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Much has been written regarding the origins of the bubble. One of the major contributing factors keeps getting overlooked. The simple ability to negotiate. After a lifetime of standing in line and paying whay we are told to pay we have lost the will to negotiate, the ability to negotiate or both. This is perhaps as primal as fight or flight and equally important to self preservation. Yet we've managed to shuffle this important skill off to the back burner to die on the vine as we "hone" our SHOPPING skills. As evidenced by the bubble we are all now confronting "shopping" is not getting it done. You've found a place that's perfect for you (but we all know it should be priced lower in the future) so how do we bring the future closer? How do we bring sellers closer to our reality? What skills need to be dusted off and brought back to the forefront as bidding wars subside and the new reality finally gains traction?
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DinOR,
Multiple offer is a sign that the owner (intentionally or not) priced their house below market clearing price. So theoretically, it's a "good price." Unfortunately, the frenzied atmosphere also breeds buyer irrationality.
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astrid,
Yeah, I really have no interest in running a "Winning the Multiple Bid Strategy" thread. That's one "negotiation" I have no desire to win! Let's be clear here though, yeah we all see people absolutely willing to blow a relationship up over a few bucks and it IS ugly. That's not what I'm talking about. When you're going to be saddled to a mortgage for the next 30 or 40? years we had better make sure that we can look back with a sense of pride at the way we handled the transaction. Every dollar we don't borrow is 3 or 4 we don't have to pay back. I realize I've said that before but how can we say it enough?
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SFWoman:
How big is the creek? I'd be a bit miffed to discover that, but I'd also attempt to excavate a path for it and work it into the place, a la Frank Lloyd Wright's Fallingwater. (Yes, I do know the other nicknames that palce was given, but I think it's still a cool idea.)
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"Winning" a multiple bid = winners curse. You never want to be the one who wins the competitive auction.
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SF Woman,
Three words for your friend in Cow Hollow:
Easton v. Strassberger.
In a falling market these 3 words can pack a big punch.
NOT LEGAL ADVICE
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We never discussed housing with our friends much, except perhaps very circumspectly. That is, until recently. Most of our friends know that we didn't buy again when we sold and moved from Belmont to Marin. We're now getting asked "what we think". I'm not sure they really believe that we're right, but they are at least now conscious enough about the possibility of a bubble to have an interest. That's why this thread is so useful to me. I get the feeling lots of our friends are waiting to see if our choices pay off, which really comes down mostly to ability to negotiate. Even in a down market the buyer can get royally screwed.
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Port Ludlow, WA
What do you all think is the average YoY appreciation for RE if there was no bubble scenario or bidding wars?
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Phil:
We worked out an equation for this here.
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Disclosure in CA has a 2 year statute of limitations, no?
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Newsfreak,
Easton v. Strassberger was a seminal appellate case in California that re-stated the duty of care that sellers and brokers owe to buyers as to inspections and disclosures. These are issues that a buyer should raise with her lawyer, who can study the specific facts and research the current law.
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I liked the idea of using a real-estate lawyer too. As a buyer, s/he'd be the only person in the chain genuinely concerned about _you_. Everyone else involved is working for the seller.
Anyone have advice/opinions on how you acquire and interject a RE lawyer into the process?
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My friend is a real estate lawyer. She got caught up in the bubble. [...]
I shall not be asking SFWoman for referrals, lol.
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Anyone have advice/opinions on how you acquire and interject a RE lawyer into the process?
Become a lawyer yourself.
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Become a lawyer yourself.
Peter P is a Troll and has personally attacked me. Please remove all his comments on and ban his IPs from these internets. He is also a below-average driver.
*Not career advice
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Well, I'd say start with Nolo study books, they're a decent introduction. Also in a nutshell books.
Next, go to a local public access law library, check out their state and local materials. Any reference librarian should be of some help.
3rdly. when you have something on hand or close, go ask around for an experienced RE to do a reality check. Good places to ask are your financial planning and tax professionals. They do a lot of referrals so they'll drop the bad ones in a hurry. Friends and neighbors are less good because of the one shot nature of transactions.
Peter P, don't be a lawyer. Law school is a lot more expensive than realtor cram school.
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Also, I guess you can just ask FormerAptBroker, he does a lot of transactions so he probably has a good idea of what works and what doesn't.
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kayvaan,
The floor is now yours!
Agreed, it's awfuly difficult for even the best negotiator to work when they are being elbowed in the gut by people trying to out bid each other! The mere presence of multiple bids should have caused the Fed to move in 100 bps leaps! Anyway, please share some of the tactics that you learned and also settle this little matter of rudeness for us!
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PS - blanket disclaimer on all my Patrick.net comments. Not to be construed as medical, relationship, legal, parenting, financial, investment, educational, etc advice.
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SFWoman,
Actually your friend might make the perfect referral. Who better than someone who's lived through the costs of not following her training. Does she take residential RE buyer clients?
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PS - blanket disclaimer on all my Patrick.net comments. Not to be construed as medical, relationship, legal, parenting, financial, investment, educational, etc advice.
You are hereby advised that my comments should not be construed as any kind of advice.
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SFWoman,
I'll still ping you when we do finally buy for a good RE lawyer referral. I'm sure you or she knows someone good who'll travel over the GG a couple times for a good, old fashioned buyer representation.
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All of my comments stand as advice. You are hereby warned that its value is directly proportional to what you paid to receive it (less any fixed costs or access/service fees).
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SFWoman,
In the range we're looking to buy, prices have already come down (in South Marin) by anywhere from 5%-15%. It's still very unstable, with lots of "me too" listings, and still a few isolated multiple bids on homes that compare well to all the overpriced "me too's". So yes, we're going to keep waiting a while. But, we have a fairly high "intangible" tolerance, with a young son and a disabled mother in house. So, for us the correction need not be a "tanking", just some up in rent and down in prices.
For us, my spreadsheet model shows we could potentially justify purchasing sometime in the not to distant future, if things keep on going this way.
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This is a very helpful thread. We should continue the discussion here.
Has anyone looked into remote influencing? Supposingly the subconscious of everyone is linked and there ought to be a way to influence the decision of others using just your mind.
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Different Sean's website
My friend is a real estate lawyer.
jesus. maybe a doctor has to have the illness themselves before they get any good...
She got caught up in the bubble. Emotions and her husband’s competitiveness must have been the driving factor in their bidding the price of the property up so high. I believe it was an actual auction type situation, but I’ll have to ask her.
The auction process was enthusiastically used by RE agents here for a long time, which probably helped drive bubble prices up further, due to emotional buying in conjunction with the banks offering huge wads of cash. Then they legislated against practices like vendor bidding, and required bidder registrations, and they suddenly became very unpopular with agents. They still auction premium properties a lot tho.
It was a convenient practice from the RE agents point of view, as they got a fee whether the property sold or not, the process was short and sudden without protracted negotiation, 10% down on the day, etc. if the property got passed in, they would start ringing around the bidders and offering the next best price, etc, like a listing. They argued that it was the best way to get the 'true market price' for their vendor. Altho vendor bidding and pushing people underwater doesn't suggest true market price to me...
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You have to say the whole thing, or entgegenkommend alone is more widely used to mean cooperative or even complacient. (The Germans are very precise).
auf halbem Weg entgegenkommen = to meet halfway
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And for you German grammar masochists:
Inflection of entgegenkommen
Ah, German conjugation. Wars have been started over less.
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Has anyone looked into remote influencing? Supposingly the subconscious of everyone is linked and there ought to be a way to influence the decision of others using just your mind.
I think that's highly plausible.
Or just employ Karl Rove and a team of talented speech-writers, and become good friends with network TV owners...
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Since I've started watching the RE market carefully, I've begun to fixate on inventory levels and new home prices as the two most important leading indicators. Here are snippets from the AP today:
Selling One's Home Is Difficult Business
By ALEKSANDRS ROZENS , 04.18.2006, 06:17 PM
Pete Montero first listed his Ann Arbor, Mich., nearly a year ago at $379,000. The 2,600-square-foot home didn't attr'act buyers so Montero dropped the price in $10,000 increments - he's now asking $329,900 - and he's even considered remodeling the kitchen.
"We really didn't think any individual thing about the house would make it difficult to sell," said Montero, whose four-bedroom home has a finished basement and sits on a cul de sac to ensure privacy.
Spring is typically the busiest time of the year for home sales. But with mortgage rates rising and sales slowing, sellers find they have to work harder to get a sale.
In February, there were 3.03 million previously owned homes for sale, a level not seen since 1991, when 1.91 million homes were up for sale, according to the National Association of Realtors.
"Business is tough. The inventory of available properties has increased," said Martin Bouma, an Ann Arbor real estate agent. "You are looking at (the number of) buyers going down, and inventory is going up."
Some incentives offered by sellers include a year's worth of free landscaping or lawn care, free snow removal for a year or a year's worth of alarm service. And, that's just from the owners of existing homes - builders sitting on a mound of inventory have also had to come up with new ways of wooing buyers.
The tempered pace of home sales in recent months follows record years of activity - 7.982 million homes sold in 2004, followed by a record 8.35 million in 2005 - that saw bidding wars and a steady escalation of prices.
The first signs of an ebbing in demand appeared last summer and have continued into this year. Applications for home loans, a gauge of future home sales, are down 20 percent from last year, according to the Mortgage Bankers Association.
"I have seen it transition from a seller's market to a buyer's market," said Bob Moulton, a mortgage broker based in Manhassett, N.Y. "Buyers are putting in bids but they are not counter offering."
The process of selling a home, meanwhile, is taking longer, a trend reflected in heightened demand for lengthier rate locks, a guarantee offered by lenders to keep the rate on a mortgage at a set level for a certain period. In recent years, rates for mortgages were guaranteed for 30 to 45 days because homes could be sold quickly. Now, borrowers ask for 120-day rate locks.
While some homes can be taken off the market place by their owners, home builders cannot afford to hold on to empty homes. So, some have offered their own incentives, such as helping to pay mortgage closing costs or upgrading kitchen appliances.
"This year we're being a little more aggressive from the advertising and incentive standpoint," said Paris Reese, chief financial officer of MDC Corp., a Denver-based builder. "Incentives are an important part of our business," but Reese is quick to note, "we're not doing any fire sales."
Dallas-based Centex Corp., meanwhile, has kicked off a series of 12-hour sales in Seattle, Las Vegas, Houston and Denver, among other markets. In Sacramento, Calif., Centex lopped off $100,000 from some multimillion dollar homes.
Centex likens its sales to a retailer clearing unsold inventory off shelves. A spokesman for the firm, Neil Devory, said the 12-hour sales have "tremendously increased traffic," but he would not disclose exactly how many sales actually resulted from the promotions.
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This is a very helpful thread. We should continue the discussion here.
Has anyone looked into remote influencing? Supposedly the subconscious of everyone is linked and there ought to be a way to influence the decision of others using just your mind.
I don't buy the supernatural-ish "collective conscious" thing, but there is a lot of evidence that tiny, imperceptible cues can deeply affect your "target". In fact, this "charisma" or "manipulative" quality is exactly why good negotiators want to have a face-to-face exchange and others want the exchange mediated.
I took a course in Berlin during which we saw influence experiments that showed how incredibly predictive various cues, some very small, could be. Sadly, one of the best predictors is physical attraction; specifically attraction that is "normative", meaning believable and not overdone. The "girl next door" if you will. This is why realtors(tm) paste their pictures everywhere, they just missed the "overdone" part.
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skibum,
I work with a lot of folks in Boston. Many of the money management firms are right there on State Street. Many of the younger wholesalers decided to hold off on buying over the last several years and man are they glad they did! One did buy in Charlestown and emailed me the pictures. It's a nice enough place but it's small, the taxes are through the roof and they're on a One Way street with virtually no parking (and no garage). While not a candidate for the "Overvalued Blogspot" they certainly overpaid! Agreed, we'll look back and see MA in general and Boston in particular as the canary in the coal mine. What's more alarming is that many of these younger folks at the financial firms come from families that worked at financial firms and their parents offered to help them get into a place before they "get priced out" and these guys thoughtfully declined. Back east EVERYBODY has money! What will it be like out west?
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Randy H,
I've seen some of those studies over the years and they reveal things about humans that suggest we haven't evolved all that much! I'm actually a lot better negotiating over the phone. It's not only that I'm more comfortable that way it's that you can apply pressure, back down and then re-apply as you sense the prospects level of interest. Sometimes it's a good idea to call someone where you might have an interest in buying and gauge their negotiating skills from a distance (almost like a third party) and just take notes on well they present their offer. Once in awhile I learn something but more often than not you find people use "crutches" like a realtor falling back on some hackneyed phrase like "location, location, location". I don't mind people prospecting me from a sales script if they deliver the content with passion, take notes on your objections and address those genuine objections intelligently.
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Skibum said,
We ended up pricing our place $30-50K less than comps (still did okay), and we were one of only 3-4 units out of 50+ in our neighborhood/price range that have sold....
Exactly. And back on the current topic, the same approach is required if and when we buy back in. If we try to time the absolute bottom or top of anything, or if you try to hold out for every possible penny in a negotiation, you'll be too paralyzed to move. Ever.
Think of the monkey who has his hand thrust deep inside a bottle. He can't pull it out because he refuses to release his grip on the peanut he has clenched in his fist.
And, if you love something let it go. If it doesn't come back hunt it down ... etc.
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Garth,
I say those very things often, and I mean them! The truth is that when we drive a hard bargain we learn things that the casual "shopper" will never learn. My old neighbor built his dream house a few doors down from a dream house that is presently in foreclosure! Everytime I would run into the guy I would ask him how things were going in his area. He would say "Oh, just great" and I left it at that. I suspect had I made the effort and drilled down a little deeper I would have learned this in time to perhaps engineer a short sale. Now it's too late and everybody and their long lost brother knows!
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newsfreak,
I'd have to say that as automated and "streamlined" the closing and financing process has become 8 months is an eternity. Clearly not priced correctly. Even before the internet 8 months was long time assuming it wasn't some kind of a mansion or unique property.
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Skibum,
Thanks. Now how do I get this damn bottle off of my hand?
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Allah's website
I won't need to negotiate, they will be begging me to take it at a price I feel it is worth. I will probably be buying my house from a bank, because soon there will be so many houses on their books that they will need to liquidate them or go under...or maybe I will buy it from an RTC auction for pennies on the dollar as many have done the last RE bust when all the S&L's went under. Either way, by the time this crash really reaches full swing, the homedebtors won't have any negotiating power! The homedebtors will soon have a six figure net worth,... too bad it will be a negative number! :evil:
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allah,
We don't need no stinking negotiations!
I LIKE IT!
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athena,
Keep those stats a comin'!
Thanks!
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athena,
So good to have you back! They say the proof is in the pudding and DAMN that's a lot of pudding! 940 listings added in a little over two weeks? Must be the "spring rush".