Real estate agents are like most other professionals; honest, hard working and committed to helping their clients; but having said that, some are better at their job than others.

Some agents know how to look for properties that can be bought using a low offer and some don’t.  Some agents know the process of making successful low offers, but don’t like making low offers.  It is far easier to make a deal if the buyer offers near or at the listing price.  Low offers require more work and the ability to negotiate, without offending the other agent and the seller.

Once the buyer has identified a property they would like to buy, they should have the following information before they decide what to offer.

• How long has the property been listed?
• Have there been any price reductions, if so how many and when?
• Has the property ever gone active to sold pending inspection, how many times?
• What did the current owner pay for the property and when?
• How much does the current owner owe on the property?
• Is the property vacant?
• Is the owner/seller local or out of town?
• What is the current market value, they agent for the buyer must do a CMA.

The ideal seller for a low offer would be an out of town owner/seller, with a high mortgage payment on a vacant home.  The home has been on the market over 90 days and has been through one sold pending inspection and then came back on the market.  This means the buyer disapproved the inspection.  We don’t know why, but we do know the seller lost one deal after thinking they had their vacant remote property sold.

Finally, the delta between the list price and what the owner/seller paid should be large, and the delta between the list price and what the owner/seller owes is large.

The seller can sell for far less than the list price and still make a profit.

While it is rare to find a property with all the above conditions, all you need is a few to decide to make a low offer.

How the agent buyer explains the low offer to the agent for the seller is extremely important.  He must state some or all of the following.

• The buyer(s) love the home and plan on living it the home forever.
• The buyer(s) are not going to resell the home and make money off the lower price they are offering.
• The buyer(s) is not trying to swindle the seller.  They just can’t pay more because they have limited funds.
• The buyer wants the seller to know they will not ask for money to correct the items the inspection finds need repair or replacement, unless they are critical to the safety of the home.
• The buyers are ready to close ASAP.

I often ask the buyer(s) to write a personal letter to the seller that includes the above, and attach the letter to the offer.

Let me say you can never lie or misrepresent.  You can’t say the above if it is your intent to resell the property, or if you have unlimited funds.

One way buyers can use a low offer is to reach up for a property they otherwise couldn’t afford to buy.  Let me use an example.

The buyer is qualified to buy a home with a sales price of $350,000, with 3.5% down, using FHA financing.

Their agent sees a property listed for $385,000 that meets or exceeds all their requirements.  The owner/seller paid $185,000 and owes $200,000 on a refinance that is costing the owner/seller $1,200/month.  The property is vacant, the owner/seller now lives in a different city and the property has been listed for 110 days.  The agent has done a CMA on the home and finds the market value at or a little above the list price.

I would have no problem with an offer of $340,000.  I would ask the buyers to write a letter telling the seller how much they love the home and that they plan to raise the children in the home.  Again this must be true, no lies allowed. 

The reason I wouldn’t offer the $350,000 is you always need room to negotiate.  The buyer can’t go above $350,000, but they can come up to $350,000 if they need to, in order to show the seller they really want the home.

Many agents wouldn’t even show their buyers a home outside the purchase price they are qualified for.

I certainly wouldn’t make a low offer without some of all of the characteristics described above.  After negotiating hundreds of deals in the corporate world, I can assure you, you never know what a seller will do unless you ask. 

If you are going to buy in the Edmonds area give me a call.  If you use me as your agent to buy any home listed by any agent, if the home is listed on the MLS, I will give you 30% of my commission, paid through escrow when the deal closes.  Mike Mitte 425-876-1921

Sellers – It’s the PRICE!

I’ve listed many homes and the sellers always think their home is worth more than it is.  My wife thinks our home is worth more than it is – that’s just how it works.  If you own it – it has to be worth more.  Most agents do the best they can to come up with a reasonable market price for a home using the CMA, but in nine out of ten cases the owner wants to try a higher price.

Most agents will allow this with the understanding the owner/seller will reduce the price after two to three weeks if there is no action on the home.

In about 50% of these cases the owner/seller does reduce the price, but in the other 50% the owner/seller blames the agent. 

This is like the story of the man who comes home from work early and finds his wife making love to the neighbor on the couch.  He gets mad and throws the couch out.

In today’s electronic world where the MLS is available to all; all agents and potential buyers see all listings.  It isn’t the listing agents fault if an overpriced home doesn’t sell – it’s the price – it’s too high. 

The owner/seller simply doesn’t want to accept the fact the home will not sell at the current overpriced amount.  Better to blame the agent.

I listed a home at a price outside the CMA market evaluation and the owner/seller refused to lower the price.  I lost the listing after having the home on the market 90 days and the owner listed the home for the same amount with another agent.  When the home didn’t sell again, they did reduce the price to what I told them to list the home at, and it sold.  To this day the owner still blames me.

One important secret most agents will not admit.  Listing agents don’t sell homes, they list homes.  If they list at or near the market price the homes will sell.  No agent, no matter how good they are can sell ten dollar bills for fifteen dollars each. 

Sellers if your home isn’t selling after 30 days, it isn’t the agent.  Your home is priced too high - it’s the PRICE, not the agent.

Real estate agents PAY buyers who buy through them

Most buyers don’t know that some real estate agents offer cash incentives to clients who buy through them.  These incentives come in different packages and include the following:

• The agent pays the buyers closing costs (escrow fee, title insurance fee, document and recording fees, etc.)
• The agent buys the buyer a new washer/dryer for the new home
• The agent allows the buyers to use a moving van for FREE
• The agent pays a rebate fee through escrow that is credited to the buyer
• The agent actually writes a check after the close of escrow and hands it to the buyer

All of the above are perfectly legal and ethical.  These practices have been going on for as long as I have been in the real estate business.

These payments all come out of the real estate commission the agent earns when he/she help the buyer buy a property. 

The commission that goes to the agent for the buyer is often called the sales office commission or SOC.  In the vast majority of cases it is one-half the total listing commission.  In the western Washington area the total commission is usually 6% (sometimes 5%) and the SOC is usually 3% (sometimes 2.5%).

Some real estate investors have been demanding real estate commission sharing for large purchases, for decades.  Many of these investments run into the high six figures and even into the millions of dollars. Their justification is they often found the property they are trying to buy, know more about real estate investments than their agent and they often do more analysis, so why not sure on the commission.

These buyer incentives can be very helpful to buyers.  I have started offering these incentives to my buyers and my cash incentives are paid from my commission through escrow.  Check out my services for buyers for more details.

Buyers have the right to ask for these incentives and to shop for an agent willing to provide these incentives before they select an agent.  Cash incentives are just one measure for selecting an agent and may not be the most important.  Watch for my blog post on how to select a real estate agent. 

If you found this post interesting and useful please send it to a friend and let them know about this website.  

How buyers find homes – the internet

The National Realtors Association (NRA) does studies each year to try and determine the sources of business ofr agents and to establish how buyers find properties. The NRA found that nationally 90% plus of all buyers used the internet and most used a link into the local Multiple Listing Service (MLS).  We know that internet use is higher in the Puget Sound area, so we can logically say well over 90% of buyers are focused on their local MLS.  

My personal experience is that buyers are texting me or emailing me potential properties they want to see.  In this area buyers are driving the market using the internet.

The NRA study for 2012 is as follows:

Information sources used in home search:

• Internet: 90%
• Real estate agent: 87% (They use the MLS – internet)
• Yard sign: 53%

Real estate-related searches on Google.com rose 253 percent over the past four years and 22 percent on annual basis in the third quarter, according to internal Google data. Of the latter, about one-fifth of such searches occurred on mobile devices — a 120 percent year-over-year increase.

Nine out of 10 house hunters searched online during the home buying process with 52 percent choosing that as their first step in the process, the report said.