Buying and Selling: August 2022 Archives

I am seeing a very disturbing trend these past few months. Rather than do the work they should be doing, listing agents are treating the entire short sale process as a kind of "Black Box", delegating the negotiations with the lender to a negotiations firm, treating the negotiation firm's advice as if it were handed down from on high, and expecting buyers (and their agents) to blindly follow along in profound indifference to the buyer's interest. Sadly, they're getting a lot of cooperation from buyer's agents who should know better but are acting more like sperm donor agents than real agents.

I have seen the following demands from these knuckleheads :

• trying to require buyers to pay repairs, termite etc before they own a property, when in fact the transaction may never come off
• requiring buyers to pay the negotiation firms that they had no role in hiring, because the lenders allegedly won't allow it to come out of sale proceeds. Maybe you should take the hint the lenders are giving you - these negotiators and their recommendations do not serve the interests of any of the three principals to a short sale transaction. The interests they serve are those of a lazy (and horrible) listing agent
• Agreeing to keep the offer open at least sixty days without an accepted purchase contract

The answer to any of these demands is short, simple, and to the point: No.

You want my client to pay for repairs to a property they don't own (and most often the sellers don't want to take it off the market)? How can agreeing to this not be a violation of buyer fiduciary interest?

You want my buyer to give keep an offer open two months without a valid purchase contract?

You want my buyer to pay a firm that they have no role in hiring and does nothing to represent their best interests?

First off, ladies and gentlemen, if you don't have a valid purchase contract, the thing to do is walk away. There is a world of difference between "offer accepted pending lender approval of short sale" and "we have submitted your offer to the lender" In the first case, you have a contract with one contingency - kind of like a loan or inspection contingency on the buyer's side, only from the seller's side instead. Nothing wrong with that. Transactions with seller contingencies happen every day. But it also means you have an accepted offer. There can be only one accepted offer, and once there is an accepted offer, the property needs to be removed from the market and no other offers may be considered until this one falls apart. In other words, the seller is stuck with the buyer every bit as much as the buyer is stuck with the seller.

But if you don't have an accepted offer, what you have is "Hope I get it". Kind of like the Little Engine That Could, except there is no defined end to the process and it's not under your control. It's just repeat the mantra of "Hope I get it' until you get told that you didn't. That choice of phrasing was very considered, by the way. Under this scenario, listing agents submit multiple offers to the bank - a recipe for disaster if ever there was one from both the perspective of the buyer and the seller. If the bank keeps getting offers, what are they going to do? That's right, keep the property on the market hoping for a better offer. Whereas if you show them some hard back and forth negotiation and one or more prospective buyers dropping out of the process until only one is left, that's good evidence that that is all the property is worth.

Understand this in your bones: That short sale lender wants one thing above all else: Their money. As much of their money as they can possibly arrange to get back. The owner's job transfer, illness, etcetera, are not their problem. I straightforwardly advise buyers to avoid short sales but some people decide they just have to try for one. That lender needs to see conclusive evidence that there is no way they are getting any more money out of this property and this owner before they will approve the short sale. They need to understand that this is all the market will support, and that the current owner cannot pay them any additional money, and that if they don't get off their fat backsides and approve this pronto, not only are they going to end up with less money when this buyer walks, but they're going to have to pay the expenses of getting it sold as well as the penalties for having a nonperforming asset on their books.

The way to approach that is to negotiate hard with prospective buyers, as if the lender weren't part of the picture. You still have to disclose short sale status, but negotiate as if it's a regular sale (Sadly, many listing agents can't even do that). The best evidence that this is what the property is worth is that you tried to convince multiple people to offer more, and this one you picked is the one that's the best for the lender. Submitting more than one offer to the lender is a recipe for Delay and two different forms of Denial from that lender. They are going to want to wait until they get still more offers.

The lenders do have a secondary concern to getting their money, and that is time. It may be difficult to believe for agents and buyers and sellers who wait three months waiting for the bank to make up their mind, but the bank really would rather move quickly. Time costs them more money. It's just that most listing agents do not and will not do the work of actually getting the offer approved by the short sale lender - which they accepted responsibility for when they took that listing. "Short sale specialist" means a lot more than hiring a negotiating firm!

This nonsense about asking buyers to fork over cash for repairs before closing, asking them to keep offers open without an acceptance of that offer, and asking them to agree to pay the negotiating firm are all things that an appropriately represented buyer is going to ask for concessions for. Concessions on price, concessions on indemnification, concessions just for putting up with the ridiculous nonsense on stilts. This all translates to the buyers who are well-qualified and have plenty of resources walking away, while the ones who are marginal or even below qualification level are perfectly willing to hang around in the hope that a miracle will happen. What else this means is that the property sells for a lower price. But the Broker's Price Opinion has no way to reflect these unattractive things making the property worth less to the buyers. It is therefore going to come in higher than the sales price. So we have two additional ways that the transaction falls apart because the listing agent couldn't do the correct thing in the first place. With stuff like this happening, is it any mystery why four out of five short sales fail? Is it any wonder that the better buyer's agents advise their clients to avoid short sales?

Short sales done correctly are really pretty much like regular sales, albeit with one long, difficult and thoroughly unpleasant step added. But what happens before that step shouldn't be any different for a short sale than any other property. Nor should what comes after be any different, except that the seller cannot get any cash out of the deal. The one extra step that is actually necessary does impact buyer desirability, but not nearly so much as all of the unnecessary nonsense (euphemism alert!) that some listing agents insist upon adding.

All of this is, incidentally, one more piece of evidence that most major real estate brokerages are built around the seller and listing property for sale for minimum effort on their part, especially of any actual licensed agent involved. The buyer can go hang. In some cases, literally. No buyer's agent worth what comes out of the south side of a northbound cow is going to counsel their buyers to put up with this stuff, at least not without a lot of concessions including a major downwards adjustment on price (and as I covered above, the lenders will deny such sales when the broker's price opinion comes in too high). But people still keep calling listing agents about their property without having a buyer's agent to advise them. Given that, the agents think they'll find some clueless victim to sell it to. All too often, someone proves them right. In the meantime, like Tina Teaser, the worthless listing agent who is really impeding the sale of the property uses the listing to make contact with as many buyers as possible.

Buyers can't force sellers to sell, much less to sell to them in particular. But sellers and listing agents shouldn't be blind to things that cause buyers to walk away or to be willing to pay less simply because the sellers are not getting cash out of the deal. Especially in a short sale situation. They may not get cash, but soon enough they will be back to getting 1099s for forgiveness of debt, a taxable event. Every dollar they can prevent the lender from losing is going to help them.

The general statistic is that one short sale in five actually comes off. Given the nonsense listing agents expect buyers to put up with, it's no wonder that buyers getting disgusted and walking away is right at the top of the list of reasons for fall out. Sellers need that buyer - without a buyer, they don't have a sale, and nobody sells their property on a short sale without a need. Nor does this nonsense on stilts motivate the bank to get off their backside and approve the short sale. Quite the opposite, actually.

Caveat Emptor (and Vendor)

Original article here

I want to sell my home for sale by owner. Is 1.5% a good amount to co-broke? Or will agents avoid me?

In most of the country, this is a buyer's market right now. You need to compete more strongly for that buyer's business than anyone else in order to win the sale.

When I'm working with a buyer, the contract says that my brokerage gets a certain percentage of the sales price. So it doesn't matter too much to me what your co-broke (aka CBB, paid to a buyer's agent by the listing agent or seller) is to me. If you don't pay it, my buyers will. Furthermore, my contract is non-exclusive, so I have incentive to get them into whatever property is going to make them happiest, as soon as possible. If I won't (or can't) do it, somebody else will, and that's how it should be, so if your property really is the best property for that client, the low co-broke won't stop me. As I said, I get my minimum percentage from any property I help the client with. Better the minimum off yours than nothing when somebody else turns them onto yours. So you're not going to be eliminated by good agents on that scale alone. However:

Even to agents in situations comparable to mine, a low CBB like that is very indicative of an owner who is overly greedy, has over-priced the property, and won't negotiate it down to anything reasonable. I've seen this at least dozens of times, probably hundreds. No exceptions to this rule yet. Better I just don't waste my time or worse, that of my clients.

This is on top of the constant issues of dealing with a For Sale By Owner (FSBO), 99% plus of whom want me to act as their agent. or at least do the work of their agent and assume that liability, as well as the buyers'. Well, I don't do dual agency anyway, and I certainly don't do it unpaid, and because there's nobody with E&O insurance on the other side of the equation, I can do all of my due diligence and then some, but because the seller lies, I still end up sued by an unhappy buyer because I'm the only one involved they can get money from. FSBOs have literally 100 times the disclosure problems agent represented properties do. Trying to persuade owners who think they did everything they need to by putting a sign in the yard to fulfill the rest of their legal obligations is a painful process, and getting them to negotiate in good faith is chancy. I've had - and heard from other agents - more "chiseler" episodes from trying to buy a FSBO property. The probability of dealing with the "chiseler" goes up by at least a factor of 10 for all FSBO properties. And if you think I don't cover this with my clients, you're wrong. It's part of my job to let them know the risks of what they might be getting into, before they're in the middle of them. A good percentage of all clients comes straight out and tells me that they don't want to consider FSBOs once I've explained the facts.

Yes, a lot of this is "guilt by association" type judgments. Nonetheless, it's how you are asking people to view you. People who hang out with outlaw biker gangs are presumed to be outlaw bikers. Doesn't matter if you wear a suit and tie and a $400 haircut and have a nice genteel manner. You're an outlaw biker gang member, and until and unless people get to know you as an individual, that's the perception you're going to have to live with. (Lest my meaning be mistaken, I'm pulling a hypothetical example. I don't think I've ever actually met or seen an outlaw biker gang. There was a large biker club seated next to us at a restaurant not too long ago. Their clothes and haircut were a little out of the ordinary, but they were mostly like other folks. Had a great conversation about our respective kids with one couple). I'd like to have the time to individually know all of the properties available well enough to discard guilt by association, but there aren't enough hours in the day.

Finally, if my buyer's cash is a little tight in the first place, the fact that they're going to have to come up with that money out of their pocket can be a deal-killer right there. Buyer cash to close is the number one obstacle to a successful transaction. It's a "lose your license" offense for agents to attempt to negotiate a higher CBB at point of offer in my state. Agents do it anyway, but I have zero sympathy for them when they get caught. But having to come up with that extra amount of cash can drive my buyers below a breakpoint on the loan, and possibly even torpedo the loan altogether, which means it's significantly harder to convince myself your property is the best one for the client.

One more thing: For agents who get exclusive buyer's agency agreements, as opposed to the non-exclusive ones I work with, your property is not a contender. Period, end of sentence. You're making them work too hard, plus they want the highest CBB they can get, and they get paid no matter who helps the buyers buy, and they have enough control to make it very difficult for a buyer to go to a place with a low CBB. Not to mention that their usual CBB is higher and this means yet more difference between what you're paying and what their contract calls for, meaning that even if their client should somehow find your property, and love it, the cash to close issue is going to make it very difficult for them to do business with you.

So you make the call:

Buyer's market, you have to make your property look more attractive than anyone else's to even attract attention. Price, condition, location - you've got to have something that stands out above the market to attract an offer in the first place, and everything else has to be competitive as well.

Add the fact that a low CBB tells experienced buyer's agents that you're someone to stay away from

Add all of the FSBO issues, and there's a lot of them. They're not minor from the agent's perspective, and they're even worse from an informed buyer's.

Then top it off with hitting the buyer's cash to close, potentially killing a viable deal, and both the buyer and their agent want to know why they should bother with your property, as opposed to the one across the street, with a CBB that pays the buyer's agent what they've got coming without the buyer having to come up with cash, with an agent on the other side who at least might know your market and price it correctly, and is unlikely to try to deceive my client by not disclosing known issues, and is going to get all of the work done in a timely fashion without me having to work them over, because they want to get paid too, and they don't want this transaction coming back to bite them any more than I do.

Which of these two properties do you think buyers and their agents are going to find more attractive? Even if they're equivalent properties priced the same?

People aren't looking for reasons to buy your property. They're looking for reasons not to buy your property. If you want to sell your property, get a good agent to list it for you, list at a price that reflects the current market, and offer an average CBB for your area. If you don't want to sell your property, why are you putting yourself through the hassle and expense of putting it on the market?

Caveat Emptor

Original article here