The art of the deal...or not

Reblogger Randy Hooker
Real Estate Broker/Owner with Dreamcatcher Realty / Greater Phoenix Area

 

The below article was written by a great agent/broker in Alaska.  Like Jesse, I receive such calls about twice a year, and every time I do, it hurts me.  A word to the wise, home buyers.  I invite you to read and take heed.

Randy Hooker -  Chandler, Gilbert, Mesa, Queen Creek, Arizona Real Estate

 

Original content by Jesse & Kathy Clifton AREC License #15292

Principles of negotiation.  Books have been written about it.  Speakers travel the world lecturing about it.  Millions have been spent trying to uncover the secret.  For some, it will remain an abstract principle they will sadly never master.

A few weeks ago I had the chance to speak with a fellow for whom negotiations had not beeFairbanks AK Real Estaten a kind mistress.  This fellow, we'll call him Stanley, set out to buy a home for his family and ended up outmaneuvered by a more skilled negotiator into a contract he now wishes he had never signed.

Stanley and his family had been renting a small house in Fairbanks for the past couple of years.  It was comfortable and the price was right but with the changes in the housing market, he hoped to make the transition from renter to owner. A yard for his children to play in... a place in which to make memories of opening presents on Christmas mornings and birthday BBQ's on the deck.  Reasons which we can no doubt all relate to.

When Stanley found 'the house' he sat down with his lender and later the seller to hammer out the details of a purchase agreement.  The seller was ready to sell... he and his wife had plans of moving to be closer to their grandchildren and were ready to take the house off the market. 

"Let's get this done and get you moved in." Motivated seller. That's good, right?

Having watched HGTV's endless parade of real estate programming and read every real estate article he saw on MSN, he had a plan.  Take the purchase price, slice 10% off the top and negotiate up from there, if necessary.  Armed with his offer strategy, Stanley and the sellers put pen to paper and in short order had a mutually agreeable contract.

"10% off the asking price and the seller agreed to pay $5,500 toward our closing costs if we would waive any contingencies and close in three weeks." The anguish was palpable as he told me the story.  He ddn't need to continue... I knew the house and where this conversaton was going.

"Earnest money was placed in escrow with the title company.  An appraisal was ordered and we were planning furniture placement."  Imagine Stanley's surprise when the lender calls to say the appraisal came in... well... a little low.  Seems as though there's a near $37,000 difference between appraised value and the contract price.

A call to the seller turns the butterflies in Stanley's stomach to catapulting, trapeze-flying monkey's trying to Fairbanks AK Real Estateclaw their way through his belly button.  No re-negotiations.  "You agreed to remove the contingencies for the 10% price reduction and the $5,500 in closing costs I'm paying" replied the seller.  Hmmm. Now what?  This is where Stanley begins his search for answers and where he lands on this blog and calls us for answers... guidance... absolution... something. 

Unfortunately the only truly helpful advice I could offer is a referral to a reputable real estate attorney.  Where and how did the train heading to paradise go so far off the tracks? 

Representation - Stanley had none.  No buyer-agent representation.  No legal representation.  Nothing.  Mano-a-mano as it were.  Given the complexities of contract law, finance, discovery, disclosures, etc. representation is key.  A buyers-agent is the buyers advocate in a transaction.  What a concept, huh?  Their primary responsibility is to protect and promote the buyers interests.  Most of the time said representation comes at little to no cost to the buyer.

Research - If you don't know the local real estate market, you need to hire someone who does.  A sellers asking price is simply a number.  Unrepresented sellers are notorious for having an inflated opinion of their homes worth.  What are comparable homes selling for?  How long is it taking to sell those homes... and how does that compare to the subject property?  You need detailed market information... and someone to interpret that data.

Last but not least, forget the hype.  Not even HGTV, your Uncle Bob in Poughkeepsie or Donald 'Combover' Trump will be much help in crafting a negotiation strategy in Fairbanks, Alaska... or in any market they're not well versed in.  When the time comes to buy a home for your family, and now is a pretty good time, rely on a local expert. As luck would have it, I happen to know a couple.

 

(gold man image courtesy of Guido Jansen)

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Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Randy:  Great one to reblog.  This is a real life lesson to anyone who thinks that the blanket answers given in HGTV's programs really help you write contracts without Realtors. 

Apr 11, 2009 03:44 PM #1
Rainer
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Randy Hooker
Dreamcatcher Realty / Greater Phoenix Area - Gilbert, AZ
Gilbert, Chandler, Mesa, Queen Creek

Thanks, Chris Ann!  It is amazing what some folks can be deluded into thinking.  Maybe Jesse's post will encourage a buyer or two to seek experienced, reputable representation BEFORE they get into trouble on a transaction.   :)

Apr 11, 2009 07:16 PM #2
Rainer
132,419
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Hi Randy - This story is a great reminder that buyers need to engage a Real Estate professional when attempting to purchase a home.  The same can be said for sellers.

Apr 12, 2009 02:55 AM #3
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Kat DeLong
LakeView Realty Enterprises, Inc - Lake Arrowhead, CA
Realtor DRE#01235311, Lake Arrowhead Real Estate (

Randy:  A horrible story indeed. The bottom line, for buyers (and sellers) is, GET A LOCAL "Professional" REALTOR TO REPRESENT YOU! 

Apr 12, 2009 03:05 AM #4
Rainer
90,008
Randy Hooker
Dreamcatcher Realty / Greater Phoenix Area - Gilbert, AZ
Gilbert, Chandler, Mesa, Queen Creek

Jon ~ Indeed!  Undertaking a real estate transaction without professional, experienced representation and assistance is like going into a court room without competent legal counsel.  Dangerous!!

Kat ~ I hear ya loud and clear!  It's not just a Realtor sales pitch, either - it's a reality of life.  Lack of good assistance from a Realtor can be a VERY costly mistake by any home buyer or seller.  Always love having you drop by, Kat!   :)

Apr 12, 2009 08:23 AM #5
Rainmaker
1,133,001
Claude Cross
Homes By Cross, Inc. - Charlotte, NC
Charlotte NC Homes For Sale

Randy - This should be rebroadcast by the NAR. I see this happening when people buy a FSBO thinking they can get a bettter deal bypassing the fees of a qualified Realtor(r). To many misguided myths. great reblog

Apr 15, 2009 01:57 AM #6
Rainmaker
683,087
Sidney Kutchuk - Realty Works Temecula Kutchuk - Realty Works Temecula
Realty Works Temecula - Temecula, CA
Realty Works Temecula

Randy, We ordered another appraisal and it came in higher....(on the one I blogged about a few weeks ago). It is not wise to buy a home unrepresented!  I know that was the point of the article, great example!

Apr 15, 2009 12:06 PM #7
Rainmaker
636,567
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Great Re-Blog Randy.  Buyers and Sellers need professional representation especially in our ever changing market.

Apr 17, 2009 03:43 PM #8
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Randy Hooker

Gilbert, Chandler, Mesa, Queen Creek
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