Tag Archives: Buyer-Information

Don't Outbid Yourself

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[photopress:stop.jpg,thumb,alignright]It is time to use Escalation Clauses in reverse. Many, if not most of my clients, were previously working with another agent. Some have explained that they were not happy with the fact that the agent was always, and without exception, recommending that they offer full price, with an escalation clause over the asking price. While this may be a sure way to insure that you get the property, you may at the same time be outbidding yourself. While over the past few years, buyers have used escalation clauses to WIN the house, it is time to use them in reverse, to protect yourself against overpaying for a property.

Recently I have seen a couple of these “Seller will not look at offers until…” backfiring to where the seller has no offers on that stated date. By requiring buyers to wait a week or so before the seller will look at the buyer’s offer ,and by pricing the property too high at the same time, the seller ends up “A day late and a dollar too high”. Just because “everyone is doing it” doesn’t mean that *you* can do it, and get away with it. You meaning the seller in that context.

Now that the market is winding down a bit, will we see an end to escalation clauses? I hope not. It is time to shift gears and use them in reverse.

Let’s say the seller is asking $530,000. Instead of putting $530,000 as your offer with a cap of $550,000, you might want to offer $500,000 with a cap of $530,000. Many falsely assume that if a property has many offers, that the property was underpriced. Clearly not so. Some who have made offers at full price or better with an even higher cap, have found themselves paying full price or better, even if they end up being the only offer on the table at the end of the “seller will not look at offers until….” timeframe.

No one can predict at this time of year if the “sluggishness” is seasonal, or a sign that the market is turning. Even during the period where it seemed prices were just shooting to “the sky’s the limit”, there are periods of sluggishness. Periods of sluggishness can be as simple as many, many agents are away on vacation (August). Many, many buyers don’t want to buy what happens to be for sale (Halloween through January 2). The period from now until early next year, with the exception of a “spurt” in September, is always a slower period with no way to predict what will happen in “high Season” (January through July).

I do know this. It is a very bad time for a seller to be “off” on his condition and asking price. It is a very bad time for buyers to assume that just because a seller will not look at offers until next week, that the seller is going to get multiple offers. During the time that you are waiting for the seller to be ready to look at your offer or respond to your offer, pay close attention. If the house has any inherent negatives, particularly with regard to location, do not outbid yourself by offering full price or better just because you “assume” that the seller will have more than one offer by next week.

To sellers…you have to be “positioned to sell” by September 15 unless you are willing to take the risk of having to wait until January 2. By the way, January 2 has always and forever been my favorite day to put a property on market. But that’s another story…

Trying to Force the Seller’s Hand

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[photopress:hand.jpg,thumb,alignright] If you are playing the game of “trying to force the seller’s hand”, you have to know how to play it right. It is not easy to force a seller to…anything. Regardless of who is right and who is wrong, if you can say there is a right and wrong to the situation, reality is what it is. If you want the house, and you are not the only one who wants the house, you have to stay “in PLAY”.

Two buyers have been “circling the wagon” for weeks. Offers have been presented to the seller, counters have gone back to the buyers. Back and forth, back and forth. Buyer Agent saying, “Did the seller look at the comps I gave you showing why the seller should?” “Well of course the seller has to fix this and fix that, remove this and add that”. Meanwhile the seller is just going about their business, day in and day out, waiting for the buyers to agree to their price and conditions.

Then along comes buyer number three. Buyer number one and buyer number two, who have had offers back and forth, know what the seller wants. So it seems only fair to tell buyer number three what the seller wants. Meanwhile buyer number two wants to submit an offer again, third time, for something less than they know the seller wants. I say, well you have two choices. You can bring an offer meeting the seller’s counter to you of a couple of weeks ago and beat buyer number three to the punch, OR you can hang back and wait to see what buyer number three does.

Buyer number two’s agent doesn’t want to bring an offer matching what the seller wants NOR wait until buyer number three makes their move on Saturday, so she brings an offer that she knows is LESS than what the seller wants and Tries To Force the Seller’s Hand”, by giving a very short response time. Bad move. You bring the seller an unacceptable offer and put a response time that is hours before buyer number three is scheduled to see the house. What happens. By trying to force the seller’s hand and make him respond before buyer number three sees the house, you are left out in the cold. Your offer is expired before the seller is going to respond. Buyer number three’s offer is accepted and your offer is a non-offer, because it expired before the seller was willing to look at it.

If you tell the seller they only have x amount of time to respond, and that timeframe does not match the seller’s schedule for some reason, your offer becomes invalid. Agent says “You COULD HAVE countered and just changed the date…” But why? Why would the seller risk countering an expired offer, when they have an acceptable and valid offer on the table? (agent’s answer is because she has worked long and hard and deserves…anytime the agent’s answer includes the agent in the picture…wrong answer – wrong thinking.)

If you are trying to force the seller’s hand by giving him a short wick, and putting a response time that is less than acceptable, you have to revise your offer and extend that date the second your response time passes. You have to keep your offer “in play”. By trying to force the seller’s hand…you can put yourself out of the game altogether, if you do not keep your dates running forward by submitting a new response time.

Buyers often think that the seller MUST respond, MUST counter. Not the case. No answer IS an answer. If you have no answer by the time your offer time expires…you have your answer. The answer is NO…try again.

When I was a teenager, my parents often didn’t want me to go to parties. So when I asked to go to a party, I didn’t demand an answer on the spot. I made my case for why I thought they should say yes, and then I left the room to give them time to talk it over and think about it. The fast answer was often no…I went to lots of parties 🙂

When you give the seller what he wants, you can try to demand a quick response. When you want the house for less than acceptable terms, you have to be willing to hang back, and you have to be willing to lose it, if the seller doesn’t meet your terms. You can’t bang your fist on the table and demand that you get the house for less. Presenting an unacceptable offer, and demanding a quick response, is like a kid throwing a tantrum…rarely works out for the best. And almost never works out for the best, when you know there are other interested buyers.

Time to get into 1st backup position.

Why I do not support the use of Buyer Agency Agreements

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[photopress:buyer.jpg,thumb,alignright] For many years I have been at loggerheads with most of my peers around the country, regarding the use or lack thereof, of Buyer Agency Agreements.

After eight years of “ad nauseum”, insider agent forum discussions on this topic, I continue to feel that buyers are most often, better off without them. Most often I am the only agent, in a forum of 28,000 agents, who does not support the use of buyer agency agreements. So maybe I am the “loggerhead” who refuses to “get it”.

The only time I will use them, and I have used them, is when there is a clear and present reason for the buyer to have one, that is of benefit to the buyer. Everything I do is on a case by case basis…everything…and must pass my smell test for being right for this client at this time, given the objectives of this client. Often I wish I didn’t impose that ethical standard on myself 🙂

I was one of the first agents to use a buyer agency contract in the area I worked in at the time. The buyer had a previous bankruptcy. Under the rules in play in that area at that time, I would need to disclose the previous bankruptcy to the listing agent, even though it had no potential negative impact on the seller, as it did not affect this buyer’s ability to secure a loan. The only way I could get around this, was to explain this to the buyer and have them sign a buyer agency agreement. They agreed, we signed it, and the buyer got both the loan and the house. Some disagree with me on this and feel the seller has a right to know everything about the buyer, regardless of whether or not it will impact the seller. I do not agree.

Today, in this area, I do not need a contract with the buyer to represent the buyer, but at that time and in that place I did, so I used one in that particular case. I used one because the buyer could not attain their objective, buying that house, unless I did use one. It passed my smell test of being better for the buyer client for me to use a written buyer agency agreement.

Some of my peers argue/ask, “Why do you always use a contract with a SELLER client?” as if the issues are one in the same…a “contract is a contract” is their mantra. I always use a contract with a seller, because it is in the best interest of the seller to have all of the members of the mls show the seller’s property. In order for the seller to gain access to the mls, the sellers must sign a written agreement to pay, through me, the agent who shows the property and brings an acceptable and accepted offer. In other words…it passes my smell test for being best for my client for my client to sign it.

Top Ten Things A Home Inspector Says

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[photopress:top_10.jpg,thumb,alignright]It’s Time for another Top Ten! Those of us who have been to 100 too many home inspections can practically stand behind a home inspector and mouth what he is going to say next, when it comes to these “Top Ten Things A Home Inspector Almost Always Says”. No we don’t do the two finger rabbit ears behind his head 🙂 I swear we don’t!

NUMBER ONE:

You need a GFI over here by the sink, oh and another one over here in the master bathroom, and one down here by the kitchen sink…and one more out here in the yard, at the outlet next to the hose bib.

NUMBER TWO:

Contact…contact…Earth-to-wood contact over here.Get that firewood AWAY from the HOUSE!

NUMBER THREE:

Now this here tree is planted WAAAAY TOO CLOSE to the HOUSE!

NUMBER FOUR:

You want to treat the roof for moss BEFORE you get moss. You can spray the treatment on with a hose from on the ground. But first you have to get the moss off the roof, because the treatment will only keep moss away. It won’t remove the moss you’ve already got. I tried to get a website link for you, but lots said we should all trash our roofs and get metal ones. Moss can’t grow on a metal roof. Pretty noisy neighborhood if it starts hailing on all the metal roofs.

NUMBER FIVE:

Cracks in the Driveway!

NUMBER SIX:

Pine needles on the roof, in the valley flashings and in the gutters.

NUMBER SEVEN:

Chimney flashing. if I had a nickel for everyone of these…

NUMBER EIGHT:

Hanging gutters, loose gutters, missing gutters, gutter downspout too close to foundation, divert water further away from the house.

NUMBER NINE:

CAULK! Take out the old caulk…put in the new caulk. Caulk inside where the tub meets the tile. Caulk outside of the tub where the tub meets the floor. Caulk around the kitchen sink. Apparently we all need many tubes of caulk in various colors, including no color at all!

And NUMBER TEN IS!

UH OH…NO TAG ON THE HEATER! OLD TAG ON THE HEATER! NO TAG DATED 2006 ON THE HEATER!

2ND INSPECTION NEEDED TO HAVE AN HVAC QUALIFIED INSPECTOR SERVICE AND INSPECT THE HEATER.

Negotiating the Commission vs. “Discounting”

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[photopress:album2.jpg,thumb,alignright]My very first entry here on RCG discussed the manner in which a buyer and their buyer’s agent negotiate the buyer agent commission. Being a “Discount Broker” and Negotiating are not one in the same. A “Discount Broker” usually has a set fee or menu of services with set prices. Many traditional brokers have a set range within which their agents cannot deviate. “Negotiating the commission” is a simple phrase for no carved in stone set amount. It means sitting down with a client and determining a fair and reasonable price for this client given this particular client’s needs and expectations. The end result being an unknown factor until the end of the interview. The end result could be higher than the client’s desire, lower than the client’s expectation and in many cases no change at all from the agent’s expectation. Negotiation is about an intelligent discussion with a mutually agreed upon end result.

Last night before I went to sleep I popped over to Greg’s excellent blog and his article that referenced my feelings on the topic of buyers and buyer’s agents. I was a little surprised to see a “nastygram” comment there aimed at me personally and my feelings on this topic. It amazes me that agents who sit down with sellers every day to negotiate the commission, become absolutely outraged at the suggestion that buyer’s should do the same with their agent.

I would like to dispell the myth that I am a “Buyer’s Broker” who exclusively works with buyers only. Not because there is anything wrong with that business model, but because it simply isn’t true. The only reason I highlight buyers with regard to commission negotiations is because agents negotiating with seller clients is a given. There is absolutely, never a listing appointment with a seller, that does not include the topic of commission. Consequently there is no reason for me to evoke change or explain the parameters within which the seller consumer can negotiate with their agent.

One of the main reasons to highlight the difference between “discounting” and “negotiating” is the fact that Buyer Agent Bonuses are on the rise. Every night I receive emails and “Zip Your Flyers” from agents around the Puget Sound offering “$5,000 EXTRA Buyer Agent Bonus!” and “4% SOC!”

The mere concept that a Buyer Agent will be enticed to lead a buyer to one house over another, because of the amount of money that Buyer Agent will make when it sells, shoud be offensive to every single agent in this country.

The Buyer Agent represents the Buyer. The Buyer Agent is not “Selling a House to Make Money”. The Buyer Agent, in representing the Buyer’s Best Interests, should never be offering advices based on the fee structure of each property. That doesn’t mean that a low fee doesn’t infiltrate and influence the thought process. We are human. It would have to be a perfect match for my client and a great house for me to truly buckle down and recommend a house that is paying five bucks or nothing. But there have been times when I recommended a house and walked away with absolutely nothing, just as there are times when I have represented a seller and found that my walking away with nothing was the only way to achieve the objective. It happens once in a while the same as a lawyer does a pro bono case once in a while. I don’t make a business model out of it, but I don’t rule out the possibility of that end outcome either.

As for the jab at the end of the “nastygram” comment “NOTE: Ardell is NOT a REALTOR”, it is absolutely true that I “stepped out of the pew” after having been a member for 14 years or so. I have given NAR over ten years of those 14 years I was a member, to raise the status of the buyer to CLIENT level. I am disappointed that Buyer Agency has not progressed further than it has, and clearly I have given them sufficient time to meet my expectations.

Does anyone really think it matters if I go over and slap my $500 or so over at the Board of Realtors on Monday to “become a REALTOR”? Does taking five minutes out of my day and $500 out of my pocket really make any difference in who I am or how I do business with my clients? I think it is more honest and ethical to be true to myself, and stay out as long as I agree with the DOJ’s position. I think it is more honest and ethical for me to stand outside the fray until our basic thinking is more in line, than to be a member who dissents from within. I’m the one who has to look at myself in the mirror in that regard, and make a personal choice. At present, this is the one I can live with.

As long as the buyer is not expected to discuss commissions when they meet with an agent, the same as a seller – no more, no less, I will remain where I am. Discussing commissions with a seller does not automatically translate into discount nor does discussing commissions with a buyer automatically translate into discount. It is a matter of equal treatment and respect, pure and simple. How can that possibly be wrong?

ON A LIGHTER NOTE – THERE WILL AGAIN BE A PRIZE, ON BOTH SITES, FOR NAMING THE BAND AND ALBUM TITLE OF THE PICTURE IN THIS POST. Same era, late sixties, fabulous Rock and Roll band from the West Coast that might have done better on a different label. Not a One Hit Wonder, with many albums in our collection, and one of Kim’s favorite bands of all time. There are other clues to the band’s name in the photo itself, but this one should not be an easy ,”googleable” answer. Good luck!

Negotiating Fees with the Buyer Client

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I was quite encouraged by a phone call I received yesterday from an agent wanting to discuss how to approach fee negotiations with a buyer. Not how to object to the subject. Not how to respond if a buyer raises the topic. But how to introduce the concept of negotiating the fee to a buyer, without the buyer being the one to first broach the subject.

Clearly, the Buyer Agent truly treating the buyer as a client, is the key to the future of our industry. As long as agents continue to think that the seller is paying their commission, when they are representing a buyer, they will continue to treat the buyer as a second class citizen in the real estate transaction. I am very hopeful that people will start to see that there are two sides to this $coin$ and that the buyer clearly pays their fair share, if not more, for their representation.

Given the huge increases lately in Buyer Agent offerings from sellers, it is obvious that 98% of the industry still does not “get it”, nor do they want to “get it”.

Looking for guesses on that album cover. Prize to be determined by location of the winner who guesses the band and the One Hit Wonder on that album.

What is a .25 bathroom?

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[photopress:9t.jpg,thumb,alignright]Nine times out of ten when someone asks me this question, the house does not actually have a .25 bath. The mls here in the Seattle area requires us to count bathrooms in a specific, and somewhat outdated manner, causing many homes to appear to have a .25 bath that do not. 

[photopress:5t.jpg,thumb,alignright]I will shortly be listing a two bedroom condo in Kirkland at the north end of Lake Washington for about $200,000 that has 1.25 baths. While many homes show 2.25 baths or 3.25 baths, these homes do not actually have a .25 bath at all. A .25 “bath” is one extra fixture, usually not housed in a separate room at all. The 1.25 bath condo I will be listing has a sink and vanity area located in the master bedroom between the full bath (with jacuzzi) and the walk in closet. You enter this dressing area from inside the master bedroom. This is the best example of a real .25 bath. It is an area inside the master bedroom, just outside the full bathroom, where one can shave or put on their make up while the other is in the bathroom taking a shower.

Most homes that show 2.25 baths actually have 3 “bathrooms” involved that total this configuration. The most common setup is one “full bath” plus one “3/4 bath” plus one “1/2” bath, that totals 1 + .75 + .50 = 2.25 total baths. The 3/4 bath is most often attached to the master bedroom and has a shower stall and no tub, making it a toilet + sink + shower stall = 3/4 bath (3 fixtures – no tub). The full bath is usually located off the main hall and is used by the persons in the “other” bedrooms and has a tub (with shower in it) + toilet + sink equalling one “full” bath. A 1 3/4 bath home would normally be a rambler style on a single level, with the full hall bath doubling as the “guest bath”.

A 2.25 bath home would normally be a two story home with a 3/4 in the master, a full bath in the hall and a half bath on the main level, with a toilet and a sink only, so that one does not have to go up to the second floor to go to the bathroom. On the East Coast this is called a “powder room” from the old days when women pretended to be “powdering their nose” as opposed to relieving themselves 🙂 A 3.25 bath home would be similar, but might have four bedrooms rather than 3 with both a hall bath and a “Jack and Jill bath”. A “Jack and Jill bath” is a term used to describe a bathroom set between two bedrooms that can be accessed from either bedroom, but not from the hallway. I had one once, though in my case it would have been more aptly called a “Jill and Jill bath”, but I do not recommend it. The occupant of the bathroom enters from their bedroom and locks the door to the other bedroom from inside the bathroom while bathing. They are supposed to remember to unlock that door when they leave, but often don’t, causing the occupant of the other bedroom to be locked out from their side of the bathroom.

Another example of a .25 bath seen in some very old homes with basements, is a “below grade” toilet only, usually in the basement and sometimes called a “service toilet”. It is a stand alone toilet or a toilet in the washer and dryer area near the “utility sink”. It is often just sitting out in the open in an unfinished basement area used by a guy who is working on his car or in his workshop area in the basement, saving him a trip up the steps to the main bath.

I say this system is “antiquated” because housing trends have expanded, but the mls method of counting fixtures has not expanded with the times. For example, my master bathroom has a separate enclosure for the toilet area, a jacuzzi tub, two separate and distinct sink areas, and a large two headed shower stall. Technically that equals six “pieces” 2 sinks plus 2 showers plus jacuzzi tub plus toilet equals 6. But the mls makes no distinction between that type of elaborate master bath and a “full” bath. That is why you will often see the term “five piece bath” in the marketing remarks of a home, meaning there is a single head shower stall and a separate tub and double sinks. The “uitility sink” located in the washer and dryer area is never counted as a “fixture” when totalling up the bathroom fixture count.

So when you see a home listed as having 2.25 baths or 3.25 baths, stop looking for the .25 bath. It generally does not exist inside that home. Instead, expect to have a 3/4 bath with no tub in the master and a .50 bath on the main level with a toilet and sink only.

What’s a buyer to do?

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[photopress:frustration.JPG,thumb,alignright] In the under $500,000 market, good properties are flying off the shelf. In the last two weeks, we were chasing properties with our client in multiple offer situations from Bellevue to Edmonds. It’s a tough market to work in and gets very discouraging to our buyers. When a market is this hot it always requires an accelerator clause if you want to be in the game.

I was thinking about how typical this chase was and want to share this little history with you. Two deals we lost, one where we bid higher and one where we bid the same and the last one that we got, we paid less than the highest bid. Here’s what we did and how we finally got a happy ending!

Offer 1:condo in Sandpoint, priced $325,000. We were the high bid on this one at $375,000. We used an accelerator clause because we knew we had to and in fact, there were 10 offers. We knew we’d have to waive inspection and form 17 and be pre-approved and we did all that, but the seller, rather than selling for the highest price, sold the condo at 5000 below our offer because the seller had met the other buyer and liked him. Our buyer, by the way, has great credentials.

Offer 2: condo in the north end priced at $330,000. we did an accelerator to 350,000 and we were beat at the same price because the other buyer was all cash. This was smart of the seller, since there’s always the problem of appraisals, which are tougher on condos than single family homes

Offer 3: condo in Roosevelt district, this one was listed at $320,000 and we put in an accelerator clause up to $365,000, no inspection, waive 17 and pre-approved. This time our buyer was in town and met with the sellers and, as usual, we found something in common with the two of them, and we got the condo for $5000 less than the highest offer.

Lesson learned: Always always try to get some connection with the seller if at all possible. It’s best, if you have a likable buyer, to have them meet and chat a bit. Even if you’re working with a sour personality, you can still coach them a bit and I’m right there with them to act as a catalyst. If the seller or buyer are out of town I write an interesting summary of how much the buyer likes the house, their strengths and I always try to find something really touching about them, some sort of volunteer, a special hobby, etc. Knowing the listing agent and/or treating them really well is a great asset, too. I’ve been known to bring a Starbucks when arriving with an offer. Sellers like to know who they’re selling to and often their home is not just a financial investment but something with soul and they want the “right” person to buy it.

So, you just never know. Selling a home is an emotional venture and there are as many reasons for who they’re going to sell to as their are people!

Is it a Buyer’s Market or a Seller’s Market?

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We are, for the most part, in a “normal market”, meaning that in some segments, it is a Seller’s Market, while in another segment, in the same city and price range, it is a balanced to Buyer’s Market. I used this sample to show how, in a small geographic area and price range, you can have two types of markets going on simultaneously.

What does that mean to you as a buyer? If you find one in the charted area that shows 0 available and 24 sold in six months, you need to act quickly and be less picky about condition and location. If you find one in the area that has 15 available and 149 sold in the last six months (same City and same Price Range, different Zip Code) then you can take your time, be more picky and even wait for a better one.

What does that mean to you as a seller? If you are putting your property on market in the first graph area and price, you can likely push the price based on supply and demand and still sell quickly at full price. If you are a seller in the second market segment noted by the second graph, you will have more competition and should price competitively and put the property in the best showing condition possible.

I have not highlighted the true “Buyer’s Market” segment, which is one where only 3-5 of every 10 homes for sale, will sell at all, meaning the ratio is 10 sellers for every 3-5 buyers. That is occuring in higher price ranges (over $1,500,000) and harder to define market segments, and not necessarily as relevant to the average RCG reader.

Perhaps other agents who work further out, like Sultan, Monroe, Des Moines, etc… can do some stats in those areas for us. Anyone seeing the ratio of buyers to sellers such that there are not enough buyers in the marketplace to absorb current inventory in a reasonable timeframe?

Interesting, not-so-nice Craig’s List practical joke

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Anytime you see a house listed FSBO at over $200K below market you gotta wonder what’s going on. This particular one on Craig’s list was just down the street from my home so I decided to take a look.

$307000 – 4 bedroom fhouse or sale by owner

4 bed 2 bath completely remodeled inside in desireable redmond location for sale by owner.this lovely split level home is located within walking distance of lake sammamish ,parks,and schools in a secluded neighborhood!

Serious buyers only!

I will be holding an open house friday through sunday 7am-8pm if im not there my wife will be so feel free to stop by and have some cookies and a mocha 🙂

please do not email i rarely check it

These poor owners had people knocking on thier door all weekend thanks to someone’s idea of a practical joke. Open posting options like Craig’s List, Google and others are free and get great exposure, they are also prone to abuse. As the man said “If it sounds too good to be true…”