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First-Time Home Buyer Credit & Short Sales Do Not Mix!

By now, even the most procrastinating of first time home buyers understands that the end is nigh.  The end of the $8000 first-time homebuyer tax credit, that is.  While rumors abound about a possible extension past the current deadline, rumors also persist that man did not actually walk on the moon in 1969 (if you happen to believe the latter, you can moonwalk your way right out of my blog catalog).  When it comes to our esteemed legislative bodies, I am not ready to take the leap of assumptive faith that they will do the logical thing.  As things stand, you have received sufficient warning from every warm and cold blooded Realtor type in the land that you need to get on the stick immediately.  With new appraisal regulations and loans which used to take 30 days now bogged down in underwriting quicksand, it is not a good idea to venture past mid October before pulling the trigger on that home you have been patiently watching for just one more price reduction.  With a fleet of fellow procrastinators waiting until the absolute zero hour (closing prior to 12/1/09), there is also the added risk of running into title company soup.  Think the end of the month is busy at your friendly title company and subsequently hectic in terms of getting your deal closed?  My hunch is that typical happenstance will be a walk along a tranquil beach in comparison to the buyer tsunami that figures to crash upon every escrow office near you between 11/1 and 11/30.

But these are the things you already know.  Just like you already know that the credit is not reserved solely for first time buyers, but also those who have not owned Real Estate within the past three calendar years.  This information is so readily available that I haven’t even bothered to write about it before now.  At great risk of being the guy who runs into the empty room to yell “Fire,” I do believe there is one more wrinkle that needs to be discussed.  With the deadline steadfastly approaching (just because it looms closer, doesn’t mean the pace has suddenly morphed to earn “rapidly approaching” designation, now does it?), lost in the prodding for first-timers to buy now is any discussion as to the kinds of homes you should be considering.  I shall rectify this egregious oversight now.

Earlier in the year, the Real Estate world was your oyster.  REOs, short sales, HUD homes, auctions … bring them on.  As long as you wrapped up your purchase prior to December, you were golden.  Thus, you had the ability to trawl every last oceanic trench to scrape up your sunken treasure.  It probably didn’t take long to realize that the biggest finds, those Titanics of the Real Estate deep, were teeming with sharp-elbowed and deep-pocketed prospectors.  Basically, you with more purchasing power.  Every time you made a play for a new bank property, you and your FHA-fueled dingy were left eating the wake of 50 foot conventional vessels and staring into the live canons of the scourge of the first timer’s sea: cash buyer pirates.

Resigned to the fact that your 3.5% down and government-backed loan vehicle is not a fair fight against the types of buyers that the best values attract, you most likely started looking at resale and short sale properties.  Resales have been tricky because most sellers are not in a position to compete with the banks.  Many that you would be interested in continue to be priced out of your affordability.

Now you may be thinking that short sales are the way to go.  The bank wants to offload a property that is in default without incurring the expense of foreclosure.  The seller just wants out and is not motivated by profit, thus creating a tantalizing asking price.  Sure there are only a couple months left to close on a house to secure your credit, but this listing says they are using a “Certified Negotiating Specialist.”  This other one says they have a 95% success rate!  Another even says that they are near bank approval!

Don’t do it.

I know you have gotten your teeth kicked in on the bidding wars that erupt on the bank properties, and the resale market is still too pricey, but short sales are not the way.  Not now.  If you had submitted an offer on one several months ago, you would have a shot, but I am telling you right now that YOU WILL NOT RECEIVE YOUR $8000 TAX CREDIT IF YOU WRITE ON A NON-APPROVED SHORT SALE LISTING at this point.  It is quite typical for the process to take 3-6 months, and the resolution is far from a sure thing.

Keep looking at the bank properties, but reset your sights a little.  Great values are still out there.  You can lock one up that isn’t priced so stupidly low that every buyer and his pet chimpanzee show up to vie for it, driving the price into the stratosphere.  Some of the best buys made right now are actually the ones with list prices that aren’t necessarily the most attractive.  When banks, just like typical sellers, miss that sweet spot, you have a better shot at negotiating the price lower versus bidding the stupid cheap one up.

This is also not a bad time to take another hard look at the resale market.  Sellers of properties that will fit the budgets of first time buyers should be receiving advice from their agents right about now that they really need to get competitive if they are to capitalize on the last minute purchasing rush.  Granted, many sellers simply are not in a financial position to lower their prices, I have noticed more and more resale listings working their way into my searches.

Finally, I would be remiss if I didn’t caution that the tax credit should not be the be all and end all for your purchasing decision.  If you simply cannot find the property you want at a price you can afford, don’t get caught up in the frenzy.  The worst decisions are often made in the face of such artificial pressure.

But if you are ready to take the plunge, find yourself a property in which the seller can give you a thumbs up or thumbs down within days instead of weeks.  Walking the short sale plank with less than 90 days to get it closed will net you an $8000 cold shower.


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Someone Can Always Make Me an Offer …

Someone can always make me an offer.”

If there were six words I could erase from the murky bog of a seller’s mind, it would be these.  Within this seemingly innocuous sentence lies a terrible sickness.  A Bubonic Real Estate Plague, if you will.  The black death of a home sale.

There is something to the thought that a target buyer exists for every property.  That the pre-qualified needle in the haystack will know a property is “the one” upon first sight.  It is another matter altogether to make the flying leap that said buyer will, in turn, disavow all semblance of self-preservation and dive onto the hand grenade that is an overpriced house.

The underlying root of the weed of denial that infests a stubborn seller’s mental garden is the unflinching notion that “the right person” will come along and “fall in love with the house” just as he or she once did.  Of course, when this simplistic rube comes along and falls head over heels in love with the one of kind abode, he won’t be able to reach into his wallet fast enough to pay whatever outlandish premium is required.  Never mind that you are competing directly with homes that are 1000 square feet larger.  Never mind that your home has a deficiency in location or condition.  You have a pantry.

“Priced grossly above recent comparable sales?  1368 days on the market?  Where do I sign?  I MUST HAVE this house!”

Here is the thing, gang.  Yes, someone can always make you an offer.  If they see your house.  If you are priced so far above and beyond the current market value of your home, however, the “right” buyer will never even see you on that outrageously lofty perch.  Oh sure, you may get some traffic, but those suitors will end up buying one of the larger, nicer competing properties.  The buyers looking in your size and amenity range are looking at properties thousands below your asking price.  Kind of hard to make an offer when they don’t even know you exist.

And you know what?  Even if they stumble across your place, why would Mr & Mrs Right make an offer on a home priced at 500k when they can make a more realistic offer on a similar home priced at 400k?  It’s more than just counter-intuitive.  A buyer would have to have been huffing spray paint in a non-ventilated storage room for the past 72 hours to pursue yours.  If the “right” buyer is defined by constant drooling and a complete lack of interest in the alphabet past the letter “j,” you might want to rethink your strategy.  The idea is to cast as wide a net as possible to find a keeper, not to dangle the bait 50 yards above the surface of the water and wait for a fish on a pogo stick to jump right into the boat.

The wise seller rolls out the welcome mat for an army of potential suitors.  The foolish seller gives the assembled masses the finger as eagle eyes scout for that one, perfect, dumb-as-a-ham sandwich buyer.

Yes, someone can always make you an offer.  Here’s mine:  Fish or cut bait.

If you are ready to do some serious bill fishing, I’ve got the boat fueled up and ready to go.  Plenty of Dramamine, too.  We’ll chum the waters with a competitive price and superior product to land the biggest damn shark the ocean will yield.

If that doesn’t sound like your kind of tea party … better to wait at the marina for the seas to change.  In another decade or two, the tides will surely rise high enough to deposit the price you covet.

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Selling Homes and Nailing Things to Trees

My wife has an affinity for collecting quotes.  Whether humorous or inspirational, on fridge magnets or flowery stationary, she likes having the visible reminders nearby as a lifeline to help pull her out of whatever malaise she may happen to find herself mired in at a given moment.  Truth be told, prone as I am to ridicule the sappy sentimentality, I kind of like having them around the house, too.  Sitting here in the kitchen on a slowly unfolding Sunday morning, sipping my first cup of coffee and awaiting the incubating bounty of cranberry muffins that is teasing my nose and stomach, one particular wall hanging catches my eye.  Emblazoned across its whitewashed, faux wooden surface in black scroll lettering is the following:

“Raising children is like trying to nail jello to a tree.”

Not the first time I have seen it, but it still draws a chuckle.  Substitute the words “Selling Real Estate” for “Raising Children,” and you have this agent’s description of the arduous world of buying and selling property in 2009.

Case in point, one of my property listings is a short sale.  My lone short sale listing.  Now, and hopefully forever.  Over the four months it has taken our buyer’s offer to gain full approval, only to have a needed extension to the closing date entail another two week period of review and authorization from the banks involved, the twists and turns of this transaction have been nothing short of spectacular.  Fortunately, with a closing now on the horizon, we finally appear to have this bit of transactional jello firmly nailed to the mesquite in my backyard.

Apparently a glutton for punishment, I currently have two buyers with offers accepted by sellers and submitted to their respective banks for approval on short sales.  One of those buyers deploys for Iraq at the end of this month.  We will be lucky to have a loss mitigator assigned to the transaction by the time his boots touch the 130 degree foreign sands.  The other buyer is a first time homeowner who has been looking with me for several months.  In both instances, we’ve only grudgingly included short sale listings recently in our lists of properties to see.  The time factor is brutal, but it is the uncertainty that has been the primary deterrent.  It’s one thing to wait indefinitely for a foregone happy conclusion, but quite another to invest a month or six of your life into a transaction that may be doomed from the start.  As such, for many, short sale properties have really turned into the “just-in-casers.”  Throwing an offer at a bank as a contingency plan, buyers are well advised to continue shopping for a property in which the seller is in a position to provide a quicker response.  If a resale or bank-owned property pops up while the short sale is still in limbo, the buyer is free to cancel that transaction (provided a standard AAR short sale addendum is included with the standard verbiage) with no loss of earnest money and pursue the new candidate.  Lots of additional work for all parties involved, but you’ve got to get your fingers dirty in the current market if your seeds are to take root and grow into an actual sale.

Then there are the bank properties. Foreclosures, REOS or whatever other term you know them by, they differ from short sales in that the bank has already taken the property back from the defaulting homeowner.  No interminable wait while the bank assesses value and the seller’s qualification for a short sale, but there are still a few wiggly characteristics with these properties.  For starters, while infinitely quicker, you can still forget about an immediate response or any loyalty to the author of the first offer.  You can attach a two page cover sheet with your offer outlining your love of the home, how the drapes match your furniture and for the first time in your life, you feel like you have really found “home,” but the asset manager at the bank will still sit on it for 3-5 business days to see if anyone will beat it by twenty five cents.  Even if you offer full price or above.  Trust me … been there, done that.  Further, because everyone wants bank owned pricing, these properties are often highly competitive.  The banks know it.  Given this truth, the very best values that you are holding out for as a buyer are highly competitive.  If you’ve seen 100 properties and think the latest one is a screaming deal, so do the thirty other buyers who have been looking at the very same houses.  That awesome deal you see on a bank-owned price is often just the floor for the higher offers that pile up like clowns in a circus car.

Wiggle, wiggle, wiggle.

Of course, if transactions involving banks are akin to manipulations with an amorphous edible substance, selling a typical resale home at present remains more like nailing a pickup truck to a tree.  By and large, resale properties continue to be drastically overpriced.  Only the savvy sellers who price to compete with the banks stand a chance of actually unloading their homes.  No matter how strong the marketing nail or stout the trunk of seller resolve, gravity continues to win that lopsided struggle.  You can only prop up an unrealistic price for so long before it finally crashes back down to market value or the broken down rig gets towed right off the market.  No buyer is going to shimmy up that tree, get behind the wheel and drive said truck straight into the ground.

Is buying and selling Real Estate in 2009 a tricky business?  Hell yes!  Up is down, down is up, and nobody knows when this crazy ride will end.  But just like raising kids, the process is uniquely rewarding.  So grab a helmet, buckle up and don’t be afraid to enter the scrum.  As long as you know what to expect and bring an experienced chaperon, you’ll eventually get where you want to go.

Even if you end up with a few stains on your shirt along the way.

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Grinding to a Halt: The Art of Killing a Deal

Everyone wants a piranha.

Whether a professional athlete intent on a signing bonus the size of Madagascar, a victim of a vicious fender bender fixated on the 2.8 million dollar legal prescription for a tender neck or a home buyer/seller whose sole purpose on this earth at the immediate moment is to grind as many Ben Franklins as possible out of the guy on the other side of a negotiation, aggressiveness is typically the hallmark virtue in the professional representation that is sought.

The sports super agent, who we are 95% certain has a life-sized portrait of his bare chested self wearing a boa constrictor around suspiciously well tanned shoulders hanging in his posh downtown office, is universally loathed by all.  Secretly, however, we all know he’d be the only guy we’d call if we needed to make a cash withdrawal from the abundant posterior of a team owner.

The weaselly ambulance chaser with the slicked back, Grecian Formula enhanced locks is similarly unlikely to find himself on the guest lists of many Bat Mitzvahs and baby showers.  That narcissistic predator might eat the baby.  When we spill the drive-thru coffee in our laps or stumble over the “Watch Your Step!” sign at a public establishment, though, he’s the guy we call.

Amicable folks are great to have around, but when the conversation turns to business, we don’t want Mary Poppins going into battle on our behalf armed only with a spoonful of sugar to make the medicine go down.  We’d rather employ the services of Dr. Jekyll to go all Mr. Hyde on the opposition and cram that spoon straight down their throats.

Easy, tiger.

There is a time to kill, and there is a time to frolic.  The problem with the constant grinder is that he often grinds himself right out of a transaction.  It is critical that you leave the other guy with some dignity at the end of a tough negotiation, lest all of your efforts collapse under the weight of the other party’s exhaustion.  After you’ve knocked the poor bloke to the ground and bloodied his nose, do the smart thing.  Extend your hand and help him up.

In practical terms, this is akin to finally saying “yes” after repeated “no’s.”  When you win on the key points, you are often in a position to make a small concession on some trivial tangential issue.  Too many times, I see lost opportunities for a clear victor to score easy diplomatic points at these junctures in the waning moments of a deal.  Want the inspection and other critical aspects of the transaction yet to come to go smoothly?  Give up something that isn’t really necessary.  Offer something minor, but unexpected.

You’ve bitten his neck on price, drank his blood on terms … time to give him a transfusion unless you want to carry his Doppelganger the rest of the way to closing.  For the record, undead weight is quite heavy.

Of course, because you are reading my blog, this advice assumes you were on the dispensing end of said treatment throughout the course of the initial negotiation.  If you were unfortunate enough to be on the receiving end, go ahead and drive a wooden stake through the SOB’s black heart.

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The Feedback Fallacy

So an unexpected job transfer snakes its way into your idyllic garden of domestic bliss one uncharacteristically blustery evening, and everything changes.  The fertile soils that you have so lovingly cultivated within its confines are to fall under the purview and care of another’s spade.  It’s time to sell your house.

Home improvement and design shows supplant your regular programs as you strive to understand what today’s buyer is looking for in a house.  While you would never think of replacing the charming old world tiled counter tops for yourself, you know you just might have to for your suitors.  The incremental evidence of your little one’s time on this earth will be obfuscated with nothing more than a coat of fresh paint on the kitchen wall.  All such changes both minor and monumental as you prepare to open your doors to the world.

Once fully prepped, your venerable old home is a lot less old and venerable than modernly stylish.  You’d buy it all over again, and that makes the forthcoming transition doubly tough.

For every showing, you light your strategically placed oatmeal raisin cookie scented candles and illuminate just the right number of lights.  Light jazz emanates from the surround sound stereo system.  No buyer can possibly navigate your well laid maze of hugs and snare traps without signing on the dotted line.

And yet, inconceivably, they do.  The first buyer puts up a fight, and somehow manages to wriggle free.  The second showing yields a prize relo catch who is lost to the sea of competition when the line snaps just as he breaches the water.  The third candidate hops away on his one good leg after gnawing through an ensnared limb to escape your clutches.  One after another they come and go.

You know there can be no possible objection to the condition of your home.  You also know there can be no objection to the price.  Though a bit higher than recommended by your Realtor, you are well aware that your home is vastly superior to anything else on the market.  And the comps?  What a joke!  Sure the Johnson’s home sold for 100k less last month, but they didn’t even have a pantry!  Something is rotten in Scottsdale, and you demand to know what it is.

You ask your agent for feedback from the buyers and agents that have viewed the home.

Which brings me to my serpentine point.

Showing feedback is not to be trusted.  While I routinely solicit input from those who have shown my listings, I do so more as a means of keeping my properties top of mind with the buyer’s agent than as an honest assessment of our positioning within the market.  It’s a tricky business to seek the opinion of the person to whom you would sell something.  For starters, if I am working with a buyer, and the listing agent calls for my showing feedback, he or she better be prepared for the forthcoming diatribe about how horrifically overpriced they are … especially if my clients are interested in the home.  Further, if the listing agent calls me multiple times, emails me and sends a carrier pigeon to my office with a note pleading for feedback, you better believe this mako smells more than a drop of blood in the water.  You can only push so hard before the obvious desperation cedes all negotiating leverage to the other party.  Not a good way to start a dialogue.

I understand the frustration that accompanies a non-selling home.  Believe me, it frustrates your agent, too.  However, you have to tread carefully when chasing down every prospect like they stole the good china.  One of them might actually be your buyer, so you have to maintain some sense of decorum.  Even the mangiest house on the market could do well to play slightly hard to get.

As I sit here typing this, I have received a second voicemail and another email from the listing agent of a property in which a client of mine has expressed an interest.  I have pointedly ignored the first correspondence attempts just to see how hard I will be pursued.  Every subsequent call will result in a 10k reduction on what I ultimately advise my clients to offer.  Believe that.

Ain’t nothin’ but the shark in me.

Besides, the most vociferous feedback seekers don’t seek feedback at all.  They seek affirmation.

Oh yes, it’s wonderfully appointed and wonderfully priced!  It has been on the market for 150 days because buyers are obviously blithering idiots!

You already know the answers to the questions you pose, even if you are not ready to admit it.  No need to run the gauntlet of buyer agents to decode this self-evident truth:

Are you getting offers?

No?

Drop your price.

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