patrick.net

HelloKitty,

I am in no position to give advice, but most of the regulars here who have been around the RE negotiating ballpark a few times (FAB, OO, SFWoman, Randy H, DinOR, etc.) seem to lean strongly in favor of using a RE attorney to draft your offer and represent you vs. a buyer's agent or going solo. They do so for a variety of reasons, which could be summarized thusly:

--No buyer's agent/brokerage claiming half the 6% commission = more motivation to sell to YOU for your price (6% of lower price is almost always more than 3% of somewhat higher price).

--Buyer's agents incentives are NOT aligned in their client's (buyer's) best interests. They are aligned basically with the seller & seller's agents (fastest possible sale at highest possible price = more commission for them).

--Buyer's agents are not as knowledgable about the pitfalls & ins/outs of RE contracts & negotiations, and may not be able to spot (or may not WANT to spot) anything that could be a problem for YOU. And how much training is the average RE agent required to take vs. a lawyer? A few of the better, more ethical, long-time agents (think: George) might be able to hack it, but the general consensus is that RE attorneys are the way to go.

HelloKitty,

Randy you are aware you are by default letting the listing agent represent you /get the buy side commission? That is the law if you submit an offer directly to an agent without broker representation.

I'm aware and that is a primary advantage of having no buyer agent. I normally communicate with the listing agent with phrases such as "since you'll get the full commission...."

Thus you should lean on listing agent to ‘get your price’. Thats what FAB recommends. You will probably find the attorney is pointless since everyone uses CAR forms for offers anyway you can get those for free you know.

Not all CA counties use CAR forms. Some use USLF or even have their own variants.

While the forms are standard, all the crap that gets written as addendum is not and I've had more than one colleague and friend get stung by not understanding a detail somewhere. We talked about this last week, in fact.

My Offer to Purchase is custom in that I have opened escrow already and in some cases I present simultaneous offers on multiple properties and need to indicate non exclusivity.

The attorney doesn't cost very much, especially relative to what is at stake. The costs are readily recouped because the commission situation allows for discounting. The attorney is the *only* person in the transaction representing the buyer's interests, including any buying agents. I've come to find that a surprisingly large number of people in Marin also use re attorneys, so if the seller has one I am exposed not being represented.

I would advise an attorney for a first time buyer. After you do a deal and are comfortable with the process you won't need one after that.

In my contracts I never check the arbitration box. One piece of advice is that you always want to preserve your rights to go to a real state court.

Randy H,

You need to write a book on "How to Buy Real Esatate for the Unintiated". And please sign me up for an advance copy.

Thought I'd pass along an anecdotal story. This week, a real estate agent that I worked with three years ago contacted me to see how things were going. I'm accustomed to the refrigerator magents and calendars in the mail, but this direct (unprompted) contact was kinda weird.

Anyway, she asks me if I've given any thought to buying again. I said that I think about it all the time, but not at the current prices. She gives me the usual "all the good stuff is going fast" better-get-off-the-dime bullsh%t. Then she says there's very little inventory. So I say, why are you reaching out to me? You're basically telling me there's nothing out there interesting and that I'm already priced out before I get started.

[long pause]

me: "Ok, never mind. What exactly do you think is the cause of this current lack of inventory?"

[long pause]

"Well. Sellers are scared right now. There's all this doom and gloom out there. The media and whatnot... I personally know four different families who are just waiting to put their homes on the market later this summer because of the current environment."

Take it for what it's worth. I know it's anecdotal but I thought it was an interesting exchange. I was kind of surprised by her candor about sellers being scared. I wonder if there are more sellers out there waiting for this gosh darn bubble news to go away so things can get back to "normal"...

And I need to start using the spellcheck more often...

HelloKitty,

Funny you suggested taking the RE agent/broker exam...

Why not?

speedingpullet -
I was impressed with LA prices back in 1999-2000.
LA did seem more reasonable vs SF South Bay.

Yea, we have a "Hump" in the Bay Area...
Big *ss tumor i often see in the zillow charts.
That hump may be head and sholder curve..
now bleeding downward..

We also show a flat line from 2001-2004
I have to say DQNews was showing double digit increases
since 1999, I dont recall seeing prices going flat.

I dont know if you recall, but it does makes sense that SoCal is higher priced than NoCal. This is what I recall most of my life living in California.
This has been the historical norm.

Malibu being more cheaper than Sunnyvale...
Beverly Hills Cheaper than Palo Alto....
excuse me.. what wrong with this picture?

So my strategy was to get my own license I am virtually unknown so will not be boycotted. Also you have to kiss ass and ‘be nice’ to the listing agent. They actually decide who buys the home,not the homeowner. They have ALL the power. In fact you can get out bid by a lower bid if the agent convinces the owner you have a ‘weak offer’ or that they think you will ‘flake’ or they will make up a lie about ziprealty.

I've been trying to say these things but until someone has bought or sold a house they understandably don't believe that a seller could ever say no. They think they are going to just waltze up and pay whatever they think, and that is not the market. Not even in a buyers market does it work like that.

HelloKitty,

All the dirty listing agent tactics you mentioned still seems to support the idea that the best way to get your offer presented --and accepted-- is to bypass the buyer's agent and take your offer straight to the listing agent. Whether you take the exam and represent yourself, or use a RE attorney, isn't that still the bottom line?

And heres one my friends were convinced to not put it in the MLS since the realtor claimed he could find a buyer for them without letting ‘thousands of strangers traipse thru the house’

This is actually a legitimate concern for many folks for whatever reasons. We addressed it by vacating and staging. The inconvenience of renting and storage in the interim can be viewed as a motivator to complete the other leg of the transaction -- finding a new home.

I'm not sure it's happening anymore, though I'm suspicious of what I'm hearing in Mountain View recently, but there were a couple of groups of realtors that got caught submitting faux bids to run up multiple bidding wars on a mark (or two). Nothing like treating home buying like 3 card Monte.

When we moved out of Redwood City and sold our little house for about 100% gain there was all kinds of bullshit going on as half the neighborhood turned over. It was common practice to auction price after bids were submitted by calling "2nd place" and telling them they had a stronger offer but needed to come up to $X, only to round robin and sell to the highest $X. The old lady next door thought this was the greatest invention since Tigerbalm as she squeeze something like an extra $75K as she moved out.

They think they are going to just waltze up and pay whatever they think, and that is not the market. Not even in a buyers market does it work like that.

In a very severe down market with a very motivated seller, or (even better) a bank-owned property, it actually can "work like that". Just as it "worked like that" in the seller's favor on the way up. Google 'RTC/S&L bailout' or CA recession of the early-90s.

I disagree Harm. What you say sounds right but you still have to be the highest out of the market. Unless you negotiate a short sale you can't get the property below the remaining balance. They will negotiate with you when you are reasonable, but there is always a market at the right price.

Just look at the hundreds of houses that remain unsold at those auctions where people had reserves. The market price is always what a willing seller and a willing buyer determine the price to be. There seems to be a fixation about really wielding some power but that is just not how it works. The seller has something the buyer really wants. If say the rental income potential is high, you can't really lowball because there is a real value. It all comes back to the fundamentals which is what my point of view will always fall back to.

HARM, I tend to agree with HelloKitty and Malcolm on the Listing-Agent-Power thing. Most people are passive, and conflict averse. That's why they use agents for RE, and that's why agents are often Glenn Gary Glenn Ross.

Going around the agent to the seller is a last resort as it makes you look like a whacko or at least makes the seller think you're one of those guys who wants to get them to cut out their agent. Of course, back where I grew up cutting out agents was common practice -- but that's more or less survival in rural midwest farm country where everyone hates realtors and insurance agents who generally only get business from people they go to church with.

Unless you negotiate a short sale you can’t get the property below the remaining balance.

Malcolm,

We've discussed this topic at some length on several previous threads. This is technically true --at least for the first lien-holder (1st mortgage). Unless the seller brings $$ to the closing, s/he can't sell it for less than what's still owed on the mortgage unless the lender agrees to a short sale (which is still possible).

However, as I said, if you buy it from the bank as REO, then no such rule applies. The bank obviously wants to recoup as much of its loss as possible. However, they also do not want to become long-term landlords on a vacant, depreciating asset that is hemorrhaging money (property tax, insurance, maintenance, vandalism, etc.). In a severe downturn, properties can --and have-- been sold for steep discounts.

OO, FAB, Randy: comments, criticism...?

Also you could go a step further and contact every ‘major’ (meaning top producing) agents in your target area and tell them you are a buyer and that they should contact you ASAP if they get any listings. But dont let them ‘chauffuer you around’ to other agents listings.

I'm sorry but things like this are what I'm talking about. Unless they think you are serious you are wasting people's time. Either get a buyer's agent to look for what you want, or go on Realtor and find it yourself. Then get the best price by going directly with the seller's agent. Like people have said they are the most motivated that way because they get both sides of the deal. Learn learn learn, then you can do it confidently. You should know the agent's interests, they want to make a sale. Keep your top offer to yourself, and negotiate like you would anything else.

btw: I've mentioned FSBOs on this site before. They are making a comeback in the Bay Area. (Or if they were never here, I guess they are starting to make inroads.)
http://sfbay.craigslist.org/search/rfs?query=%22by%20owner%22

Did a cursory scan and there's stuff in here in Los Altos, Potrero Hill, Belmont, Danville, Menlo Park, Aptos... This is not exactly junk. A bunch of stuff close to $1m. I can't help but wonder if these people are upside down and trying to avoid realtor fees.

Randy H,

Actually I wasn't advocating cutting out the LISTING agent --only the BUYER'S agent. Please re-read my above posts. ;-)

"greatest invention since Tigerbalm"

What a sad state of affairs. Seems like realtwhores are only "rookies" for their first sale then after they get their cherry popped it's all about learning the "real deal" of back stabbing or collusion. AND the only way around it is to become one yourself. Great system.

Have you ever seen a group of "professionals" that establish pecking order by placing a value on brazenness?

Harm wrote:

"However, they also do not want to become long-term landlords on a vacant, depreciating asset that is hemorrhaging money"

Consider also they will need to comply with bank regulations which disallow banks from holding property to begin with.

Even so, if such property is carried on banks books they would be written down anyway, because the market value is below cost to them.

The loan on the other hand was already written off to the allowance account for bad debt.

-2 cents from an Accountant.

Anybody feel like living in San Jose for a year for free?
http://sfbay.craigslist.org/sby/rfs/299198533.html

I don't get it. Los Angeles is now our 2nd largest city and one out of every 94 CA's is a realtor. Even w/my attitude I don't think I'd live long enough to p#ss ALL of them off! Why would I fear getting black balled?

Malcolm,

Perhaps I came on too strong earlier and my schadenfreude was showing :-). But I did not mean to imply that suddenly the sky will magically open up and Rapture priced-out buyers up to real estate Heaven. All I was really saying is that the rules of the game are rapidly changing. What has held true for several years now (extreme seller's market) is evaporating, even though sellers are very slow to recognize it and are still mostly clinging to their mental accounting & sky-high wishing prices (for now).

I do *not* expect prices to plunge by huge amounts overnight, nor do I expect the market to flip completely to the buyer's favor. Rather a slow, painful drip process of transition to a more buyer-favorable market, as FBs get hit by resets in waves over the next several years. This --plus inflation-- will slowly erode real prices over time and gradually reset seller/buyer expectations back to a more rational, sanely-priced and sustainable market.

But I *do* think I'm entitled to a little schadenfreude and the occasional anti-REIC rant, given all the arrogant self-serving bull$hit I've been forced to listen to for the last three years (since I really started paying attention).

I'm actually considering getting whatever licenses or certifications are necessary to have at least a snowball's chance at getting a crack at short sales or foreclosures. I know, I know, it's all who you know and if they don't already know you then you don't know who. But I'm not particularly interested in leaving that "economic dead loss" on the table for the same folks who skimmed the cream on the way up without a fight.

Then again, I probably don't have the time. Isn't there a business model here somewhere?

Consider also they will need to comply with bank regulations which disallow banks from holding property to begin with.

That's so 1980s. Banks have regulations? Since when. I'm not even sure they're barred from having people killed or eating babies anymore.

Putting my SOX 404 cap on again...

Randy H said-
"submitted by calling “2nd place” and telling them they had a stronger offer but needed to come up to $X, only to round robin and sell to the highest $X."

I find it shocking that someone would take your word for it. After all you dont need the 2nd highest bid. I would not be surprised to find only one bidder "1st place" being told there are other bids to squeeze out that additional dollar... Oh yes it does happen....

None of these "bids" are confirmable... given the $$ value we are tall taliking about... like I said its shocking...

DinOR-
Be very affraid! Yipes!

From two threads back:

I said:

And so is your sushi!

My sushi is free?

Yes, you heard that right Peter P, I will pay for all the sushi you can consume at the next blog party. We might have to do it on the sly, since my wife will be sure to be annoyed if she realizes that I am doing it...

I reserve the right to withdraw this offer if you keep deleting my posts though :-)

Randy H & HelloKitty,

Again - to clarify: I wasn't recommending cutting out the listing agent, just the buyer's agent.

I also wouldn't want to deliberately piss off listing agent if I'm making a serious offer --unless of course they give me guff and invent phantom "bidding wars". Even so, I'm still not feeding any f**king squirrels.

Randy H, there is definitely a business model here in disintermediating the realtors. This is sort of what ziprealty is trying to do. But I guess you are talking about something else. Who exactly are you trying to cut out of the transaction?

Space_Acer, not to be a Bay Area snob, but the quality of life in LA has declined quite a bit faster than the quality of life in the Bay Area. LA used to command a premium, but it doesn't deserve one anymore.

Okay, I am a Bay Area snob, sue me.

I reserve the right to withdraw this offer if you keep deleting my posts though

Why would I delete your posts? :)

@Hello Kitty:
I too started out a few years ago hating realtors and their monopoly so I joined it (keeping full time job). So anyway now I know all thier dirty tricks and can play them myself if I want.

So my strategy was to get my own license I am virtually unknown so will not be boycotted. Also you have to kiss ass and ‘be nice’ to the listing agent.

So what's the consensus here?

1- What does it take to get a real estate license? (is that different than a broker?)

2- Is it worth it? Do they teach you all the dirty tricks that will be used against you as a First Time Buyer? Will you actually save money?

Any of us can contact the OCC (Office of the Comptroller of Currency) and bid on blocks of non-performing paper.

Dude, I now own your house. Did you want to get current and start making your payments directly to me or should I just go ahead and foreclose now? It will happen in all price brackets, all neighborhoods.

They DO have an office in SF.

I occasionally see ’sweet deals’ get put into the MLS as sold they put ’sold before processing’ on the description, they never hit realtor.com or anywhere and the agent had a buyer in thier pocket the whole time. These are called ‘pocket listings’ for those who didnt know about this. If you do this of course you better know what a good deal is (as always) and be able to act fast.

What's the point of putting it into the system if its sold already? Maybe I'm just not evil enough to see the angle on this...

Oh wait...

http://www.realestatelicense.com/index-ca.aspx

What's the difference between these two offerings:

1. California Real Estate Salesperson License

2. California Real Estate Broker License

Are we supposed to hate theotherside? He seems to be quite reasonable now.

Jimbo - Your comments are welcomed...

Sad, i recall some great times off the Sunset strip during the
metal years...

Here is a business idea then:

Go to the OCC and get a list of all the non-performing paper that is up for bid, then generate the list of properties that is backing that paper.

Build a website that allows people to view those properties, using Web 2.0 hooks to allow people to map them and look them using zillow and MSN Live Local Search. You could even put in things like school data, etc, pretty easily.

Then form buyers co-ops where people who are interested in these properties can put up the money to buy out their "share" of the paper, in return for future ownership interest in the property. Of course, there is the risk that the person who is in default will end up making up the payments, but in that case the person can get their money back.

You would have to get economies of scale going, otherwise it would be hard to get enough people together to do this all at once fast enough.

Is this the sort of thing you were thinking of Randy?