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Buyers: How I Work
How I Work
Buyer Representation: showing
property
Buyers aren't
liars, they are just normal human beings who don't know what they want
until they see it and fall in love with it. Kind of like marriage.
Anyway....
As a buyer
try and think for a moment like a real estate agent. The real estate agent
loves to see a buyer with limiting factors. A good example of a limiting factor
would be: "we must have a 4 bedroom home with a pool in the XYZ elementary
school district between $200,000 and $250,000."
Perfect.
We go to our trusty computer and enter the parameters and viola! There are 12
houses that meet that description. What I like do in this instance is set up
appointments to see all 12 one day. Why? There are several reasons:
- Great
houses are readily apparent. I try and set up showings best first to find
something my buyers will like. After you have seen a super upgraded home with
an awesome waterfall pool, sport court, built in barbecue, granite countertops,
flagstone floors, on a private acre cul de sac for $209,900, the second place
homes do not need as much attention. Remember, you only need one.
- The
second key reason to see this many is so that you will know what the value of
the homes are. There are many subjective ways to value property such as an
appraisal or looking at the history of the subdivision, or the map codes, etc.
I think the most objective method is to look at the asking prices of the
current competition, check days on market, and look for very recent sales.
- Great
houses don't stay on the market long. Particularly now, many agents are
seeing homes they list sell within the first 3-5 days if they are priced
correctly and show well. Most people take a great deal of pride in their homes
and some, bless their hearts, take extraordinary steps to make their homes
beautiful. These are the ones I'm after.
But what if nothing
works?
It's time to
push the parameters. Many times buyers will go through a number of houses
and undergo a transformation of their "must haves". There truly is no
substitute for getting in the car and seeing the homes. The Internet is great
for looking at pictures but it never will give you a feel for the neighborhood,
or show the power lines, or the freeway backing the home.
Negotiation Strategy
Much has been
written on the art of negotiation. I think it all boils down to recognizing
strength and weakness, your own and that of the opposition. To this day I have
never seen a better negotiator than Ivan Sampson. (The name has been changed to
protect the innocent: me!)
A great guy
with an adorable wife, they had just dropped their listing price because the
home hadn't sold--which was a great price. What I or my buyer didn't know was
that he was, as they say in poker--was all in.
My buyer
made a typical below asking price offer to which Mr. Sampson responded:
"What? Are you
out of your ___ing mind? Tell that ________, (I can't even provide a letter
here), to take his offer and shove it up his ___. ____ it, I'm not moving, I'll
stay here till the day I die."
[reply]
Oh.
That's
strength in its purest form. I can't say that I've ever seen any stronger,
the point is that in a negotiation whatever point you are making must be made
with conviction. This is why we look at the competing houses so that we know
with conviction what we are dealing with and how much conviction to have. There
are many instances where a home has been overpriced and then dropped to a level
that is an excellent value at the new full price.
Buyer Brokerage
Different
states have different customs when it comes to buying and selling
properties. In California for example, it is unusual for a new home builder
to pay a commission to a buyer's agent. Here in Arizona the opposite is true as
real estate agents are welcomed, by and large due to the extremely competitive
market here.
So what does a buyer broker
do?
Primarily a
buyer broker's responsibility is to find the home, negotiate the terms to
the buyer's best advantage, and take care of the details through the closing.
It is
customary in Arizona for the buyer's agent, (actually broker), to be
compensated by the listing broker. For example: let's say you want to sell
your home in Arizona and you list it for sale with a real estate company.
Typically a listing commission will be 6% of the purchase price which is owed
to the listing broker at the close of escrow.
What happens
in the majority of sales is that the listing broker, in wanting the maximum
exposure for his/her property, posts the property to the multiple listing
service and offers a 3% commission to any agent that will bring them a
buyer.
What's
important to remember is that the seller/broker relationship has been
established before the buyer comes along, so if a buyer chooses to have a
representative negotiate for them the fee structure is already in place in the
majority of cases.
A good buyer
representative will do the following: present a clean offer, be able to
justify the purchase price, and have the buyers qualified.
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A Clean Offer
A Seller's Wish: How much and
when?
Our
residential purchase contract in Arizona is a wonderful 9 page, (in
quadruplicate!), thoughtfully prepared document that covers nearly anything
that can happen in a real estate transaction.
Inspection
periods, financing terms, who holds the earnest money, who handles the
escrow, when is the closing date, how much is the homeowner association
transfer fee and who pays it--are just a sample of what is covered. In Arizona
it is not customary for a buyer or seller to have an attorney represent them
because basically there isn't much left unsaid! Back to the point.
A clean
offer is one that will appeal to a seller and will take into consideration the
seller's basic desire to get their money and get out of town. Sellers are
wonderfully simple this way. While buyers fret and worry about the size of the
bedrooms and whether the dresser will fit, the seller is thinking: how much and
when?
Of course
our incredible 9 page contract has a variety of options for who pays what.
The seller can be asked to pay the buyer's points, appraisal, credit report,
and home warranty, to name a few --it's all subject to negotiation. Obviously
sellers don't want to pay for anything they don't have to.
So what should a buyer do?
Write a clean
offer. Buyers: pay for your own appraisal, pay for your own points, show
the seller a loan qualification letter, (not a prequalification letter), and
then ask for a price based on your agent's comps not the sellers. Don't give
the seller anything to negotiate over except the bottom line: price.
One
exception might be that sellers are used to seeing buyers ask them to pay
for a one year home warranty. Sellers can and do say no but we agents see it
asked for a lot.
This should
not substitute for a professional home inspection. Be sure to ask if your
inspector has an ASHI, (American Society of Home Inspectors) certification,
which requires its members to have done at least 250 fee paid inspections.
Home
warranties cover most mechanical items and run about $250 for basic
coverage. Interestingly enough air conditioning is not considered a basic
coverage item so add about $50 for that and swimming pools will run anywhere
from $100-125 per year. Swimming pools are not yet mandatory in Arizona but air
conditioning is very close! Deductibles usually run from about $35 to $60 for a
service call.
Back to
top
Buyer Qualification
What happened to
pre-qualification?
Prequalification still exists in Arizona
but it doesn't have much shelf life. Page two of the Residential Resale
Purchase Contract states that the buyer must have conditional loan approval to
be presented with the offer based on a written loan application and a Trimerged
Residential Credit Report.
Of course
the loan will be subject to the property appraising for the purchase price
which is generally a formality in Arizona, (no offense intended
appraisers!).
Many lenders
offer free qualification and to make offers on properties without having
financing arranged is like going to the grocery store without your pocketbook.
The clerk will politely tell you to come back when you have some money.
A word of caution...
Beware the
lender that will promise you a rate that is not "locked". Locking refers to
a guarantee which should be in writing as to what the rate is and how long the
lock is good for. When calling for quotes always ask for a 30 day lockable rate
and have them prepare a good faith estimate in writing. This is important
because of the nature of the lending business.
Every day
interest rates fluctuate slightly, and the fluctuation is measured in the
wholesale price of say, for example, 7%. At the wholesale level a 7% interest
rate might cost a loan broker a 1/2 a point on Monday, 3/8 of a point Tuesday,
back to 1/2 a point Wednesday-- until Thursday when Alan Greenspan announces
interest rates are rising, there is a sell off in the bond market and now the
loan broker has to pay 1 and 1/4 points for 7%.
Your lender,
who had quoted you 7% with 1 and 1/2 points on Monday, would stand to make
only a quarter of a point on your loan if he had guaranteed the rate. What
happens to people who don't lock rates is that they can be in for an unpleasant
phone call.
Again don't
be misled into thinking that there is some mystery to the loan business.
Rates are rates, fees are fees, and we all want the lowest ones. A lender
who doesn't want to put theirs in writing or is even resistant to it should be
avoided.
Call Tim
Henry today for your FREE comprehensive relocation package that will be tailor
made just for you!
(Due to email
volume please call or email your phone number and best time to call, thanks!
Tim)
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| REAL ESTATE TRIVIA |
| Q |
What is the world's most capacious building?
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| A |
The Boeing Company's main aircraft assembly plant in Everett, Washington, has been expanded to a capacity of 13.4 million cubic meters, or 473 million cubic feet. |
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