea, I also bought in 95 in Newport Beach. Very similar story. I think the OC downturn during 90 to 95 is are excellent model for the bubble markets today. The late 80’s had the same type of specutlative excess and greed. Prices fell 40% — and that’s not adjusted for inflation. Expensive homes fell the most, 60% in some cases.
I still live in Newport, same house. It used to be a lot of fun, great neighbors, lots to do. But now so many of my neighbors are just empty houses. It’s getting little too quiet. I’d guess 30% are empty. The owners call them summer homes … I suspect they were actually ‘investments’.
The median price for my zipcode last month hit $2.2M. I paid $251K in 1995. I don’t think I could afford the taxes let alone the mortgage if I bought my own home. Good god, what have we done?
Last summer I was on the Balboa Peninsula in NPB. A Mexican women with her two kids was dumpster diving behind homes on the beach front. You have the same problems in Orange County as in the Third World now. High priced homes with growing numbers of poor people looking for something or someone to steal.
Yet another one of the best posts I have ever read on this blog.
That one goes to the hall of fame.
Congratulations, Cards!
Posted ” It took him 7 years before he could break even. ”
Quite common in the three downturns, I have owned property during. I doubt we will do much better on this go around.
Many home in LA took 11 years to reach break-even — from around 1989 to 2000/2001. And we didn’t have this kind of credit bubble back then.
People are seriously fooling themselves if they think prices will rebound anytime in the near future (~within 5 years). Prices will not rebound for at least 15 to 20 years if they do at all. This is what history tells us, just take a look at the Nikkei Bubble in Japan. That downturn has been ongoing for 14 years and is still not over. In this boom, what has happened is that first and second time buyers were replaced by investors and speculators which in turn priced out the former. Now the investors and speculators are gone and so the top of the pyramid is in the stratosphere while the bottom of the pyramid (1st & 2nd time buyers) is still on the ground. It will take a long tome for the top to return to the ground. In the meantime, greed will cause people to lose a lot of money because, by refusing to lower their price, they will just follow the market down. People who are not greedy and know how to price their properties correctly will make out OK. Just watch …
Couple of things…..
To soften up the sellers, it’s going to take a group like myself who are in the market to buy now who will pound them and pound them with lowball offers. It may take months before they get the message; but each buyer who holds firm on their offer helps remove the seller from their state of denial. They aren’t going to wake up one day and have a price epiphany.
Stress and distress are going to be the meat tenderizers
I find more people leaning over to listen to me talk with local reators, etc. And you’re right, educating people, including sellers is constructive.
Thanks for doing the dirty work.
A few years of ‘nothing’ might also wear down a seller. No one showing up at the open houses. No one making offers. Then, when it is so quiet that the seller is hopeful for even a lowball offer to come his way, then that is when prices will begin to fall. This will take years but we are on track for it.
So, I predict that Ben gets to keep his day job for years! Ben, thank you for all your efforts.
That was how it was in the mid 90’s in Stockton Ca, there were many homes that had been for sale for years. Nice homes priced at 90 times rents (as opposed to 150-200 today) would just sit. 93-95 RE was TOXIC and the public steered clear of RE. The RE ponzi scheme (89′) implosion was current events. Dominant media/public perception of RE as an investment was as negative as it was positive at the height of the hype. The perception pendullem will travel negative as fat as it swan to the positive.
“Stress and distress are going to be the meat tenderizers”
I like that description. Here is another:
Many sellers are still ‘green’ with expectations. It will take several seasons of mixed expectations for them to ‘ripen.’
Dan ” Stress and distress are going to be the meat tenderizers ”
Don’t worry Dan after awhile they will beg you too offer them penny’s on the dollar. Wait until they go 15 months without an offer. It will happen.
Stress and distress are going to be the meat tenderizers
—————————————————————————-
ROTFLOL !!!
I will not waste my time or resources trying to negotiate with resellers at this juncture unless they are facing impending foreclosure. Resellers are in denial.
I spoke to an investor yesterday, a complete stranger, with a ‘portfolio of investment properties’ and she was’nt even aware that market volume and prices turned negative YOY. She apologized for not keeping up with market trends but held firm in her undying belief that RE only goes up up and away.
She is still euphoric from all the price gains and suffers from all the sypmtoms we discuss daily on this blog. She was a victim of the dotCom implosion and was attracted to the lure of tangible assets. She thinks the FRB will save the day and keep prices up. Her renters are not covering her cost of ownership and on and on and on; it made me sick.
Why would anyone want to negotiate with a stubborn mule, particularly one with the belief set outlined above and throughout this blog? If I were a sales manager, I woul’nt send my guys into that brierpatch; it’s full of prickly reluctant fools and our margins would be shred to pieces within weeks. I’d be searching for a different line of work if I were a Realtor™ and save myself the grief OR at a minimum establishing some contacts with large REO departments.
would’nt…
and
….OR at a minimum I would start establishing some contacts within large REO departments.
posted ” She is still euphoric from all the price gains”
ignorance is bliss!
In the previous downturn, I got greedy…so I know what they’re feeling. It was 1989 in the Hollywood Holls and I couldn’t get my price…so I rented it out for 5 years. I sold to one of my tenants for well under the asking price. I lost a couple of hundred thousand dollars. Soon thereafter the market turned and stared climbing again. Arrgh! There comes a time when you just can’t hang on anymore…when you just want to be done with it and move on with your life. I could be tenacious as I WAS getting a positive return on my investment. Most this time won’t so it’ll be a quicker shake-out. This talk of a spring bounce just irks me. Didn’t they say that last year???I believe we will be flooded with overpriced inventory next spring (those hoping for a bounce)and HOPEFULLY only lowball offers….some of them will be mine. If I cannot find the right deal…then I will continue renting.
Cash will be king…I will offer lots of perks to the sellers such as several months to move if they need…I will make nice(as DinOR says)…show trend graphs…they don’t have to fix a thing (we’ll just take it off the price to keep taxes down) I’ll plan on at least a month of fixing before I move in because I plan on living there a looooong time.
Heck…I’ve owned 5 homes before…if prices don’t fall…I may never buy again! Renting is fairly trouble free!
Seems the best advise comes from the folks at Pimco ….. or Patricks, take your pick
Nice post!
- ‘A reply, “Step one: decide what you are willing to pay.’
- Step two: OFFER IS GOOD FOR 24 Hours ONLY!!!!
End of Story.
Even better strategy, not mine, but read here.
Find 5 homes you like.
Calculate their value to you (usually 30-40% lowball).
Make offer one the first one with the note that the offer is good for 24-48 hours and that the next offer will go in on the next house in line if they don’t accept.
Repeat as necessary.
Better yet……
I’ve taken the old “Seller Has Mulitple Offers” verbiage, switched it over to “Buyer Is Making Offers On Multiple Properties”…..w/24 hours to accept. I took all the stuff sellers were using and am turning back on them. If anyone’s interested, let me know and I’ll post it in full and you can cut and paste for your own use. Only caution is have a RE attorney in your state review and make changes to insure it’s legality. I call it the “Nuclear Option”…..you won’t get a lot of Christmas cards but you will turn up the seller’s stress level to atomic proportions. They freak when they see they are going to lose out on a real live buyer to neighbor if they don’t accept NOW. However, they don’t know who, what, or even how many; if any, offers you are making…..just like sellers used to do….BWG
It’s a tactic; not to be confused with a strategy.
That’s a damn good tactic how is it working out for you. Something like that I could see bringing down the market quick fast and in a hurry. If every buyer employed that tactic. That’s damn good I like.
Dan, I am interested in your strategy.
Please post it if you can. Thx.
Please post in full!
Great idea!
Here ya go:
Invest in a RE attorney and have him approve something like this as legal and binding in your state:
“This offer is tendered as part of a Multiple Purchase Offer. The buyers named above are making simultaneous offers on one or more additional properties. This offer and all of the other offers tendered are conditioned upon and subject to the final approval of the buyers, which will be delivered in writing within 3 days of sellers’ acceptance of this Purchase Offer, unless deadlines are extended by written agreement of the affected parties. Immediately upon transmittal of the buyers’ final approval of one of the sellers’ acceptance of the offer tendered to those sellers, all other offers in this Multiple Purchase Offer will be unilaterally withdrawn by the buyers.”
Submit with the price YOU want to pay and with no contingencies of having to sell on your part; a nice clean QUICK deal for the seller.
Do so on the 1st Tuesday of the month after another the seller has had another weekend with no offers and the ink is still wet on the mortgage payment he mailed within the past week and it’s fresh on his mind.
Offer is valid for 24 hours which makes for a sleepless night for the seller. He’s got to make a decision NOW and not have the time to try some silly counter; which you won’t accept anyway. For him, it’s time to “fish or cut bait”….
Remember, it’s a TACTIC; not a strategy. You’ve got to do all the prep work prior to making an offer. If you jump in with this, no agent will present it. You’ve already done your homework to make sure the seller has sufficient equity, both agents have so much time and effort invested they will comply with your wishes, your buyer’s agent agreement states they will deliver and provide proof of delivery of all offers to the seller and his agent….and so on.
Sellers, like frogs, are best boiled by slowly turning up the heat….LOL
I’ve used something similar when I bought a restaurant a few years ago and it will be no different with a house. In negotiations you have to control the flow and increase the seller’s stress level and this will certainly do it.
You will NOT be popular with the other parties; but who cares? YOU are the buyer, the one who brings the cash to the table, the one the deal doesn’t happen without. Who says a “lowball” offer is lowball? I use it as a descriptor, but my offer on a house is what it’s worth to ME and that’s makes it the fair market price. Isn’t it time buyers dictated terms and definitions?
BTW, I’ve read some other tactics on this thread that are great additions to the process. I didn’t invent this one; just learned from others and tailored it to fit my needs.
Hope it helps
LOL! What a great idea
Please share more!
Here is an outlandish legal theory:
Actually, this is just a replay of the “blockbusting” tactics that went on in Chicago during the 50s and 60s. Only then, it was race and not so much price.
The persons running the scam would “sneak” a black family onto a block, and then the existing owners would panic and sell ever cheaper.
Nowadays, race isn’t the factor that it used to be. The only color that _really_ counts is green. A lower “comp” on a block just might be the equivalent to seeding a “good” neighborhood with a minority.
I doubt it would fly in court unless some legal hotshot could establish that those with less money/equity are some sort of “protected class”. Perhaps Santa Monica, CA?
The problem with this approach is that a really low offer (more than 20% less than asking) is just going to be rejected because the seller’s agent knows they can reduce the price 10% and see if they get any offers and then do that again and again until they hit a range where they get an offer. This takes time. Say 3 months between price reductions.
BUT, if the seller really starts to be concerned with falling prices and suspects that he and his agent have been chasing the market down then he might accept a offer at less than 20%. For example, if 6 months ago he turned down a ‘lowball’ offer that he would gladly accept today then he might then become concerned that he’s chasing the market down. Unfortunatley, we are early in this process (at least in my area) so sellers have not had that experience yet.
“OFFER IS GOOD FOR 24 Hours ONLY!!!!”
……Not me!!!…. I will never, ever give a seller a chance to shop my offer, even 24 hours is way too long with the internet and fax machines. I got burned last year with an out of state seller who needed 3 days to
get the paperwork back to me. He shopped it and I lost the deal.
All my offers expires at 10PM that same day. I try to get the offers to the seller earlier in the day, but there is no good reason, none, to let them off the hook. If they let it lapse by 10PM,
I could always rewrite the offer the next morning. Man, when that seller has the clock ticking, and its 9:50 at nite, who’s he going to call.
The realtor on my last deal was really PO’d. They had to fax me a signed agreement at 10 o’clock at night. The poor darlings had kids to put to bed, and a husband to feed, and asking them to do Real Estate at night was not in their script.
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Last year was a hot market though David, which could be a better explanation of the lost deal than the contractual timeline. But you have given me new inspiration to demand a quick acceptance/rejection of the offer when that time comes. I agree with this completely. In 2002 I made an offer on a house that had been on the market for over a year. The seller was really pissed that it had not sold, and I don’t blame them …. It was nice. Smelling blood, made the offer ….. the selling agent told our agent that another offer was going to also be looked at, on the coming weekend. My luck. This place is for sale for a YEAR, and in the same week, two offers!?! Lost out, and it would have been a good buy.
I agree, do not give the seller any time to mull over the offer you have made …. kind of like the time allowed for you to think about buying for the last 5 years ………
Everybody in the real estate industry wants to keep the party going don’t they ?
Until the over-inflated ,speculator driven ,greed and fear based markets correct to pre-mania prices ,anyone who buys is taking a risk that they are overpaying .
I remember 8 months ago how LV Landlord ,(a realtor investor ),use to spin that her Vegas market had already corrected . Now she doesn’t come around anymore because of the egg on her face .
Prices need to get down to affordable by a qualified buyer . A short-term speculator or any buyer who can only qualify by teaser rates and liar loans does not determine stable long term prices .Look at Casey , do you want Casey types setting the market values with his get rich quick schemes and inflated appraisals ?
First the lenders have to stop their faulty easy money lending practices that supported this mania .
I have the feeling that “stubborn sellers” phenomenon also related to fact that many properties are owned by realtors, meantime regular sellers could be induced to list at “market prices” & hold, giving realtors increased chance to sell their own “just reduced”… probably after this crash, law will require realtors to disclose if they own property in the area.
Same happened in wall street “post-bubble”, now brokers/analysts have to disclose if they own shares of companies recommend…
Excellent suggestion. “Full Disclosure” laws apply to every licensed professional except realtors. Even judges have to recuse themselves from hearing a case if there is a conflict of interest.
“For those who have to buy (for example, are moving and can’t find a rental that works for them), how should they negotiate? ”
This is a completely ridiculous premise, so the discussion will reach ridiculous conclusions. Not surprising that a realtor proposed it.
This is like asking “if I ABSOLUTELY MUST catch a falling razor-sharp rapidly-spinning knife, what is the best technique?” Or “if I absolutely MUST catch a falling grand piano…”
You get the point: the best idea is NOT to get your body under either one.
I think it is often difficult to get real estate agents to participate in making reasonable (often considered as “low ball”) offers.
The problem is not a real-estate-agent-to-seller thing, but rather a real-estate-agent-to-real-estate-agent thing.
That is, the buyer’s real estate agent is not worried about insulting the seller, but rather, is worried about insulting the seller’s real estate agent.
This, of course, can all happen regardless of what the true market value of the house is.
Nah, that’s not the problem. Not even close, if a buyers agent is worried about insulting the listing agent that agent should be fired on the spot. He’s not doing you any good.
The problem lies solely with the listing agent in most cases. A large percentage of the time there is a relationship between the seller and the listing agent and the listing agent has made certain promises or what they call in the industry bought the listing. A large percentage of the time the Seller has no clue what the real market is indicating.
A lot of times the only way to circumvent that is to have your agent send a copy of the offer directly to the seller.
“It’s a ridiculous statement to say you can’t find a rental that will work. It’s, in fact, EASIER to find a rental that works than a house (IMO). If for no other reason, then the fact that it’s only temporary makes it work.”
Exactly. Don’t even look at apartment rentals, look for housing owned by ‘investors’ who need to rent it out - they’ll bend over backwards to get you in. We have a large dog and a cat and still managed to find many who would accept us, even if the ad stated “no pets”. Our place is a bit small and we’d like a bit more space, but it’s fine for 2 - 3 years while we save money like crazy and wait out the crash.
Can’t paint the walls? Who gives a rats? Who looks at the walls two weeks after painting anyway? Read a book instead…
OK, here’s a few thoughts (I wish I could say they were mine, but I’m plagiarizing from others here and at other sites:
1) Locate appropriate buyer — you need someone who had real equity. Nobody who has bought in 2005 or 2006 has any equity left (maybe 2004, 2003, 2002 etc in a year or more). Forget flippers — it’s a busted flush
2) Option One - use the “round robin” approach discussed above. X number of houses — make the offer, good for 24 hours (no counter), if not accepted, on to the next on the list. BTW, if no one bites and you get a call back later on an offer (”Is that offer still available” — then offer less).
3) Option Two — a boatload of issues/problems/contingencies with the offer ( that you’re willing to give away). Makes the buyer feel good.
Remember, as Txchick57 said (I think), “If you’re not embarrassed to make the offer, you’re offering too much”.
Oops,
In Option 2, delete “buyer” with “seller” as in, Makes the seller feel good
I think what the broker really wants to know is how to get the sellers to sell. I suggest this:
Find out what the seller bought for. Find out what the seller earned that year.
Add in inflation to the sale price and earnings, or inflation plus one percent. Tell the seller that, absent a crazy bubble, this is what the house would sell for today. Ask the seller if, at an equivalent salary, he could afford his house today at what he wants for it. In much of the country, the answer will be know.
Then tell the seller that, regardless of what someone else got lasts year, he doesn’t deserve any more than the figure you provided. Any dollar over that is a ripoff at the buyer’s expense. Then tell him to get as much earned profit as possible, he/she has to sell now for whatever he can get, before prices get further back to normal. And he has to price below everyone else to grab from the dwindling supply of suckers with money.
No seller right now will believe in the bottom price or even a fair price right now until the market actually gets there unless the sellers is desperate .To many sellers think they have the option of renting
and would rather wait for a better market .Right now many sellers think this slumpis just a little bump in the road .
You’re right, so let’s all be tenants. Why are we even talking about purchase strategies/tactics when it’s way too early to buy anything. Except, I did like the idea above of bombarding sellers w/ lowball offers just to get them to face reality.
Talking about purchasing tactics and strategy now is how smart buyers prepare. Some will want to jump in at different times, but it’s never too early to prepare. The bad part is most people have little or no negotiating skills and experience. The good part is very few will obtain same. Those that do; will win the day. What’s the use of timing the market correctly if you aren’t ready to take FULL advantage of the situation? You make your money when you buy; not when you sell……
And, wouldn’t you agree, good negotiating skills apply to renting as well as many other situations?
Merced, Ca, last week I seen a sign for 40% off this weekend.
Other observations below:
Ranchwood — 20k-25K Reduction on a 278K house!
http://tinyurl.com/yal8yn
Ryland — 40K Reduction on 200K-300K house
http://tinyurl.com/vyfxh