patrick.net

Thanks, DinOR!

I just saw this great post on Ben Jones's blog:

http://thehousingbubbleblog.com/?p=504#comments

scroll down to 2006-04-17 06:55:44

It's very long so I won't post the whole thing. It's a repost of a Housing Panic post by a guy who did RTC work around 1990.

Two words: psychological warfare.

This bloke won't haggle. I think we all need to haggle like an Arab at a bazaar. Me, I don't stop until the "seller" is in tears.

This one works for ALL kinds of offers. You've tracked your "escalation of commitment" and are now ready to present a "quality" offer. Make sure you use the word quality. It's important. Start by saying this;

Mr. Seller, I just want to start by saying that whatever happens in the next few minutes Mrs. DinOR and I REALLY are a nice young couple! (This usually gets a slight chuckle and relieves a little tension). It also puts the seller on notice; This is not your "dream" offer! So get those notions of making a killing ALL on this one deal out of your head.

Mr. Seller, my wife and I have watched with keen interest as this property has developed and we like it. What we want to put in front of you is a QUALITY offer. (Pause here for effect as if you are choosing your words very carefully here!) Originally on the market for X dollars and that didn't happen, right? (Get them to say right or at least wait until they nod in agreement before moving on). Well, I don't expect people to do business with me, lose money at it and then actually want to do it again, right? At the same time I don't expect people to make ALL of their money off of me, O.K? (This usually gets a mild chuckle too and by now they know that you have done this before and just want to get to "the number") After much we consideration we are prepared to offer you X dollars AND we don't even need to take occupancy until X date! (Or whatever "give" you want to insert here). This works, believe me.

Don't be mean to the seller. A lot of people will prefer bankruptcy over selling to a mean buyer.

DinOR,

Interesting tactical point: should a buyer demand an actual, face-to-face negotiation with the seller? The "normal" negotiation is a completely disintermediated affair, done entirely through agents who often never even meet each other face-to-face.

I worry that many sellers will be very hesitant to agree to meet face-to-face. People use agents so that they don't have to go through the "unpleasantness" of the negotiation. They have come to believe (right or wrong) that they aren't strong enough to represent their own interests and so must delegate to a "professional".

Also get to know the pros and cons of selling for the other side. Talk up the pros of taking your offer, talk down the cons of not taking your offer.

Randy H,

All good points. The last time I made an offer an a piece of real estate I told the sellers realtor that I would like to present my "quality" offer in person. They did not object. I understand that is by no means the standard but I asked and I got it. It's just too easy for the seller to pull down the fax with "the number" and reject it out of hand. Now true, my offer was rejected as well. But God did it feel good! I still accomplished so many things! Since that "casual" conversation a year ago they have made SO many improvements. Things that should have been handled before these condos were even put on the market. They are in the process of completely re-doing the waterfront with a retainer wall (custom laid rock wall) back filling with topsoil and planting grass, tons of landscaping. Installed an on-site mailbox and they're sealing the concrete in the court yard among many other improvements. Most sheeple would have just stood in line, paid and not gotten the benefit of ANY improvements. Let's all try to remember, you can't own everything so don't even try. But the things you do want to own, make your best offer and even if it's refused people still have to respect you. As SFWoman says though, do your research. When they rebutt your offer you'll have more ammunition to reply with!

Negotiation starts with preparation (know everything you can about the neighborhood you want). You’ll need to know a bargain when you do find one. Then you need to make lowball offers without just wasting your time. Remember when you applied to college or grad school? You submit lots of applications. But you don’t waste your application fees or energy on schools that will never, ever take you. So your offers must be low enough to entice a counter but should never get accepted outright.

Experience will trump theory. You’ll learn on the job so plan on slammed doors.

Finally, don’t expect to time the exact bottom and be prepared to live in the house for a long time.

Mr. Vincent,

Me? Personally presenting an offer is my favorite part of business! Wouldn't miss it for the world. At the same time I realize this isn't for everybody however; we need to make sure if we are using an agent to present the offer that their skills and objectives are in alignment with our objectives. If you have an agent that only likes to present offers that are accepted ON THE SPOT, no questions asked then you need to find another!

DinOR,

Even if I have an agent present the offer, I'd really want to sit in on the presentation. Under the current incentive structure, an agent's interest is always in getting a deal done with minimal time expended.

Please tell more about your stage II chipping away sales price strategy.

skibum,

Thanks for bringing that up. Very important! Also remember that the seller is already stuck with the property or car or whatever, CASH IS KING so always come from a position of strength when in the buyers role. Don't be afraid to walk away! I have some clients that walked away from a coastal resort type property for want of the smallest details. I say, GOOD FOR THEM!

astrid,

This is where the research and math come in. In my case I knew to the penny what the guy paid. (Zillow will make for even more transparency going forward). I said, "Look, I've got a pretty good idea what these units went for and in this particular instance your investment OUTPERFORMED the S+P 500, the NASDAQ and even RE on a national basis!" Assuming I pay what you're asking!? "Look, it was a good investment, and I AM making a quality offer here but what you're asking just isn't real". Here's what I propose........

Oh Oh Oh I disagree! The closer you get toward being rude the closer you are to "right" price! Don't be afraid to ruffle some feathers here. Now that doesn't mean calling someone's manhood into question! Your comments and line of tact NEED to advance the sale. So let's leave moms out of this but we can't shy away at the 5 yard line. Many times after some heated exchanges you find a new respect for one another. Again this plays right into Randy's escalation of commitment. When things have calmed down now you can reassert your cause.

newsfreak,

Everything is on the table here! How are we supposed to feel after we've been there for a 6 months and still struggling with deficiencies that should have been addressed before the closing? That's right, like sheeple. My wife and I had the option to buy this place for 227K. I know, I know alot of folks in th BA would DIE to have a place this big, this nice for that kind of money. But there were so many flaws, flaws that are just now being addressed. After they've spent about 25K in landscaping and improvements maybe now we can talk.

Talk about the death of negotiation! With multiple offers, no contigency for the buyer to sell his/her home and not subject to inspection? No wonder we're having to have a "remedial" course in haggling!

DinOR,

Thanks for correcting my perception. I guess it's more a matter of buyers and sellers leaving the table with respect for each other. I know some Chinese people who overkills on bargain hunting (not for house but for little stuff) and it gets ugly.

Also, I guess it's important to be reasonably nice at the beginning of the negotiations, so I don't get thrown out immediately. Then slowly tighten the noose as the seller's commitment to my deal increases.

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.

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?

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.)

"Winning" a multiple bid = winners curse. You never want to be the one who wins the competitive auction.

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

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.

What do you all think is the average YoY appreciation for RE if there was no bubble scenario or bidding wars?

Phil:

We worked out an equation for this here.

Disclosure in CA has a 2 year statute of limitations, no?

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.

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?

My friend is a real estate lawyer. She got caught up in the bubble. [...]

I shall not be asking SFWoman for referrals, lol.

Anyone have advice/opinions on how you acquire and interject a RE lawyer into the process?

Become a lawyer yourself.

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

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.

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.

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!

PS - blanket disclaimer on all my Patrick.net comments. Not to be construed as medical, relationship, legal, parenting, financial, investment, educational, etc advice.

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?

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.

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.