Monthly Archives: April 2013

Playing Your Cards Right

cardsLast week we talked about Buyers polishing their resumes as worthy buyers and really prepping themselves for effective offer presentations in multiple offer situations –  something plenty of prospective buyers are familiar with these days.

I’m thinking about the 19 offers I received on a Westside listing last month. In the end there could only be one purchaser left standing. What happened to the other 18 prospective buyers who didn’t get the brass ring?

Since there haven’t been 18 great places in the same price range that have come on the market in the last month,  I can only assume that the majority of those 18 Buyers are still wandering around the marketplace.  Looking for the real thing.

Perhaps a few have found THE place of their dreams, beat the odds and come out on top in the multiple offer mosh pit this time.  Maybe some have given up. Taken their bats and balls and gone somewhere else.  But I suspect the majority will still be duking it out with each other on the next great place that comes on. And the next one after that.

Not unusual for Buyers checking out properties these days to see the same familiar faces of other eager Buyers over and over again at every open house.  There’s a kind of  “we have met the buyers and they are us”  quality to the experience.

That’s right Buyers.  Look in the mirror. Lots of those other Buyers out there are just like you. They want the same kind of house in the same price range.  And they aren’t going away anytime soon.

It’s important that Buyers understand the hard truth of a marketplace where demand exceeds supply.   In multiple offer situations Buyers aren’t really negotiating with Sellers. They are competing against each other.

Sellers have no idea what Buyers are or aren’t going to offer in terms of price or contingency timelines or financing scenarios.  All they know is what they’d love to see in their wildest fantasies.

Think of a multiple offer process as something akin to a blind poker game.  The Seller is the only one that sees everyone elses’ hand.  But the Seller can’t tell anyone else what to bet. What cards to play. When to hold. Or fold.  Whether to up the ante. Or raise the stakes.  Buyers gotta guess those things for themselves. If they want it bad enough and have enough resources available.

If you are a Buyer – first you gotta find the right place.  Then you gotta sit down at the table, play your cards and compete for it.  The big question is –  how can you increase your odds of winning when you don’t know what other Buyers are willing to do?

Remember – it’s not always about the highest price. Let’s say there are 10 offers on a house and all of them have been bid up to the exact same price.  Here are a few rules of thumb about what trumps what in a game of multiple offers:

Larger earnest money deposit trumps smaller one
Agreeing with Sellers choice of title company trumps insistence on yours
Cash trumps loan
Lower loan to value trumps higher loan to value
25% down conventional loan trumps FHA, VA or PMI
Likeable buyer trumps unlikeable buyer
No appraisal contingency trumps appraisal contingency
No contingency for buyer to sell property trumps contingency to sell property
Short contingency timelines trumps longer timelines
Quick close usually trumps longer close
Closing sooner offering seller rent back usually trumps  longer escrow period
Free rent back trumps paid rent back
Local mortgage broker usually trumps out of town lender
Good local Realtor usually trumps unknown, infamous or out of town agent
No petty requests usually trumps requests for home warranty & extra items of personal property.

There you have it Buyers. Some of the above are entirely in your control. Some aren’t.  If you don’t have cash you just don’t have cash.  But…in a multiple offer game where so much is out of your control, at least make the effort to play the cards you do have wisely. It will increase your odds immensely.

More next week.

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Multiple-Offer Do’s and Don’ts

dos-and-donts_thumbsYep…still waxing on about Multiple Offers.  So much to say. So little time.  And so little ad space!!  If you all chip in – I can buy a full page next week and finish this up once and for all.  I’ll go halfies with you! Send your contributions c/o the Santa Cruz Sentinel.

Today we’re going to try to help Buyers who are about to enter into the Multiple Offer fray,  polish their resume and prep for the upcoming, all-important presentation of their offer.

In other words… Why the heck should that Seller pick your offer above and beyond the other three or five or ten offers sitting in front of them?  How can you get an edge? A leg up on the competition?

Well…. you could bounce the offering price up a couple $100k.  That would probably earn you a few extra brownie points.  But absent total auction-type insanity on your part,  what’s a reasonably sane posture to take in an otherwise completely crazy process where there is absolutely no certainty.

The only thing you can control in the bizarro world of multiple offers is you and your own choices.  No one elses’.   People that make egregious mistakes when making an offer usually do so because they can’t control themselves.

Multiple offers aren’t always decided by dollars alone. It’s not the highest bidder that necessarily wins out in the end.  Sometimes it’s the other side of the multiple offer equation –  namely – how a Seller or Seller’s Agent feels about you or at least perceives you.

Yes. Realty often follows perception.  Everything else being equal, an Agent will usually advocate for and a Seller will often opt for the person and offer that they most resonate with on a more, visceral, personal level – well below any threshold of desire they may have to get every last dollar possible.

So whaddya going to do to make the Seller like you?  Let’s start with what not to do. A few rudimentary rules of thumb.

When you go to that first open house and the Listing Agent is there, don’t criticize the house in front of them.  Don’t ask questions that indicate you might be fearful or unsure about buying.  Don’t talk about how you and your partner aren’t on the same page. Don’t blurt out that you have a house to sell. Or relatives that you hope will give you a gift.  Don’t mention that you are an attorney. Or that you even know any attorneys.  Don’t talk about the last real estate agent you fired.  Don’t whine and complain about how unfair a multiple offer market is.  And don’t try to wheedle your way into the Listing Agent’s good graces and appeal to their greed by telling them you don’t have an Agent and you want them to represent you.

Trust me.  We know when you really have an Agent.  Or when your ethics are so loose that you are willing to toss the Agent who’s been driving you around for six months aside for a shot it.  If you are willing to dump someone who’s worked hard for you –  then – why can you be trusted to follow through on an offer commitment to a stranger?  Besides….a Listing Agent (in my opinion) is just plain dumb if they try to represent a buyer themselves when they have ten other offers coming in from other Agents.  Dumb.

Where were we? Oh yeah…Don’t get overanxious and call the Listing Agent with twenty questions ten minutes after the property pops up new on your Search Engine.  Don’t say:  “Tell me all about the house” when you have your own Agent and you haven’t even driven by it yet.    Don’t ask them to show it to you because your Agent is out of town on vacation.  Above all, don’t ask them to show it to you because your Agent is too busy to show it to you.

I know some of this probably sounds harsh.  But I’m just trying to keep it real here.

When you are a buyer in a potential multiple offer situation you are auditioning to play the part of  prospective suitor.  If you want the Seller to get into bed with you in a deal they’ll need to feel good it.

So – don’t telegraph any hint that you might be trouble ahead of time.  More next week.
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Drilling Down on Multiple-Offers

hammer-drill-adapter1Let’s keep going.  I’ve still got plenty to say about Multiple Offers.  I’m sure I’ll talk myself out in another couple of months.  Or maybe the market will shift and there’ll be something else that becomes more important than understanding the complicated dynamic of the multiple offer from all perspectives –  Buyer, Seller and Agent.

But for now? No.  The M.O/M.O (Multiple Offer Modus Operandi) is the reigning discussion du jour. It’s the real thing.

So here’s a question I’ll toss out to today’s studio audience.

If (and this is a big if) the entire orbit of Real Estate truly revolves around a steady-state, binary system of fear and greed and the ongoing shifts and permutations from the gravitational pull exerted between them…   in a multiple offer situation…  what is the average Seller most greedy about?

Why… money of course. That’s pretty easy.  The more – the better. Right?

Now, a harder question. What is a Seller’s biggest fear?

Buyers and would-be Buyers (and some Sellers leaning a little too far to the right on the greed spectrum) should pay close attention to this. In order to be successful negotiating anything, you have to be able to put yourself into the other person’s shoes and mindset.  Buyers – if you truly understand what scares the hell out of Sellers – it can give you a big leg up in the competition.

A Seller’s biggest fear in multiple offer situations is the fear of choosing the wrong offer/buyer/person to enter into escrow with.  The prospect of getting down the road two or three weeks into an escrow and then either falling out or having to suffer the slings and arrows of some prickly Buyer whose Jeckyl has suddenly transformed into a Hyde – is – simply put…an awful thought. A Seller’s worst nightmare.

You only get one chance to be a brand new listing, in a tight market without any inventory.  It’s a magical moment in time rife with opportunity.  And lightening doesn’t strike twice on the same place.   If a listing comes back on the market two or three weeks down the road,  because things went terribly south in escrow, the loan didn’t happen or the buyer became unreasonable, it isn’t going to be worth nearly as much as it was the first time around.

What’s the best way Buyers can approach a multiple offer situation…knowing they aren’t  going to have the benefit of much insight into what other competing Buyers may or may not be willing to do to get a particular house?  (This is a blind poker game for Buyers. The Seller deals. And the Seller knows the cards in everyone’s hands. Buyer’s don’t even get a chance to look around the table and read the ticks in the other player’s eyebrows or note the beads of sweat on their upper lips.)

So, smart Buyers chart a parallel course.  They pay proper homage to a Seller’s greedy side at the same time they do everything in their power to tamp down those fearful voices rattling around in a Seller’s head.

The ones that keep shouting:  “What if I pick the wrong person?  What if this Buyer is just telling me what they think I want to hear and they don’t really mean it? What if they can’t get a loan? What if the price gets bid up so high that the house doesn’t appraise?  What if they have their brother-in-law the contractor come in to inspect and write terrible things in a report that become disclosure issues for me down the road?

Next week:   Polishing your Buyer Resume and Prepping your Presentation. A practical guide to reducing Seller fears.
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Roller Coast Ride Through the Wringer

500x_rollercoaster_1618538More on Multiple Offers.   An integral part of our marketplace at the moment. A strange landscape that buyers and their agents are struggling to find better and more effective ways to navigate over, under, around and through.

There are no accurate maps.  Just vague compass points.  An occasional star in the nighttime sky to triangulate from.  Lots of fateful winds and rogue waves that can rise up to ruin your day at a moment’s notice.

Some hopefully soon-to-be Buyers reading this have already been through three or four multiple offer situations without taking home a home as their trophy.  Instead they’ve taken a roller coaster ride through the ringer.  Felt the highs and the lows of being in the hunt.  Gotten close but not close enough.  No banana as of yet.

Other would-be Buyers reading this are just beginning to venture into the market. Stick their toes into the deep end.  They’ve heard it can be tough to buy right now but they haven’t experienced what it feels like in their guts or in their bones when they find themselves sweating out the conclusion of a life-changing process accompanied by a sensation of complete powerlessness.

Any Agent who has done more than a couple of deals in the last six months has undoubtedly mixed it up with a multiple offer scenario or two along the way.  A lot of what is accepted as status quo procedure in a multiple offer land came out of the huge run up of the late 1990’s.  When Silicon Valley was going nuts.  Manna in the form of IPOs was falling out of the sky.  Hordes of 30somethings were wondering through open houses with stock options burning holes in their pockets.

I remember counting multiple offer transactions.  I had a streak of 150 closed escrows that involved 145 multiple offer situations of one kind of another. In some I represented Sellers receiving 5 to 15 offers on their properties. In others I represented Buyers competing against anywhere from 3 to 30 offers on the latest greatest listing to hit the streets.

What was it that Jim McKay used to say at the beginning of every edition of ABCs Wide World Of Sports? “The thrill of victory or the agony of defeat.  The human drama of real estate competition… “

Win or lose, joyous celebration or crushing crash and burn, most real estate deals are accompanied by huge-doses of that mind-altering chemical stimulants known as adrenalin.  Regular real estate is like Wide World of Sports.  Here on the multiple offer channel,  real estate’s altered state of mind is like the Wild World of Xtreme Sports ramped-up on roids.

As much as it is possible to generalize about anything in real estate – let’s outline the typical M.O./M.O  –  Multiple Offer Modus Operandi –  that you are likely to find in the market these days.

Pretend I’m the listing Agent on a great new property worth somewhere in the $600s – $700s.

Here’s probably how I’m going to run it – or at least suggest to my Seller-Client that they run it:

Listing goes on the MLS on Tuesday.  Brokers Open on Thursday.  Open house on Saturday and Sunday.  Both days 1-4pm.   If it is clear that there is significant offer-writing interest on the property by the end of the first weekend, then we set a date and time that’s not too far out in the distance.  Let’s say Wednesday at 12noon.  All offers to be in by then.  No exceptions. No foot dragging.

If it is clear by the end of the open house on Sunday that there is interest,  but not INTEREST,  then the likelihood is that there will be another Brokers Open the next Thursday and another round of open houses the next Saturday and Sunday.

If we haven’t gotten enough of the right people through by the second Sunday to capitalize the word INTEREST…then, the conclusion is clear – we are priced on the high side of where we should be. And before we lose all the mojo that comes with being a new listing – we better lower the price and find the place that the market is willing to compete at.

If we get to a third week or fourth week with a listing in the $500k – $800k price range – then the accrued days on market are going to kill us. We’re going to sell for less than if we had priced it lower in the first place and let the competition between buyers carry the price up.

Sound familiar?  It’s called chasing the market down. More next week.
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