Real Estate Investing

If you want a free house, there’s one waiting for you in Clarksville, Tennessee.  But there’s a catch…. really a couple of catches.  First, the house is not livable without complete remodeling.  The second catch is the house doesn’t come with the land.  You must move the 880 square foot house to somewhere else.  Further, when you move it, you can’t take the basement or the foundation - just the top floor.  Want to read more?  Here’s the link.

Another agent asked why people hate “us” so much (”us” being real estate agents) because of another advertisement on Craigslist.  The ad was removed, but here’s a link to the original in PDF format.  Jonelle noted that these words were written with such venom that she wonders what our industry has done to make people so angry,

Back to our original topic of Craigslist.  We talked in our meeting this morning that many agents are forgetting to put their company name and phone number when they place a home on Craigslist.  I did a quick search and found agents are all over the place.  Some forget the office number, but include the company name.  Others list the phone number, but forget to tell who they work for.  Agents must have both the company name nad phone number or they are in violation of state law.

Here’s a house on Craigslist for $270 - a 2600 square foot home with lots of nice stuff.  I think they meant $270,000.

Finally, Craigslist has a “funny” ads page which were pretty eye opening.  I love this one where someone is looking for a roommate, but - again - there is a catch.  One of the roommates is a gorilla,

BEDROOM MUST BE SHARED WITH APPROX. 700 LB. ADULT MALE SILVERBACK GORILLA. THIS IS AN EASTERN LOWLAND GORILLA WHO IS FAIRLY DOCILE ALTHOUGH HE DOES NEED TO “STRETCH HIS LEGS” FROM TIME TO TIME.

The ad goes into more graphic details.  Want to buy a house?  Call a Realtor!

Before we start talking about the art of negotiation, I want to refer you to our Mortgage corner for an update by Miranda Marquit about what’s going on with Fannie Mae and Freddie Mac.  It’s essential that these power houses survive so that buyers can find affordable home loans!

However, for those lucky people who are now in the market to buy a home, negotiating the sales contract can sometimes be just as challenging as finding the right home.  Yes, it’s a buyers market.   However this doesn’t mean that a buyer automatically gets to buy a home for $10,000 to $60,000 less than the asking price.  Perhaps they can from the ORIGINAL list price, but most homes currently for sale are already priced at market value.

When you write a contract, one of the most important things to consider is how a seller will react to your offer.  How much money do they owe on the home?  Will they have to bring money to the table at closing in order to sell?  If it looks like they might net $20,000, have you counted the commission they’ll be paying to the listing agent?

For example, a friend of one of the buyers I’m now working with said it was ridiculous that the buyer even give a thought to the seller.  He felt she should ask for the world - go for the throat - to size up the seller and then negotiate the price up from there.  His advice was possibly the worst advice I’ve ever heard!!  When you insult the seller with a ridiculous amount, you stand a very real chance of being shut out of any further offers.  I’ve seen it happen… heck, I’ve told a buyer’s agent to go away (at the direction of my seller) when their offer is so low that it’s offensive.

Similarly, I’ve worked with buyers whose primary goal seems to be to “stick it” to the seller.  They are blinded to the ultimate goal of finding a nice place to live - blinded by their own ambition to brag that they “got” the seller for thousands of dollars.  I learned long ago to happily refer this kind of buyer to someone else.  Don’t be so focused on bragging rights that you lose out on what would be a house of your dreams.

U.S. News & World Report outlines more negotiating tips.

Finally, one of the most important things is to know how much homes are selling for in the neighborhood.  Make sure that your agent performs a comparable market analysis to see that you don’t overpay for the area.  It’s common to compare prices when an agent lists a home, but it’s just as important to provide this service when buying.

Real Estate ABC.com also offers insight about reasonable market price v. your price.

The key is to figure out what the seller’s bottom line is - especially if it’s a fair price - and making sure this amount isn’t going to break your budget.

An always fabulous agent I work with told me recently about one of her closings.  She found a home for her buyer that had first been on the market for $145,000.  Following the market downward, it was reduced after several months to $130,000 in order to remain competitive.

Her buyer wanted this home, so they wrote a contract.  In the contract, they asked for 3% ($3900) in down payment assistance and 3% ($3900) in closing costs.  They also asked for a home warranty, a $1000 repair limit, termite inspection (we’ll say $75, but could be up to $800 depending on whether termites were found), and for the seller to pay for title expenses (another $1200).

This once $145,000 home was being purchased for

… drumroll …

$119,925 after the seller paid all of the concessions on behalf of the buyer.

That was $25,075 less than the original list price.  BUT because the market sets the price - and in fairness - the number would be $10,075 off the list price.  So the buyer made a full price offer on paper, and yet it was not a full price offer.

It got back to my friend the agent that the buyer’s father fussed at everyone he met because the agent didn’t get her son a “good enough” deal in a buyers market.  I beg to differ.  That she saved his son over $10,000 dollars from the list price was a pretty fabulous deal.

Yet there are always people who argue that it wasn’t enough.

Another friend of mine wrote a comment to me about full price offers saying, “No one should ever pay full asking price for anything that lends itself for negotiation possibilities…..there is always someone willing to wiggle….keep looking.”  I respectfully disagreed with her given the scenario outlined above.

I believe people need to always remember that just because you see something on paper, it doesn’t tell the whole story.  A full price offer may appear to be full price, but when a seller walks away with over $10,000 less than expected, they are not receiving full price.

Of course, you can also ask yourself how badly you want a house.  Even in a strong buyers’ market, homes in your price range in safe neighborhoods may not be available, so you do what you have to do.

I urge buyers and agents to never let the naysayers convince you that you made a mistake because only you know and have the complete picture of what your needs are.

Photo by Kathy T. and her blackjackii phone. Special guest: the calculator.