Well....
We have all heard the expression "Real Estate Agents are always a commission away" from closing a deal...at least I have heard it more often than not.
It never seems to amaze me more than in this type of market how sellers can take our commission and throw it into the negotiations! Unethical, Illegal, or whatever....
Call it what you want but I just tend to think it is complete B.S.
Here is a little sample of what has just happened and you make your comments as you see fit...
I have a very affluent buyer looking to purchase a $4,000,000 plus home. We know exactly the home we are going after and both him and his wife love everything about it. It sits overlooking Heavenly and the Carson Valleys and is the "its it" of homes in that area. One of 14 planned homes to be part of the Whitebark planned unit development. This is the first home to be sold in this area as a "Ski-In Ski-Out" Mountain Lodge...
Okay so now you have a little picture in your mind of this 5000+ sqft home sitting on the mountain side. Now for the fun part...
I have been working with this couple that have been referred to me out of Southern California, Beverly Hills Area. They are extremely easy to work with and I feel a great comfort level in providing my top notch service to them. The Buyers are extremely anxious to make an offer on the home and get their mountain lodge getaway. After running the numbers, I just didn't feel that comfortable with the asking price..$4,375,000 (plus the seller was offering a 5% to the selling side as a last minute effort to sell the home) Caught my attention! Regardless of the commission of course we were still going to pursue making an offer....
Again after running the numbers I felt that the price was just too high and I wanted to do a little more homework and see that we were going to make a fair offer on behalf of the buyers but, of course not overpay for something we are not too sure of the value since there were no comps to compare. I suggested that we enlist in the services of one the top appraisers in this area to see if she could justify that price in any way shape or form. Needless to say the appraiser had just as hard of a time justifying the over $4 million dollar home. There just are not any comps...
The appraiser ended up arriving at about $3.5 million, which is a far cry from what the seller is asking for the home. We ended up writing the offer at $3.5 million with the appraisal attached...and this was ALL CASH and closing within days...
Seller responds...He is pissed! He built this home as a spec and feels, of course, that his home is worth every penny of the asking price even though we justified our price by getting an appraisal which even made him more upset! "How dare you go and get an appraisal!!?", he says. This seller ends up countering. We counter back with our own and so on and so on and we did stick to our price....
The seller calls a meeting to introduce himself and provide a counter to my team and try to explain his position. He kept beating around the bush and telling us how fantastic this home really is. We really were not arguing this point with him since he did have one fantastic home but, unfortunately we just were not biting on the "THROW IT AGAINST THE WALL AND HOPE IT STICKS PRICING METHOD". We did some homework. We asked the seller to justify his price any possible way during that meeting and he repeatedly told us the home is worth every penny and he will not provide any proof of costs of construction, cost of land, detailed materials used or at the very least to get hi OWN Appraisal. NOTHING!!!
Needless to say the Seller is furious with us at this time and so RED in the face combined with sweat I just laid back and felt comfortable with our position since we justified our position.
This back and forth game went on for 3 1/2 months and I was shocked! The seller ultimately came to a price of $3.9 million and my buyer came up out of the kindness of his heart and desire to have that home to $3.7 million. (THAT IS $200K over our justified price) I asked him to stop there and do not pay a dime over that. My feeling was that if he did end up paying that much for the home and decided for any reason he wanted to sell, I sure didn't want him and his wife upset with me if I couldn't sell it for what they paid.
Buyer held strong at $3.7 million
Seller held strong at $3.9 million
At these prices the initial 5% commission that was offered to the Selling Agent was taken away immediately (we knew that was coming). So we are back to 3% each side...
Total Commissions paid would be $222k....wow look at the spread of what the buyer and seller are at...too CLOSE TO THE COMMISSION AMOUNT....
HERE WE GO!!!
Here is where the Seller decided to throw the agents under the bus...
On one of the last counter offers that we battled back and forth with, the Seller came back and said that he would take $3.9 million with a reduction of commissions to $50k of total commissions paid. I had to laugh. It really wasn't funny but being delirious you start thinking in strange ways... Maybe that was my way of coping with the stress of how crazy this seller was thinking...
Now call me a straight forward person but, I called the listing side and told them that counter offer was completely unethical in placing our commissions at the point of negotiations and how can they think of putting that in there no matter what the seller told them to do. They were so afraid of this seller that they just did anything he said to do...I say B.S.!
I told them to take their offer back and remove that immediately since "COMMISSIONS ARE NOT TO BE PART OF THE NEGOTIATIONS" After more weeks of battling that issue my Buyer is finally getting to the point of not trusting the seller at all. I have to say that I can hardly blame him! I worked so hard to get to this point only to have the seller road block us every turn. Just when we thought we were close...we weren't!
After many months of trying to put this deal together we are not at a stalemate with a $200k gap between buyer and seller. I have advised my Buyer to stand strong and let the Seller sit on this for a while and see if he changes his mind. The seller has to be realistic with the following...
1. MARKET
2. ALL CASH OFFER
3. CLOSING VERY QUICKLY
4. JUSTIFIED OF WITH APPRAISAL AND $200k ABOVE THAT
5. NO ONE IS LINING UP TO MAKE OFFERS ON THIS HOME AT THIS TIME
6. CARRYING COSTS MONTHLY FOR THE SELLER-- I AM SURE THEY ARE ENORMOUS!
7. BE REALISTIC!
these are mentioning a few items that the seller needs to consider at this time!
Now that we have let the offer expire, the seller is coming back with his tail between his legs begging the listing side to call us and see what we want to do. The carrying costs alone will add up to $200k in a matter of months while he sits and no one else makes an offer.
He has now indicated that the agents should give ALL their commission up to make the deal work in the interest of the BUYER AND SELLER. Okay again, "Mr. Seller, did you just ask me to sell your home for FREE?"
SURE ENOUGH!!! HE IS!!!
WE HOLD THE ACE MR. SELLER!!! We have a justified offer that you need to accept. Remember when you signed that listing agreement Mr. Seller, you signed it with the intentions of paying out 6% commission.
We are not here for your FREE Service....
Ultimately, now on the seller is starting to say things like this....
"I HOPE YOUR BUYER DOESN'T FIND OUT HOW YOU GUYS HELD THIS HOME FROM HIM ON THE ACCOUNT OF YOUR COMMISSIONS...."
WHAT A JERK!!!!!!
COMMENTS-----THOUGHTS-----SUGGESTIONS???????
TAHOETRAVIS
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