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Randy H,

Your explanation to Michael should be "the playbook" going forward. And it wasn't too hard to understand either! That will be the next wave of financial self help books. "How to profit from the RE Crash" In fact I believe there are already a few out there. Hey, I was going to ask you, Patrick has recently linked daily articles from a certain Charles Hugh Smith lately and I can't really find anything about this individuals credentials. He seems sensible enough but I find myself wondering if he too hasn't jumped on the "crash bandwagon" of late as well.

skibum,

A couple of specific points: I've seen only a couple counter-offers, but when I tried this strategy about 10 months ago I experienced selling agents refusing to even present offers to their clients (even though I'm not sure this is within their code of conduct as per some discussion generated here last year). Secondly, I am targeting homes which have been on the market a long time and haven't sold, but are quality homes (not me-too listings). That is I'm looking for overpriced listings. The last was a home that has re-listed 3 maybe more times, and the sellers have raised the price each time. I think it fell out of escrow once. Zillow says it's about .99M - 1.2M based on comps, but the sellers just re-listed at 1.45M. I offered 1.05M, or just under 30% off asking. I'm in South Marin and targeting MV, CM, LS.

Oh, and I never bid on "multiple offer" situations. I always ask the agent if there will be other offers (they always say yes), then I say "no-thanks". If they come back and solicit a bid I use my gut-intuition to read if they're trying to get a second bid. If so I tell them "naw, I'll just wait a while and see if it sells".

Skibum,

As usual Randy is right. Here in Oregon I've made a few offers well below asking that were not accepted. HOWEVER; I did calls back from realtors months later to ask if we were still interested in the home. It is SO much fun toying with them to see what they'll say. Btw, it is the realtors that are pleading with sellers not to be such greedy a$$holes! Imagine that? With sales volumes drying up the realtors need a sale yesterday, and this is what I've always said would start the "correction". Peter P has always said that we don't need a crash, all we need is for prices to stall out. Hard to argue with him too.

DinOR,

If you care to help coach people on negotiating 101 feel free to start a thread here (I think you have authoring rights, if not let me know). I think your expertise could help prospective buyers quite a bit to understand the mechanical side of negotiating tactics. I am a firm believer that negotiating will be much more important in claiming value than macro-economics of all this stuff we talk about all the time.

For example, how can a buyer use the seller's agent to her own benefit? How does Ms. Buyer set up a negotiation such that she, her buying agent and the seller's agent are all working towards her own price/value goal?

Randy H,

Thanks, btw I did check out Cap. 2.0 and it's actually pretty good! For those among us that may not feel up to negotiating please remember that it is YOU that will be making the payments for the next 15, 20 or 30 years. Every dollar you don't borrow is 3 to 4 dollars you don't have to pay back. Everytime somebody says "lowball offer" the gut reaction is "insulted". Especially in smaller towns where you might actually know or know of the seller. For people in a town the size of San Diego I can't imagine where the reservation might come from! But when you "lowball" you have to GIVE something. The give is a big part of "making nice" and believe it or not goes a long way toward building a rapport with the seller. Just make sure the "give" is no skin off your nose, like "I don't have to move in until _____ date! Hell, none of us here are in any hurry! Go ahead, let them feel good about themselves, write the offer something like "upon finding suitable accomodations" or whatever. Make a list of things you would like to see repaired and then back down on like 95% of them. You're "making nice" here so no need for them to label you a heartless bottom feeder. Then comes the moment where the realtor really, really needs the sale and says something like, "you know this really isn't a bad offer" and then they can go through line item by line item on all of the concessions you've made as a buyer. The realtor knows this is BS but they need the close. Like Randy says (and I can't say enough) yeah, the macro picture and timing are important but not nearly so as our ability to create our own deal. Remember, make nice.

George,

Great insight on the types of sellers to target. Indeed, finding a seller that isn't pricing on a "needs basis" is probably more fruitful than trying to find someone two ticks away from bankruptcy (even though this may seem counter-intuitive). Buyers need to keep in mind the "escalation of commitment" psychology. As one becomes distressed they are prone to take bigger and bigger risks because they feel they have little left to lose and may just get that big-win to bail them out. A better seller is one who can afford to sell to you at the discount.

A better seller is one who can afford to sell to you at the discount.

For similar reasons I will not rent from anyone with a negative cashflow on the property.

John M
Last weekend I found out my previous home(that I sold last Aug.) was up for sale for 200K more than I sold it for...don't feel bad...don't look back! The cap gains law DID affect my choice to sell and I do agree...that law was put into place when being a millionaire meant something. When I had bought , rennovated and sold previously, the law was not in place. When I moved into the neighborhood in 1997, my neighbors thought I paid too much for the house at 325K. Little did we know that in 5 years our hood would become a million $ neighborhood. The smallest house goes for about 850K. Just crazy!
DinOr
Yes! The art of negotiation! Now that's something I'll need to educate myself in. I've done ok...but I only know enough to be dangerous!
I'd love to see a thread on negotiation 101. :P
This is how I plan to profit on the crash. No gold or stocks. I've tied some $ up in CDs..primarily to STOP me from even THINKING of buying now. The market here is 'frozen' according to the realtor representing my old house. I have to sit on my hands to wait till there is a significant fall with significant panic before I jump. Heck...I'm the cat watching the canary...poor birdie! :twisted:

Randy H,

I like the "escalation of commitment" as well. It takes the sellers focus off of price and price alone and brings them meandering down this trail of minutiae that you are starting to control. A big part of closing (no matter what side of the transaction you're on) is to let the other party have some dignity! Especially in the "Age of Zillow" the seller can say "Well, that's true, we did sell at X but the buyer let us spend the summer/fall/holidays here and they didn't nit pick us to death". It can be hard to generalize but look at the sellers age/situation and try to imagine the "give" that will appeal to them the most.

How about asking the seller to pay 3 points and other closing costs?

3% of 1M is only 30K but that will drop your 30YR FRM interest rate to below 6%. The seller can have some dignity and your payment will be considerably lower.

Peter P,

Excellent suggestion! In OR what we are finding (and I think George may have mentioned this is FL as well) is that you can offer full price (I can't believe I said that) but the seller pays everything. Sometimes I've heard of cash back at closing, flooring allowance (wink wink) and even trips. Personally though I think we can do alot better by moving the "line of scrimmage" substantially back by a low ball offer to begin with then loading them up with demands and then backing off those demands that don't really matter to us anyway.

DinOr
Good stuff...escalation of commitment...It s about getting them to spend enough time with your offer going through the details instead of instantly disreguarding it as lowball. Brilliant!

Linda in La La Land,

The gentlemanly term you describe above is attributable to Randy H. Me? I call it sex. It's a shame more of us don't. Not the "Hey, I bought a bunch of drinks here!" type stuff. I'm talking about the way business used to be done! Everyone makes their list of causes for the HB but right after the 1997 legislation is the cryptic (and lost world) of negotiating. In the 90's when things were rockin' and rollin' people were getting ESOP's and bonuses so they would go and look at a home and say, Yeah, we can afford that. Without so much as a wimper! Then we wonder how sellers got so bold. O.K, so now I'm doing some serious revisions to the list but I DO feel it's a very important factor.

I’d love to see a thread on negotiation 101.

I'll second that!

DinOR: Fantastic tips on negotiating give-and-take. It's obvious you've learned this from first-hand experience, which makes it "real life" and all the more valuable.

George: Great tips on whom to target. Totally flies in the face of typical "target the deperate/pre-foreclosures" advice, and I completely see your logic here.

DinOR & George homework assignment:

1. Email Patrick (p@patrick.net) and ask him for thread moderator rights
2. Get familiar with WordPress administration tools (it's easy -- just go to main page patrick.net/wp, look on right-hand side, find "Site Admin" link under "Meta").
3. Author a new thread on Buyer Negotiation 101 (DinOR) and Types of Sellers to Target in a Falling Market (George).

Why do we need a new thread on investing 101 ? THIS IS THE THREAD !

Great stuff guys. Thanks a ton for sharing these tips, strategies to complete strangers ! Sometimes even friends don't disclose all the tricks they know.

Why do we need a new thread on investing 101 ? THIS IS THE THREAD !

Actually, we need more contributing moderators here. 90% of the threads here are posted by the same 4 people: myself, Peter P , Randy H (who's now busy with his own site), Surfer-X & SQT. Occasionally, there a few others contribute (San Francisco RENTER, brightc, matt_walsh, Girgl, etc.) but it's not enough --yet.

We need new moderators with fresh perspectives/experiences. If 10% of regular posters contribute one thread a month, that's still a big improvement over today.

Harm, what is the normal lag time between your blog news and when Fox News runs the story? The other media outlets never run this stuff and Fox is behind you by about 3 to 4 days on average by my count. Any idea?

Wow, Bap33, I had no idea that Fox News was tracking this or any other bubble blogs. Is Rupert Murdoch a Patrick.net lurker? ;-)

Harm,

I e-mailed Patrick so I should get a reply here shortly. Negotiating 101 huh? I actually got my start doing collections for my old man when he ran a counter top business in Western Springs, IL. There's a trial by fire.

I contributed one once ;>

HARM,

Don't you already have the power to promote moderators? I think you might.

It sounds a lot smarter coming from Randy H:

One simple, non-speculative way to benefit as the market crashes is to buy a home. As prices come down, and sellers start to panic, you have the maximum leverage as a buyer. ***

***I wouldn’t try to time the absolute bottom of the market. My reasoning is that you have more buyer-negotiating power on the way down than on the way back up. For most regular folks negotiating has more of an effect on their outcomes than ultra-precise-timing.

The Farklese translation:

I’m going to wait and watch and shop for value. I know my next home could drop a bit after I buy, but I’ll own it a long, long time.

Thanks, tsusiat. Sorry if I missed anyone --all are encouraged to post, even if you can only do so on an occasional basis. Fyi: If you currently post annonymously, you'll have to register(login) before you can request thread authoring/moderating rights.

Randy H, you may be right. Forgot about our new "spam & troll-quashing" powers ;-). Will have to look into that.

DinOR/George,

If Patrick doesn't get back to you today, let me know. It looks like Randy H, myself SQT & Peter P now have rights to promote you to author level.
Make sure you register first: http://patrick.net/wp/wp-register.php

DinOr says:

A big part of closing (no matter what side of the transaction you’re on) is to let the other party have some dignity!

I completely agree. Unless it's a trustee's sale you have to get the seller to say "yes." They won't do that unless they see something in it for themselves.

A lawyer I knew told me that Art of negotiating is to take the other lawyer in the back room, bend him over the table, and then he's thanking you on the way out.

I think this thread already got hijacked back in to the "Time to Buy" thread.

Or maybe it's the "How to Buy Thread."

It all sounds quite Trollish. Surfer-X, save us.

"one of the internets most infamous housing bubble sites"

Are we? How do we rate? I mean overall. I won't stop until we are the standard by which all other bubble believers are measured!

DinOR, if you Google "housing bubble" today, we are the #1 hit.

Hmm... maybe Rupert Murdoch DOES read this site.... 8O

HARM,

You know something? You're right! It's leverage time baby!

I won't get semantical about whether a home is an "investment." It's definitely an investment of time and money.

The thing about "investing" in a home is that each piece of RE is unique. A home is not a fungible commodity. Investing in a particular painting or sculpture is an apt analogy. That's why the courts can order specific performance when a home seller breaches the contract. If you dishonor a contract to sell corn, the buyer's remedy is just money damages--the difference between the contract price and the going rate for that commodity at the time of sale. If you can prove that an RE seller breached his contract you may have a remedy in equity to compel the sale.

That's also why shopping and negotiating is so important. And why the role of macroeconomics--the direction of the market in general--plays a lesser role. As long as you have a good sense of the comparable value of the house you buy, and you buy it for a good value, you can get near "the bottom." You are not timing the market, you're timing the market for that unique house.

Now, Surfer-X shield your eyes, that's also why a qualified and honest real estate broker may be worth the "investment" in his fee. Buying RE is tricky. Sure, Zillow is cool. But I wouldn't buy anything in a strange market without a local expert, and a lot of professional help. I nearly screwed the pooch on my own sale by not recording the transfer of my sole ownership to my wife before closing (to get the full $500). My real estate agent/CPA saved me a lot more than the 6%.

Newsfreak
It is my understanding that both agents actually represent the seller's interests...even if its a buyers agent. This is the myth of the buyers agent...they're still there to SELL. It's illegal to do something that could 'kill the deal'....correct me if I'm wrong....I'm not an authority.

Skibum

I will just refer you to the congressional transcripts:

Surfer-X: "Mr. Farkley, please tell teh members of this committe, are you now or have you ever been a Troll?"

Farkely: "On the advice of counsel I refuse to answer."

Surfer-X: “Mr. Farkley, please tell teh members of this committe, are you now or have you ever been a Troll?”

Troll: You have done enough. Have you no sense of decency sir, at long last? Have you left no sense of decency?

Astrid:

Absolutely right. I hold no brief for price-fixing.

The difference between "investing" in art and real estate is that everybody thinks they understand real estate.

Lunch is over. That was delicious, thanks. Time to go work for the Man.

that’s also why a qualified and honest real estate broker may be worth the “investment” in his fee.

In california the person you mention is currently in the Bahamas with Santa Claus, Elvis, Jimmy Hoffa, The Easter Bunny, and....... Jim Morrison.

They also must disclose all offers to the sellers, even if they find them insulting.

Really? :D

Rand H.:

Thanks for the info.

I'm thinking maybe buying the worst house on the best street, fixing it up, and settle for a few grand profit, i.e. $10-$20K a pop.

Do one every two months wouldn't be too bad, no?

Think it's doable in a sinking/sunk market?

Garth Farkley,

Sorry if the title of my thread "Time to Buy" was a bit provocative. My intention was to get people thinking about their own personal decision scenario. I personally think we've seen the macro peak and that macro sentiment has turned.

But, as the bubble deflates real-estate will become more and more local and there will be lots of "wild west" (thanks George) type of stuff going on. This means some neighborhoods will stagnate, some will bump up and down wildly, some will drop like a rock. It won't be so much of a balloon deflating (which does so pretty evenly), but more like a giant tin-foil ball being crushed (very lumpy).

Given all of that, each person's individual decision about when to buy will be different. People with lots of HaHas -- like those who sold recently (of which I fully disclose my own position) -- may wish to buy before the bottom since they can go in with lots of equity, reasonable fixed payments, and a hope of having their pick of homes that were out of reach a year ago. Others will want or need to wait until closer to the bottom. Some will want to wait until it's passed the bottom and shows signs of heading back up (Zephyr posited such a formula, but he's a RE investor/landlord).

Almost everyone who reads this blog is here because they want to buy not because they want to sit around and cheer the death of US real-estate (but I'm sure we have at least one who would love to see all US RE nationalized...)

Giant ball of tin foil beig crushed

Interesting analogy