Negotiating the Offer Part 2 – The “Contingent” Seller

Posted on May 7, 2006 by ARDELL

[photopress:startinggate.jpg,thumb,alignright]The “Contingent” seller knows exactly where he is going if and when his house sells. He is stuck at the starting gate until he gets an acceptable offer on his home. Every day he faces the possibility that someone else will come along and snatch his new home from him; someone who can make an offer without a home sale contingency.

Contingent offers have a limited time frame, and can potentially leave a seller at the starting gate, if his home is not sold within that timeframe.

Presenting an offer from a buyer to a “contingent” seller is one of my favorite scenarios. It is one of the few true win-win set ups. The seller is more focused on being able to get out of the starting gate and to the finish line. He’s chomping at the bit for the race to start and is genuinely happy to have received an offer on his home. The buyer usually doesn’t have to leap over as many hurdles, to get his offer accepted with a fair price and fair terms.

One of the tell-tale signs that you are dealing with a contingent seller is that the seller’s agent is from far away. When you see a Seattle condo listed by a Lynnwood agent, you get the hint that maybe this seller is buying new construction in Lynnwood. When you see an agent whose inventory generally consists of $700,000 homes in Lakemont, list a home in Kenmore for $450,000, you get the idea that maybe this seller has a contingent offer on a house in Lakemont.

Often buyers make the mistake of looking the seller right in the eye and asking “Why are you moving?”, the normal reaction being a look on their face that resembles that of a deer in headlights. As with all fact finding endeavors in the residential real estate market, it is better to surmise and test, than to point blank ask. When I suspect that I am dealing with a “contingent” seller, I call the agent and say I MAY be writing an offer and would like to know if the seller needs a specific closing date. Most often the seller’s agent will respond that the seller needs “closing plus 3”, so that the funds from his sale can get to his next transaction, and so the seller doesn’t have to move his things out of his house until that next transaction closes. This way I can quickly find out that there is a next transaction identified and that the seller cannot close unless he sells this house.

“Closing plus 3” is often identified in the mls, but it is by no means a sure sign that the seller is in a contingent contract. Closing plus 3 is used in divorce situations and almost any scenario where the seller is going to a rental, so you can’t rely on that fact alone to determine seller motivation.

Negotiating price and terms is generally a piece of cake when dealing with the “contingent” seller. The sticky point in negotiations with a contingent seller often becomes the washer, dryer and refrigerator, if they did not negotiate to receive those in their contingent sale contract, minor detail. When preparing and negotiating offers with “contingent” sellers, we are more likely to be looking over our shoulders for another buyer, than to be worrying about reaching a fair agreement with the seller.

Anytime you take too long getting from offer stage to signed around, you leave the door open for another buyer to swoop in and stop your negotiations in their tracks. Move forward with smarts and speed and wrap it up when the issues in dispute become minor and not worth losing the house over.

Negotiating The Offer Part 1 – The “Homeless” Seller

Posted on May 6, 2006 by ARDELL

[photopress:250px_Tug_of_war.jpg,thumb,alignright]It is a popular perception that every seller wants top dollar as their primary objective. In my experience that is not always true, and in fact is often not true at all, at the time the offer is being presented. Let’s take a step back first to see where the perception comes from.

When a seller is speaking with agents before the home goes on market, it is true that the discussion focuses on selling the property at the highest price, in the shortest amount of time and with as little inconvenience to those occupying the home, as possible. Agents are trained to speak in these terms, and so that is how the discussion generally goes.

At the time the offer is presented however, if there is a lengthy discussion, that discussion is often not about the price at all. Even when the discussion is about price, the underlying pressure on the price is often about something else entirely, like the cost of temporary housing for the seller.

For many sellers, the minute they accept an offer on their home, they are immediately, though temporarily, homeless. I can’t tell you how many times a seller has looked up at me after signing the offer and said, “I guess I’m homeless now”.

Often when a seller is picking on every minutae detail of the offer, it is because they do not know where they are going. This is a dangerous situation for a buyer, as the seller often wants them to “make it worth their while” to leave. You might think it was obvious to them when they listed their home for sale, that they would have to leave. Trust me, the reality in that moment when they pick up the pen to sign your offer, that the minute they sign it they will be “homeless”, hits them like a ton of bricks IF they do not know where they are going.

Any good negotiatior considers the factors on the other side of the table when preparing the offer, or during the give and take of the negotiation process as new information becomes available. While 30 day escrows have become the norm, does that really give a seller the time they need to find their next home? Often the seller can’t make an offer on their next home until their home is sold, or at least in escrow. If you are willing to give them the time they need to know where they are going, and match up the closing dates so they don’t have to go to temporary housing, you often will win out on price.

If you are currently renting, adding an extra couple of weeks or more to the escrow time can actually save you money. Go out to the date where you will not be paying rent and interest on your mortgage simultaneously. Giving the seller time to negotiate the offer on his next home can be a winning strategy in multiple offer situations and even get you the house you want at a lesser price than other offers on the table. Consider a longer close or a post occupancy agreement when writing your offer. (Some lenders will not permit a post occupancy to exceed 30 days on “owner occupied” financing, so check with your lender before agreeing to anything longer than 30 days past close of escrow, even if longer is only by a couple of days.)

Giving the seller the peace of mind that they can stay in their current home until they are moving into their new home is generally worth up to at least $5,000 in price and sometimes as much as $10,000. If the seller has two offers on the table, one with an escalator up to $460,000 and one at $450,000 straight up with no escalator, they often will accept or counter the lower offer, if it provides them with the ability to find their next home before having to leave the house. Sometimes something as simple as letting the seller keep some things in the garage for a week or two can make the difference. Sometimes giving them the entire weekend to move can make the difference. Sometimes splitting the weekend, giving them all day Saturday to move out and leaving you all day Sunday to move in is sufficient. Often these little things prevent the seller from pulling extra had on the price to compensate for his uneasiness and inconvenience.

The perception that the highest price on the table always wins out, is erroneous. A seller who faces being “homeless”, will often select the offer that affords him the option to stay until he closes and can move his belongings into his new home, even if that offer is not the highest price on the table.

Teaching Effective Blogging to Realtors?

Posted on May 5, 2006 by Dustin Luther

One of the great things about real estate blogging is that we’re all making this up as we go along… What is the “right” way to blog? I really have no idea but I like to think that the contributors on Rain City Guide are on the right track…

Recognizing that we might be onto something, Russ Cofano approached me a few months ago with the idea of creating a “Bloginar” where we would travel the country teaching real estate professionals how to blog (This is before I accepted a position at Move). With his experience giving seminars to real estate professionals and our combined experience with blogging, the timing seemed right and we quickly put together an outline for our idea. Russ ran this outline past some of his contacts in the industry and the results is that we quickly signed up a few organizations to host our seminars. Our first similar was today in Portland, and for those interested, here is a high-level outline of our presentation:

Understanding Blogs

History
Anatomy
Motivations

Basics of Blogging

Creating a Blog
Posting Content
Creating Links
Writing Comments

Increasing Your Business With Blogging

Current Internet Real Estate Tools Suck
High Search Engine Ranking
High Conversion Rates
Long-Term Benefits
Low Monetary Costs

Effective Blogging Techniques

Linkation
Content
Complementary Tools

It is a full three-hour presentation so you can imagine that we go into a lot of detail on each of these topics!

There are a couple of things that I know are missing from our presentation… I’d really like to spent more time on how to host a blog as well as how to incorporate photos/podcasts/videos into blogs. With that said, we only had three hours so we tried to hit the “sweat-spot” of giving enough information to new bloggers without overloading them on some of the more advanced stuff. My hope is that each and every person that walks out of our seminars feels equipped (and excited!) enough to start an effective real estate blog that evening.

If you’re interested in scheduling this seminar for your organization, please contact Russ (His blog is Realty Objectives [link removed] and his site includes some more information on our seminars [link removed]). You’ll definitely want to sign up soon because with my full-time job at Move, I can only commit to a handful of presentations each month (and we’re already booked-up through July!).

Also, if you are one of the people who attended the seminar, please consider leaving a comment below with your take on our presentation (along with a link to your new blog! 😉 )

Unintended Consequences

Posted on May 3, 2006 by Russ Cofano

According to an article in Advertising Age, a NY-based Ad Agency is suing a blogger for copyright infringement, defamation and trade libel and injurious falsehood. Appears that the blogger, Lance Dutson, made negative remarks about the agency on his blog that revolved around the agency’s work for the Maine Office of Toursim. The agency apparently tried to get Mr. Dutson to remove the remarks and apologize. He said no. They sued. Repeat after me, “Never, never, underestimate the power of the blog for unintended consequences.”

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Unforunately for the agency, the blogosphere flew to Mr. Dutson’s plight like bees to honey. According to Mr. Dutson’s latest post on his site, more than 200 blogs are now referencing him compared to just 2 before the suit. Seems that the negative PR to the agency from the cumulative effects of bloggers may have surpassed the harm they suffered from Mr. Dutson’s original comments. At the very least, there are a lot of eyes reading this story that would never have seen the original comments on Mr. Dutson’s blog.

This is another example of how blogging can alter the historical power dynamics of business. I don’t know anything about the financial strength of either Mr. Dutson nor the ad agency but if I was a wagering man (which I am), I would guess that the agency has the resources to use the legal system to make Mr. Dutson spend a lot of money on his defense. This is a common practice in the legal profession and explains why many small firms back away from challenging the entrenched larger firms even when the small fish have good cases. Bottom line is that it takes a LOT of money to litigate a dispute and power goes to those that can afford it. Justice is blind but it ain’t cheap.

While Mr. Dutson will certainly spend some money on attorney fees, it cost him NOTHING to have positive PR spread across the Web. In the old days (like a couple years ago), litigating a case in the press would require the press to actually want you to win. In the blogosphere, Mr. Dutson does not need to worry about the political will or economics of the traditional press to get “web time.” And there is NOTHING that the agency can do about this. The cannot enjoin the collective blogosphere from commenting on this case and opining on its merits or what they think about the agency themselves.

In the end, this is just one example of how blogging can play a part in leveling the business playing field.

How does this impact the real estate industry? Many of us who are (as we like to think) “in the know” debate about the future of real estate, about the new oohs and ahhs in real estate technology and the tidal wave of change that is looming. But the average joe or jane knows nothing about this stuff – yet. They buy and sell homes each and every day just like they did for the last 20 years. As blogs proliferate, so too will communication about the new and the old, and the good and the bad, in real estate. Average joes and janes will spread their opinions about new companies and new offerings and just like the ad agency, there will be an impact on how business is done.

Visionary brokers will figure this out and harness the immense power of social networking. Others, like the ad agency, will operate at its mercy.

Social Networking in Real Estate

Posted on May 2, 2006 by Dustin Luther

One of the most interesting sessions I attended at Mind Camp was led by Dan from Biznik on Social Networking. Social networking tools allow people to share information about themselves, other people and other things (like photos, products, etc) in a setting that attempts to foster a certain level of trust among users. For example, if I’m in the market to find a real estate agent, Biznik allows me to see the real estate agents that Dan would recommend I use. Assuming I know and trust Dan, that’s probably a pretty good recommendation.

The social networking website with the most buzz today is clearly MySpace. I can’t claim to know or use this service, but I know that my teenage sister (warning: music!) can’t imagine life without it. When she visits, she spends most of her visit checking up on her friends…

But there are lots of other social networks, and depending on how broadly you definitely the term, there could be hundreds, if not thousands, of social networking tools on the internet…

Some of the more popular social networks we identified during the session included:

These are some of the more popular services that are directly built to be “social networking” tools in that they are designed around giving users the opportunity to connect with “friends”. Some of them, like LinkedIn and Biznik, are designed to let users share job hunting and business contacts while Judy’s Book is about sharing references and recommendations about anything local.

The idea is that you’d be much more likely to purchase a product or use the services of someone if you knew that they were recommended by a friend (or more likely a friend of a friend).

[photopress:seo_networking.jpg,thumb,alignright]I’m often surprised that I don’t see more real estate professionals talk about social networking tools because real estate is really about relationships and social networks on the internet are just an extension of this idea. Social networking tools are one of the most powerful ways for real estate professionals to use the internet to connect with potential buyers and sellers. When you get a reference (or lead) from a social network, this person comes to you with a certain level of trust!

By the way, the tricky part about defining social networking tools is that most people don’t limit them to websites. Tools like instant messaging (IM) and email are simple ways to start building up a community through the internet.

In addition, tools like Flickr and del.icio.us, have perfected the art of using community input to make a service that is better than the mere sum of its parts. When sharing photos with Flickr, you enter a community where good photos are commented on and added to groups where a magic “interestingness” rating identifies photos most worth seeing. With del.icio.us you can follow the links and notes of the friends and they surf the web to find webpages worth visiting. (Both of these sites were bought by Yahoo for vast sums of money because of their ability to use the general web-surfing public to organize webpages for Yahoo!).

Which brings up the most controversial part of existing social networking tools. Just about every single one of them requires the user to input information (tags, descriptions, etc) that benefit the owner of the site, but very few of the tools (and none of the major ones) allow a user to output their information or delete their information when they don’t feel like “sharing” any more. Jim Benson probably covers this topic better than anyone else I know and his recent article, People vs. Peep Hole, dives into the idea that a corporate controlled community can never be free.

These concerns are interesting, and definitely worth following, but most real estate professionals are so far behind the curve in effectively using online networking tools that they should worry first and foremost about “getting involved”. In the future, someone will figure out how to keep our data “free” while still providing all the wonderful benefits of a social network, but until then, I’d highly recommend taking part in an online group that interests you… (By the way, joining a group of bloggers also counts! 😉 )

UPDATE:

Right after I hit publish on this post, I got an email alerting me that the MindMap (a topic worthy of another blog post) for the social networking session was published on a file sharing site used for MindCamp stuff. Download the pdf file on the site to see a much more comprehensive list of social networking sites!

Hair Raising Fears of a Housing Bubble!!!

Posted on May 1, 2006 by ARDELL

[photopress:hair.JPG,thumb,alignright]It is very difficult for young people today to buy with confidence. There are some very real fears, and justifiably so, that housing prices can not and will not continue to rise at the levels they have in recent years. Some ask if they should wait until they have saved 20% down. Historically, most people have bought their first homes with less than 20% down for good reason. There are no guarantees that interest rates will not rise. Interest rates are still, historically very low. How would you feel if you waited to purchase only to find that prices were still high and interest rates were 9.5%?

Renting when you are a family with children has its risks. What do you do when one day the landlord knocks on the door and says “I’ve decided to sell the house and you all have to move out in 30 says”?

Anyone who can qualify for the first time buyer program at First Tech, should consider that option. It is an excellent program, with almost no loan costs and a very low interest rate. Take the time to find the very best loan program that you can and work on your credit score to insure you can get the best possible rate available.

When selecting property, try to convince yourself to buy that diamond in the rough. This way if values do not increase, you will still be able to sell at a profit. Buy the house that needs a lot of cosmetic fixes, but has good curb appeal and is in a decent area. Consider all of those areas that have only increased by 10% or 15% but border on areas that have increased by 30%. Buy that “old people” house in a great neighborhood that everyone else is turning their nose up at because it has sculptured carpet and pinch pleated avocado drapes.

The one sure way to buy with confidence is to ignore the cosmetic issues and don’t be fooled by heavy “staging” that might lure you into paying too much for the house. It has never been more important to buy wisely. It has never been more important to avoid making choices based on creature comforts like “needs nothing”, totally remodeled or brand new, less than 15 minutes to work. Don’t get tangled up in these creature comfort premiums, unless you are willing to face the fact that the tradeoff may be having to sell for less than you paid when you need to move.

There are still plenty of values and many of them require a little TLC like paint and landscaping. Be the smart buyer who isn’t crying the blues in a year or two if prices level out or take a dip.

Are We Brewing A Bubble In Seattle?

Posted on April 28, 2006 by Chuck

Probably the most frequent single question I get as a realtor from my friends and clients and contacts is “Are we in a real estate bubble?

Posted on April 27, 2006 by ARDELL

[photopress:heathbillboard_1.jpg,thumb,alignright] Russ and my exchange regarding whether or not Broker’s will ultimately have to deal with complaints about an agent’s blog, reminded my of this “Got Real Estate” Billboard.

It had mixed reviews nationally. Given Wendy works in Belmont Shores where lots of people have seen her with her husband and children, and dog of course, in her bikini, it really wasn’t a big deal. But it made national news when she was fired because of the billboard. Another broker picked her up immediately (no pun intended) and she actually got a lot of business in support of her, when people heard she was fired.

In agent forums, a lot of people from those landlocked states thought it was indecent and unprofessional. But in Belmont Shores CA, someone walking around in a business suit and pumps would actually look weirder than someone walking around in a bikini. When I worked in Manhattan Beach, I had to change my whole wardrobe. I actually stopped traffic when I walked around in my East Coast business attire, pinstriped business suit and white sneakers, like Melanie Griffith in Working Girl. My broker told me I had to ditch my Philly digs if I was going to “work the beach”. I compromised and bought some really cool black Sketchers.

What do you think about Wendy’s billboard ad?

Instant Real Estate Gratification

Posted on April 26, 2006 by Dustin Luther

[photopress:sasha_skyping.JPG,thumb,alignright]Our operators are standing by ready to take your call!

Here at Rain City Guide, we do our best to answer your questions before you ask them (at least that is a major part of good blogging!).

However, I know that we’re barely touching the surface of answering all your Seattle real estate questions and I doubt you want to wait around until we write a blog post about what’s on your mind right now. So, today, I’m releasing an “instant gratification” feature!

Notice how a few of the contributors (on the right panel) have a button under their name that tells you if they are online… Every time you reload a page on Rain City Guide, my server goes out and checks the status of these contributors. If they are online, then making contact with these contributors is simple, using free software called Skype.

So far, I have four RCG contributors who have agreed to take part in this experiment:

A Real Estate Agent (Anna Luther)
A Real Estate Lawyer (Russ Cofano)
A Mortgage Broker (Russ Shulman)
A Real Estate Tech Guy (myself)

I’m not sure what I have to offer via this medium, but if you want to talk with an agent, a mortgage broker, and/or a real estate lawyer, they are available to talk with you any time they are online. (By the way, we’re not going to stop here as more RCG contributors should be coming online soon…)

Contacting any of us is very simple and if you already have Skype, you can skip the first step:

Download and Install the Free Skype tool
Return to Rain City Guide and click on the button under anyone whose status says “I’m Online” and/or “I’m not telling”.

This will bring up a pop-up menu that starts the process of calling us over the internet.

Why Skype?

It’s free! Anna has been using it for almost a year to talk with her friends and family in Russia (Here is an article she wrote about Skype last September.)
The quality of the calls are awesome! They are much better than a cell phone and akin to a land-line.
No fancy equipment is needed. Assuming you have speakers and a mic on your computer, it just works. Honestly. I’ve set it up for friends and family on five or ten different computers, and assuming they have a mic (every computer has speakers nowadays), it has worked immediately after installation. Note that even if you don’t have a mic, you can still use Skype to send instant messages, so still consider using Skype to contact us…
Did I mention it is free? Skype will cost you nothing and there is no spyware or anything nasty in the software, so go ahead, download the software and start making calls to friends and family around the world.

One last note… The status of some of the people is displayed as “I’m not telling” which is just no fun. The reason is that the status of Skype users can only be displayed on a website if they are connected to Skype through a PC. Anna and I are using a Mac. Nonetheless, I’ve included these buttons because you can still use them to contact us. Assuming I’m online, I’ll definitely answer your calls. Assuming I’m not online, I pay Skype a few dollars a year for voicemail service, so you can always just leave me a message.

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(this is a photo of our daughter using Skype to talk with her grandparents in Russia!)

UPDATE:

I added both Ardell and Galen (and two more contributors said they were hoping to join up soon)!

I also had some great questions from people about how Skype works. The system is essentially the same as a telephone conversation except it is over the internet. If you call up one of the contributors, you will be talking with them and only them. You are not entering a group conversation, a group chat, or anything like that… It will really just be you talking with them. Simple, but powerful!

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