patrick.net

Period… there is no way you can prevent the agent from cashing it. What are you going to prove in court? Verbal agreement? Come one …

The check is written to the escrow company, not the agent. Look, you seem like a nice enough person but you obviously have never done a deal like this.

(3rd attempt; trying to evade spamfilter; where’s JukuBot when I need him?)

* My lawyer structures the “Offer to Purchase” with addendum to the standard form that specifically address the earnest money and escrow obligations. (something to the effect of ‘#6 DEPOSIT: I have deposited the sum of $cash earnest money to account #123ABC, held in escrow of your acceptance of this offer….legalese)

* Before my last round of offers I opened a neutral escrow account before writing the first offer. You don’t need a real estate agent to open escrow, nor do you have to designate the other party. They are all too happy to earn interest on your money.

to wit,

Setting Up Escrow

Setting up or “opening escrow” involves simply visiting the office of the escrow or title company which you have selected and handing over the deposit monies and giving instructions for the transaction. That is all there is to opening escrow. It is something anyone who’s involved in the transaction may do - the buyer, the seller, the lender, or the real estate agent. It doesn’t matter who opens the escrow just so long as those involved in the transaction have designated someone to do it when they sign the final purchase agreement. If there is no real estate agent involved, the seller will typically be the one to start the escrow process, as she will be holding a deposit or good faith check from the buyer, together with the signed purchase agreement. In for sale-by-owner transactions, the buyer and the seller may both open escrow.

* The seller may verify the deposit is already in escrow.
* The offer is severely time-limited.
* The offer also has language that allows me to select one seller from among up to 3 if I have submitted offers on multiple parties, but sellers may counter propose.
* Sometimes I drop the previous clause and instead substitute a “counter proposals will not be considered and are hereby preemptively rejected” clause. I do this only if I am offering my maximum price on a clean offer from the outset, and don’t want to waste time. Usually this is also a longshot situation where I’m hoping the seller is desperate. The expiration on this type of offer is 24 hours.

The purpose of this mechanic is it allows me to control the symbolic deposit dance. I’ve already demonstrated more commitment than a check with a clown and balloons drawn on it. And I’ve signaled to the selling agent that I am serious, not some random ZipRealty.com lowball fisher, and that I have representation. Finally, I have stipulated a time period at which point the escrow expires and reverts to me, giving me a known fixed window during which time I am highly motivated to find a deal. I should also mention that my earnest deposit is significantly greater than the customary minimum. This prevents me from just f-ing around lowballing since I’m losing opportunity cost on that money.

All that said [injected for DinOR] none of this means anything if my maximum price is not greater or equal than the seller’s minimum price. Also it risks causing damage to myself in the ince$tuous and collusive South Marin realter racket, as I could find myself blacklisted. Early on (before I had everything above worked out just so) I had an agent tell me that “we’ll never sell you a house in Marin if you keep wasting everyone’s time”. She also told me Marin realtors never sell to anyone without an agent as a matter of ethics [ironically].)

It has nothing to do with being a pushover. If two deals are identical you would go with the one with the highest deposit and least contingenices. That's what I mean by think like a seller. The seller just wants to sell the house, they aren't trying to screw you out of anything. What is with this paranoia?

(the winner was "ince$tuous", for future reference)

athena,

I would be only TOO proud to table an embarrassingly low lowball offer on your behalf! (Trust me, I've been called every name but the one my mother gave me) so what makes you think I give a rip about what some FS (TM) (Frustrated Seller) thinks! :)

She also told me Marin realtors never sell to anyone without an agent as a matter of ethics [ironically].)

She can lose her license if you are able to get that in writing. CA realtors must present sellers with all offers or they breach their trust.

I'd just love to be athena's Vanna White.

athena: "Now you can see on this next chart that you're clearly an idiot"
randy: [Flips to next chart]

"What is with this paranoia? "

Sorry Malcolm, Im only speaking for myself. If a buyer wants to make an offer, make an offer, sign the contract, pay a deposit. Thats it! Im a corporate guy and deal with black and white. You got no contract, you got no deal (and sometimes no legs to stand on)

If he wants something upfront and you want to pay thats your way of doing business, fine.

athena,

I'm game --and I bet Mr-X would be happy to join in as well (for a little free beer, of course ;-) ).

"a check with a clown and balloons drawn on it" LOL!

Amen, Randy. That's kind of my point in a way. I simply tell the realtor that I'm a man of my word, I'm *not here to waste your (or anyone else's) time and this is how I do business.

What we're all kind of glossing over is how did all of this become such a big damn issue in the first place!? How can there be SO MANY multiple offer/bidding war situations? How can there be so many people willing to walk away from a transaction? How did we get here?

Malcom

Are you familiar with the realty business in South Marin? Visit marinite's blog if you want to read some of the stories. There's a lot of BS that passes here. I swear there are enclaves where you have to practically be invited to buy a home. It makes Novato seem more and more attractive to this old midwestern boy all the time.

Anyway, I've had a few realtors refuse to present my offers to clients. I was told by someone on this blog a while back that yes, it's in violation. Yes, they can lose their license. No, they won't because no, no one really cares. It appears I'm not the only one facing this as Zip Realty complained a ton a few months back that no agents would present offers originating from them. In fact, agents refused to even show homes to Zip Realty clients. Zip retaliated by having a couple clients write offers contingent upon being allowed to view the property and confirm their offer thereafter, which they then delivered directly to the sellers via registered mail.

It was in the papers. Zip was doing it to try to let everyone know what was going on. If I recall the resolution was Zip getting chummier with the RE machine, and somehow trying to limit out-of-parameter lowballs. That last part is hearsay though.

Space_Acer.....verry eeenterestink, re 'when did the madness start'...

For once, I guess you could say, 'its all local' and be right.

We moved to L.A in spring of 2000, and prices were just starting to nudge upwards down here. Although we weren't in a position to buy back then, it was still possible to buy a decent SFR in Santa Monica for less than 1/2 million - and not possible a year later in 2001. And, sadly, still not possible now.

Looking at properties on zillow, it seems that the largest price hikes happened around Jan 2004 in LA county- so many of the 5 and 10 year graphs show a characteristic 'hump' around then, which in most cases hasn't reverted back yet.

So the price hike in different areas being in different years is no real surprise - San Diego seems to have been the earliest - then the Bay Area - then L.A.

OT - just watched CNBC crowing about the 'rise' in existing home sales this month....husband is half-watching too... turns to me and starts to say 'heh, well there goes your gloom-and-doom scenario' (he's a lot more bullish that myself)

until he finally figures it out.....'erm....a rise against what? what are they comparing with?'
Being a programmer, he has a modicum of basic math, so knows the difference between a Year on Year comparison and a Month on Month one.

"So...they're saying there's been a small increase in existing home sales since Feb.....but... don't more people buy in the spring anyway? What is it like compared to last year, or the year before?"

It made me feel all warm and fuzzy inside. I didn't have to utter a word, and he figured it out for himself.

"Marin realtors never sell to anyone without an agent as a matter of ethics"

Now THERE'S some brass coming from someone who's qualifications include Starbucks AND Nordstrom's!

God bless Randy H, for (once again) going above and beyond the call to explain to us schmucks how to do somethin right!

Also it risks causing damage to myself in the ince$tuous and collusive South Marin realter racket, as I could find myself blacklisted. Early on (before I had everything above worked out just so) I had an agent tell me that “we’ll never sell you a house in Marin if you keep wasting everyone’s time”. She also told me Marin realtors never sell to anyone without an agent as a matter of ethics [ironically].)

Blacklisted. For tendering a completely fair and reasonable offer, based on "obsolete" fundamentals, like price-rent/price-income ratios that have held true for centuries, or "quaint" inflation-adjusted historical baselines.

I am warmly looking forward to the approaching day when business falls off so precipitously that I can *personally* bitch-slap these arrogant, ince$tuous greedbags and force them to eat their words, along with a generous helping of humble pie.

Sorry Malcolm, Im only speaking for myself. If a buyer wants to make an offer, make an offer, sign the contract, pay a deposit. Thats it! Im a corporate guy and deal with black and white. You got no contract, you got no deal (and sometimes no legs to stand on)

I don't know what we've been disagreeing on. It is only customary to give the check at the time but it is not required. The contract normally reads within 24 hours of acceptance the buyer will deposit the earnest money. This is just a detail, I think in principle we are in agreement since I don't disagree with anything in your statement. If you want me to say it, yes, there should be no deposit until an agreement. Sorry if that was ever vague.

athena,

I would love nothing more than to be there and partake of your considerable housing wisdom but alas I find myself with the "wedding party" evaluating the reception hall! BUT you could reciprocate by giving me a 1/5th of Gin and hitting on the back of the head with a shovel so that by the time I come to it's all over? :)

I had a similar experience as you, that’s why I can vouch that there is a real cost to having someone stroke you.

Malcolm,
Oh yes, the oldest profession - yes, older than being a Realt-whore (TM), just a plain whore! :D

btw, I give great credit to two years of reading Patrick.net in helping me to refine my current strategy. I entered this foray knowing very little about real estate other than how to do the financial math. I particularly learned a lot from FAB, an earlier version of Zephyr, and a couple other previous regulars who've since faded away; most notably George.

Randy H Says:

March 23rd, 2007 at 2:45 pm
Malcom

Are you familiar with the realty business in South Marin?

No.

Visit marinite’s blog if you want to read some of the stories. There’s a lot of BS that passes here. I swear there are enclaves where you have to practically be invited to buy a home. It makes Novato seem more and more attractive to this old midwestern boy all the time.

Rancho Santa Fe is our comprable area. Every city has a snooty area in it where laws are treated as guidlines.

Anyway, I’ve had a few realtors refuse to present my offers to clients. I was told by someone on this blog a while back that yes, it’s in violation. Yes, they can lose their license. No, they won’t because no, no one really cares.

Not the case. CA has an agency which handles these specific types of complaints.

It appears I’m not the only one facing this as Zip Realty complained a ton a few months back that no agents would present offers originating from them. In fact, agents refused to even show homes to Zip Realty clients. Zip retaliated by having a couple clients write offers contingent upon being allowed to view the property and confirm their offer thereafter, which they then delivered directly to the sellers via registered mail.

I believe this made the news.

It was in the papers. Zip was doing it to try to let everyone know what was going on. If I recall the resolution was Zip getting chummier with the RE machine, and somehow trying to limit out-of-parameter lowballs. That last part is hearsay though.

Agents have been acting more and more unprofessionally as new technologies, and innovations have threatened to disrupt the status quo. The publicity backfires on them because an agent adds value by showing you homes you wouldn't normally find on your own. Now with internet search engines now everything is commodotized. When it is publicized that agents don't show all the houses they become even less valuable, and now they are hurting even more. The industry has countered with ads basically promising that all houses for sale are shown to their clients. I believe Century 21 or Coldwell Banker have promoted this as some sort of pledge of service. I do know that this happens because I was doing 1 - 2% seller/buyer commissions, and my agent used to receive calls saying they would not show my home for a discounted commission. They became irrelevant because other agents did, and we sold for above asking price. The free market is a powerful tool, when someone just decides (I'm not paying a deposit or I'm not going to show this home) they run the risk of being left out entirely.

Oh yes, the oldest profession

I definitely felt F'd, but not relieved down there.

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. ;-)