Real Estate Investing

There’s an agent in my area who shall remain nameless.  He’s a big, popular agent.  He guarantees his listings will sell in 60 days or else.  The else is the charming part… or else what?

Or else he’ll buy them personally?  No.

Or else he’ll sell them without charging a commission?  No.

Or else he’ll just re-list them again and again so it will appear it’s only been listed for 60 days?  Bingo!

A friend of mine - before I became an agent myself - once said that she called him and learned that to list with him you were required to sign at least six listing forms.  Each form was good for 30 to 60 days.  When one listing date expired, his staff would re-input everything into the MLS thus creating a new MLS number.  We’re not supposed to do this - it’s against the MLS rules… more specifically there’s supposed to be a 10-day rest period before a home listing shows back up as a new, active listing.  Here’s what I found the other day on one home:

August 6, 2007 - 49 days
September 24, 2007 - 49 days
November 12, 2007 - 46 days
December 28, 2007 - 61 days
February 28, 2008 - 46 days
April 14, 2008 - 46 days
May 30, 2008 - 63 days
August 1, 2008 - 45 days
September 15, 2008 - 45 days
October 30, 2008 - 48 days
December 17, 2008 - 170 days (wrong picture)
June 5, 2009 - 119 days

I definitely sense a pattern that the agent is tired of the 45 days listings and is expanding them to three and four months! So this may be a boost for sellers - to give them optimal exposure because we agents do keep an eye on the hot sheets - to see what’s new on the market, what prices have come down, who’s withdrawn and expired.  Yet it’s misleading to buyers UNLESS their agent performs due diligence and looks at the full history of the house.  If I was the buyer’s agent, my thoughts would be that since it’s been on the market for 787 DAYS, they may be willing to negotiate.  OR they probably are NOT willing to negotiate!

Maybe we should just call this Reason #29 to Interview and Hire a Professional Realtor to Represent Your Best Interests.

In the best case scenario when the housing market and home values are down, a seller may still have equity in his/her home.  Let’s say they owe $125,000 on a house that could’ve sold three years ago for $165,000 (a $40,000 gross profit).  Today, the same home is worth $145,000.  (And let’s just forget about fees, commissions, etc. for now).  To many sellers, this could feel like a $20,000 LOSS on the home - though they’ll still walk away with money.

The other very important consideration is what you would’ve paid in RENT on a comparable property… because rent or own you would’ve paid something either way.  Let’s say Mr. Seller has lived there for seven years (just a random number) and it would’ve cost $1000 p/month to rent.  That’s $84,000 that would be straight up gone without even $20,000 in capital gains to trumpet.

Finally, you’re selling in order to move up, down, or sideways.  The potential savings on the next home purchased is where the seller will make up the $20,000 difference he could’ve earned by selling three years ago.  Mr. & Mrs. Seller could possibly now get into a $210,000 home for $180,000, for example.

CNN Money.com illustrates what I’m saying with some tips for people looking to find a new crib.

Galdes, 43, may have to sell her condo — bought in 2003 for $287,000 — for less than she’d hoped. But the discount on a better place will more than offset the reduction on hers. And she’ll net $86,000 after closing even if she breaks even.

If you plan to sell but not to make another purchase, I’d advise to hold on for several more years until prices come back (if you can).  If you plan to change homes, however, the time could be right for you!

A colleague once told me that his favorite part of being a Realtor is the negotiation.  We couldn’t be more opposite.  I hate negotiating.  Hate it with a passion.  It is a necessary evil, though, so I still strive to give it my best, to be the voice for my client so their interests are guarded and protected.  But it still doesn’t mean I have to like negotiating.

I know both buyers and sellers want the best deal.  Buyers want a good price on a home - with repairs made and hopefully a chunk of the closing costs paid.   Sellers obviously want top dollar, but any closing costs or repairs they dole out will affect their bottom line.   I find these costs are usually the sticking point of a home sale - NOT the price of the house.

So here are my own Top Five Negotiation Strategies for buyers and sellers:

1. Put yourself in the shoes of the person facing you at the table.  While their problem is not your problem, it COULD be your problem if they say “No.”  Try to be reasonable and understand WHY they need X done.
2. Do NOT take it personally.  Just because a price comes in low doesn’t mean that your house isn’t nice (although sometimes that is the reality).  They may be wheeler-dealer investors.  Even if the price is ridiculous, you have the option of saying, “YES, NO, or MAYBE.”
3. Never let the negotiation end in your lap.  Always make a counter-offer, even if the other side says, “Final offer.”  Make them to be the one to say “NO” so you’ll be able to sleep at night knowing you gave it your best shot.
4. Never be afraid to ask your agent to talk with their broker for insight and advice.  This outside-looking-in coolness can state the obvious without heated emotions interfering.
5. It’s okay to say YES to an offer or a counter-offer.  This is where you should be sensible and reasonable.  Do you really want to lose the house you love because the seller won’t pay for a $50 heating element in the stove?  Do you really want to hang on to your mortgage payment for another two months because you wouldn’t drop the price by another $1000?  You may regret your decision that was probably made in anger or frustration.

I’d love to hear of other negotiation tips from buyers, sellers, or agents!