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Category Archive: ‘Why You Should Hire Jim as your Buyer’s Agent’

Making a Lower Offer

2016-06-25 07.26.42

It is rare in today’s market that you will find a truly motivated seller that will give it away (discount more than 10%).  Of the NSDCC sales closed over $1,000,000 in the last 30 days, the average sales price has been within 5% of the average list price.

Does it hurt to try?

Lightweight agents will warn you not to ‘offend’ anybody with a lowball offer.  But let’s assume that sellers have a thicker skin.  There is a tactical problem that makes it very difficult to come to terms when a buyer presents a low offer.

My rule-of-thumb is that we have two days or two counter-offers, whichever comes first, to make the deal.  If the initial offer is 15% or more below the list price, there is too much ground to cover.  You’re more likely to run out of time or counters, than to reach an agreement.

The biggest problem is that both sides become attached to their price once they put it on paper, and feel the need to defend it no matter how that price was determined.

Typical Example:

Buyer offers 85% of list price.

Seller thinks it is low, and counters 98% of list to send a message to the buyer that this house isn’t going to be stolen.

But the buyer becomes attached to his 85% offer, and he’s not going to be pushed around! The fight is on – and the buyer counters at 88% of list.

Seller thinks we’re going nowhere fast, and drops the negotiations.

Example that has a Better Chance:

The buyer offers 85% with low expectations, knowing the seller won’t be pleased.  The seller counters at his 98% number.

The buyer’s response to the seller’s counter needs to be at least 90% of list, for  two reasons: A) to impress the seller that a deal could be made here, and B) beat the clock.

Typically, the seller will then counter at 95% of list, and hope the buyer just signs it.  But the buyer splits the difference instead at 92.5%, and hopes the difference is small enough that the seller shrugs it off and signs.

The key is the buyer’s counter to the seller’s first counter – it has to be high enough that the seller stays in the fight.  If the buyer doesn’t come up much, it’s too easy for the seller to give up.

Tips:

  •  If you want to buy at 85% of list, then have the agents discuss it on the phone.  You have to convince both the seller and the listing agent, so you might as well start with the agent first – if they blow you off, just wait and see if they lower the price later.
  •  Determine a price strategy in advance, and respond promptly.  The egos on both sides will run out of gas within two days.
  •  Make a clean, crisp offer – include a solid prequal letter and proof of funds.
  •  Provide convincing data why your price is right, especially if there have been new comps since the listing began.
  •  Don’t justify your price by dogging the house, and all the repairs needed.
  •  Include other sweeteners like free rent after closing.
  •  Keep in mind that you are only fighting for the last 2% or 3%.

Having a strategy is important.  Too often a buyer will just throw a price out there, without having a path to follow – and the path is predictable!

The prevailing market theory employed by nearly every realtor is to wait until someone comes along to pay their price.  Your negotiations have to go perfectly to disrupt that belief!

Get Good Help!

Posted by on Jun 25, 2016 in Jim's Take on the Market, Listing Agent Practices, Thinking of Buying?, Thinking of Selling?, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 5 comments

San Diego’s Pending Index Rises

pending index

Work with an agent who is well-versed in handling multiple offers!

http://www.car.org/newsstand/newsreleases/2016releases/may2016pending

Pending home sales in Southern California as a whole rose 5.6 percent from May 2015 and 2.4 percent from April, thanks to year-over-year gains of 6.9 percent in Los Angeles County and 6.2 percent in San Diego County. Orange County experienced a 1.8 percent decrease from the previous year.

In a separate study, California REALTORS® responding to C.A.R.’s May Market Pulse Survey reported slower growth in floor calls, listing appointments, and open house traffic, reflecting slowing market activity. Despite the lagging indicators, the percentage of properties selling above asking price reached an all-time high and the number of offers per property rose.

• The share of homes selling above asking price in May increased to 38 percent, the highest level since the survey began, rising from 32 percent in April. Conversely, the share of properties selling below asking price dropped to 34 percent. The remainder (27 percent) sold at asking price.

• For the homes that sold above asking price, the premium paid over asking price declined for the third straight month to an average of 9.4 percent, down from April’s 9.6 percent and up from 8 percent in May 2015.

• The 34 percent of homes that sold below asking price sold for an average of 10 percent below asking price in May, down from 12 percent in April and up from 7 percent a year ago.

• Nearly seven of 10 properties for sale received multiple offers in May, indicating the market remains competitive. Sixty-five percent of properties received multiple offers in May 2015.

• The average number of offers per property increased to 3.1 in May, up from 2.9 in April and 2.8 in May 2015. The increase in the number of offers was driven by a greater share of transactions that received three or more offers. Moreover, homes priced between $200,000- $399,000 and $750,000-$999,000 saw the greatest increases in three or more offers compared to a year ago.

• About one in four (23 percent) properties had price reductions in May, indicating sellers are pricing their homes more realistically. One-fourth of properties had price reductions in May 2015.

Posted by on Jun 24, 2016 in Jim's Take on the Market, Market Buzz, Market Conditions, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 0 comments

Buyer Tips in a Seller’s Market

buying

Hat tip to bode for sending this in, and noting the importance of #3!

http://www.trulia.com/blog/mistakes-buyers-make-in-sellers-market/

The real estate market fluctuates often, making it tough to predict whether the market will favor buyers or sellers when it’s your turn to buy. If you’re shopping for real estate in a market that currently favors sellers, you need to know some tricks of the trade to help ensure you don’t make any mistakes.

Buyers in a seller’s market can get what they want, but they need to bring their “A” game — buying a house in a hot market isn’t for the indecisive. Here are six common mistakes many buyers make — mistakes that you can learn to avoid — when shopping in a seller’s market.

http://www.trulia.com/blog/mistakes-buyers-make-in-sellers-market/

 

Posted by on Jun 11, 2016 in Jim's Take on the Market, Market Conditions, Thinking of Buying?, Tips, Advice & Links, Why You Should Hire Jim as your Buyer's Agent | 0 comments

Real Estate Disclosures

asis

The finer points about disclosures.  An excerpt:

When preparing the Transfer Disclosure Statement, the seller sets forth any property defects they know or suspect to exist. Defects to be disclosed in the TDS include any conditions known to the seller which might negatively affect the value and desirability of the property for a prospective buyer, even though they may not be an item listed on the TDS. Thus, disclosures to the buyer are not limited to classic conditions preprinted for comment on the form. [CC §1102.8]

Further, the buyer cannot waive the seller’s delivery of the statutorily-mandated TDS. Any attempted waiver, such as the use of an “as-is” clause in the purchase agreement, is unenforceable as against public policy. The words “as is” are never to be used in the context of real estate transactions.

“As is” implies a failure to disclose something adverse known to the seller or their agent, a prohibited activity. In contrast, “as disclosed” is the condition of the property as known by the buyer when the seller accepts their purchase agreement offer. [CC §1102.1(a)]

Thus, all buyers purchase property:

“as disclosed” by the seller, the seller’s broker and the broker’s agents; and

“as actually observed” by the buyer prior to entering into the purchase agreement.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Brokers and their agents who list one-to-four unit residential property have a duty to all prospective buyers, separate from the seller’s, to timely disclose any physical aspects of a property:

– observable by the broker or their agent on a reasonable inspection of the property; and

– affecting the property’s market value.

A buyer of a one-to-four unit residential property has two years from the close of escrow to pursue the seller’s broker and agent to recover losses caused by the broker’s or agent’s negligent failure to disclose observable and known defects affecting the property’s physical condition and value. Undisclosed and unknown defects permitting recovery by a buyer for the cost to cure the defect or loss of value are those observable by a reasonably competent broker during a visual on-site inspection. A seller’s agent is expected to be as competent as their broker in an inspection. [CC §2079.4]

However, the buyer is unable to recover their losses from the seller’s broker if the seller’s broker or agent inspected the property as a reasonable competent broker, did not observe the defect and did not actually know it existed. [CC §1102.4(a)]

For more on seller disclosures and case law, click here:

http://journal.firsttuesday.us/brokerage-reminder-the-as-is-clause-instigating-negligent-failure-to-disclose/52170/

Posted by on Apr 26, 2016 in Jim's Take on the Market, Listing Agent Practices, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 7 comments

From the Street

Klinge2015_0260

A few real-life occurrences this month – and it’s only February!

It happens regularly that out-of-staters will call me after arriving for a preliminary visit. They are respectful about being very early in the process, and really just want to drive around by themselves to get a feel.  I love the opportunity, because I am happy to give them some quick advice, and a handful of homes to drive by.  Call anytime!

Jerry called on Monday – we spoke for less than five minutes, and then he emailed me this response:

Great speaking with you yesterday!

Took your advice, was in and out of the car a great deal, did visit the house in Solana Beach, and then drove around South Carlsbad.

Your analysis is spot on. Really appreciate your honesty. As for me, I will have to rethink what I’m looking for. You were right, $1 million or so doesn’t really get you anything.

Continued success and best wishes!

A million dollars ain’t what it used to be!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

When a listing agent was informed that her list price was 9% higher than the model-match comp that closed in November, she filed this response:

Hi, the seller has showed plenty of flexibility. But the buyer can not get it at last year prices. I hope we can work together.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Agents hate when sellers and buyers get together prior to closing.  Myself, I never minded much, because we’re all big boys and girls here, and if something went wacky, I’d find a way to resolve.

But I had a case where we were wrapping up our inspection that began at 8:30am in the morning.  The seller had agreed to it, but didn’t leave the house and is now rambling around in her bathrobe.

The buyer and us (Donna and I) are outside on the patio, waiting patiently for a sewer-pipe camera scan to complete.  The seller opens the glass slider and says, “I need to get ready for work, so go wait in your car”. The tone, and the attitude, were worse than the words.

It was more than insulting – it was downright rude, and worthy of cancelling the sale on the spot.  But because I think of every issue in monetary terms, I thought to myself, “that’s going to cost you $5,000.”

I reel in my buyer, and to compensate, we agree to request a $5,000 credit.

The listing agent witnessed the carnage, and knew there was a problem.  The sale negotiations had already been tough because the sellers wanted more from this sale to be able to purchase their next home out-of-state.  But home valuations don’t work that way.

Thankfully, the agent agreed, and when I told her that the $5,000 credit was life or death, she heard me.  Additionally, I told her that if this sale cancels, I felt sorry for her because trying to re-sell this house would be a nightmare.  The sellers would want more, and do less.

The sellers objected to the credit, so the agent threw in the $5,000 herself.

It was a very smart move – make a little something, and move on.

The agent understood that spending additional weeks or months on this case could be more time wasted, and it might never sell.  But rarely do agents consider all of the possibilities.  Instead, agents should make the deal.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This is the year that negotiations are going to matter again.

Get Good Help!

Posted by on Feb 9, 2016 in Jim's Take on the Market, Klinge Realty, Listing Agent Practices, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 5 comments

Discount Off List Price

At every open house, people want to know, “How much lower?”

It is relative to the usual factors – how long on the market, seller motivation, etc. – but what over-rides everything else is timing.  It is early in the selling season now, and every seller is optimistic.

Even if the house has been on the market for months – or repeatedly ‘refreshed’ over several years – every seller thinks this is a new beginning.

If you look at the recent averages, big discounts are rare – buyers are lucky to get 5% off, especially in the first half of the year.

Here is the history of discounts off list price in North SD Coastal:

SPLPratios

Houses sold under $1,400,000 have barely knocked off 2% to 3% from the list price over the last three years.  Those between $1.4 and $2.4 had a great year in 2015 – above 95%.  But every price range does better in spring.

Posted by on Jan 31, 2016 in Jim's Take on the Market, Listing Agent Practices, Market Conditions, Spring Kick, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 0 comments

Sniff Test

Snifftest

With inventory scarce and buyers aplenty, there really shouldn’t be any reason a house doesn’t sell these days.

Yet, they’re not all selling.

In 2009 and 2010, buyers couldn’t go wrong – all you needed was guts.  But as our market hits a maturing stage, the risks are higher that buyers can pay too much, and/or buy a money pit.

How do you know?  Let the days on market be your guide.

A. If a new NSDCC listing under $1.5 million doesn’t have offers in the first 7-10 days, then something is wrong with it (and it might not be price).

B. If any listing has been on the market for more than 30 days, or has been refreshed, it confirms that something isn’t right.

It’s a buyer’s job is to figure out why it’s not selling, and in most cases it is just price. The most common marketing plan for sellers is to wait until the market catches up, or until they just get lucky. Buyers decide the rest.

But if the price seems close enough and a house still isn’t selling, how can buyers protect themselves from getting stuck with a house with undesirables?

The sniff test is when you know others buyers have considered the house, and passed on it.  If you hear a listing agent say they’ve had lots of showings or you see a number of agent business cards left at the house, you have to wonder why it hasn’t sold.

Be rigorous during your tour of the house. Once you have enjoyed the positives, find the negatives and determine if they can be remedied and at what cost.

  1.  Be listening for road noise and dogs barking – the two most annoying sounds to avoid. Visit at different times of the day.
  2.  Are the grounds wet? Compare to neighbors to see if it is just over-watering or a bigger problem.
  3.  Listen for aircraft – is the house under a flight path?
  4.  Talk to neighbors about house defects and neighborhood concerns.
  5.  When in backyard, are neighbors looking in?
  6.  Does it have a pool?  They are usually a neutral value at best, due to risk.
  7.  Once inside the house, are the upgrades current? Or were they done 5-10 years ago, and now getting the dated look?
  8.  Is there enough natural light inside? Turn lights off to test.
  9.  Is the ceiling height acceptable?
  10.  Does the floor plan make sense?  Larger rooms?
  11.  Is there separation between the master and kids bedrooms?
  12.  If homes are close together, are there smokers or noise-makers around?
  13.  Check crime statistics and sex offenders’ website.

These are items that may not get divulged on the seller disclosures, nor the home-inspection report – because these items are more concerned with personal taste and tolerance, and not about things that are broke.  But you want to factor them into your decision – because if buyers aren’t buying this house today and you can’t fix it, you will have the same problem when you re-sell it.

Divide defects into curable and non-curable categories, and determine what you can’t live with, and assess a value to those you can. Many buyers throw homes out with the bath water, so this could be an opportunity, for those willing to tackle a fixer.

There is a difference between fixes and improvements too.  You can fix just about everything for $5,000 or less – things like roof repair, new furnace, removing a cottage-cheese ceiling, etc. – those are fixes.  Major improvements such as kitchen or bathroom remodels are more extensive but there are several online estimators to get ballpark ideas on costs.

It is easy to get caught up in the moment and relish the positives when seeing a house the first time.  To keep it all in perspective, remember one question.  If it is such a great house, how come it’s still for sale?  Doing your own head-scratching might save you a few home-inspection fees – or more!

Posted by on Jan 16, 2016 in Jim's Take on the Market, Thinking of Buying?, Why You Should Hire Jim as your Buyer's Agent | 4 comments

BOM

BOM

Have you seen the remark, “Back on market, no fault of property”?

Well then……..whose fault was it?

The agents.

Somebody allowed the buyers and sellers to believe they had a deal.  Rarely is it intentional – and almost always it’s due to a condition that could have been remedied in advance, if both agents were on their game.

When a buyer does want to cancel, it is their agent’s duty to craft a real whopper of an excuse so there is no conflict in getting the deposit back.  As a result, the real reason for cancelling is rarely known.

The most common excuses:

  1. Buyer didn’t qualify.
  2. Some other babbling, semi-conscious drivel.

There is no excuse for getting offers accepted with buyers who don’t qualify.  The frenzy is over, so there is no reason to rush an offer before the lender has taken a full application and has had it underwritten.

I’m even reluctant to believe that the buyer got laid off – come on, they had no idea that their job was in peril?  It’s hard to believe any employee would be out shopping for homes if they thought there was any unrest at work.

But it is a great excuse for cancelling – how can the sellers blame you?

If the excuse given is just a smoke screen to ensure the deposit is returned, then what was the real reason?  Could there be a solution to the real reason?

Two places where agents screw up:

  1. Don’t verify the prequal (for buyers who really cancel for that reason).
  2. They don’t try to save the deal.

Upon being notified of an impending cancellation, listing agents rush to their computer and quickly mark the listing BOM (back-on-market).  Many will add ‘no fault of the property’ (which is really code for ‘flaky buyers’, ‘stupid buyer’s agent’, or both), and the listing agent goes back to their prayer vigil.

If the listing agent took the best of many offers received during the first week, then you can’t blame them for being confident that other buyers might still be interested.  But if they’ve been struggling for weeks or months to find a buyer, the writing is on the wall – the price isn’t working.

Price can fix anything.  Either agent can take the initiative too.

It happened to me yesterday.  My buyers and I went the conventional route, and conducted the home inspection after our offer was accepted (which included a seller’s counter-offer insisting upon a 7-day inspection period).  We scrambled to complete the inspection promptly, but it revealed enough problems that my buyers said ‘forget it, let’s cancel’.

But because I had also gotten repair quotes on items we thought could be an issue, I was at least able to put a price on it.  I urged my buyers to consider buying the property, if the price was right.

They said they would buy it, if I could get the seller to knock off $20,000.

We had made our offer the first day the house was on the market, and according the the listing agent, there were multiple offers.  The $20,000 reduction seemed like a tall order, but anything is possible!

I went to work on crafting a powerful and compelling case on why the sellers should do it (without including any repair quotes or complaints because those just start a fight over what is worthy).

I included a concession (a must) that if agreed, we would release all contingencies the same day, and that we would close in two weeks.

The sellers agreed to the $20,000 reduction.

For those who wonder why you should have me assist you with your real estate needs – this is it.  In every sale, there are opportunities where agents can make or break a deal.  I know they are coming – I’m looking for them – and I find ways to save deals and create a win-win for all.

Isn’t that what you want?

Get Good Help!

Posted by on Oct 23, 2015 in Jim's Take on the Market, Listing Agent Practices, Why You Should Hire Jim as your Buyer's Agent, Why You Should List With Jim | 7 comments