2010 Oct 26th

Please Let Me Know The Number in Their Head

I had a very funny encounter with a listing agent today.  My buyers made an offer on a Hoboken condo property.  It was a respectable offer.  Seriously, what offer isn’t respectable these days?  As I always do, I submitted the offer in contract form with the buyers’ prequalification letter.  She replied by thanking me for the offer, noting what percentage the offer was discounted from the list price and asking me to please let her know the number in my buyers’ heads.head full of numbers

Sure – I’ll just tell you our negotiating strategy and bottom line right now.  That way you can get more for your seller.  I guess some agents are dumb enough to do this.  I replied by saying that the number was on the contract.  The art of negotiating – it’s always interesting.

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  1. homeboken

    Seller’s need to be re-trained to accept the current market environment. They have long-memories and the heady days of full asking price, or bidding wars still has them dreaming.

    Would be Buyer’s would do well to submit the price they are comfortable with, call it best and final, and say the offer is good for 48 hours. Then, if the Seller rejects, don’t worry one bit. Wait two weeks, then do it again, since said property WILL be on the market at that time.

    After doing this 3-4 times, the seller’s will realize the size of the potential buyer universe.

    As a buyer, why would I negotiate with a seller that has no leverage? You accept my price, or you do not. There are over 500 condo’s listed for sale on the MLS alone, I can have my pick.

  2. Howie

    That’s a fine strategy only if you really don’t mind not getting the property. Many buyers with whom we work search for the perfect apartment in their price range for months. When they find a place that meets their specific needs and that is within their price range, playing a game of chicken with a seller may not be the best plan, especially if it’s a new listing. Regardless of how many properties are on the market, nice, new listings in good locations that are well priced often still go pretty quickly. If you’re looking at a place as an investment alone, and it’s been on the market for a while – go ahead and play hardball. However, if you love a place, and will be devestated if you don’t get it, I would not recommend this strategy. If you see great value in a beautiful place… it’s somewhat likely that someone else will see that value as well.

  3. Lori

    New property came on the market this week. I brought my buyers – they loved it. This morning we had the conversation about how much I recommend they offer. I said “full price and fast”. This afternoon I got the call from the listing agent informing me that they already have two other offers. So in this case, following Homeboken’s plan means you lose.

  4. [email protected]

    I noticed a 1BR in a nice pre-war doorman building in Manhattan for $665/sq ft. This is in a decent area in Midtown. I haven’t seen a price/sq ft this low in a decent area in Manhattan for a very long time.

  5. patk14

    Lori, 2 other offers at what level of discount? Of course the listing agent would not disclose that but it seems like she is trying to get your bidder to up his/her bid. Let’s see what price it closes at. You wrote that your bidders placed a respectable bid. If they really want it, they can up it to full price but you’ll never know what the other bids were.

  6. homeboken

    Howie and Lori – Your strategy requires that buyers put their emotions at a higher priority than economics.

    Please read my post again, I stated – “Buyer’s would do well to submit the price they are comfortable with”

    Not sure why you think that means automatic low-ball. The price a buyer is comfortable with might be full ask.

    My point is that No buyer should be thinking that this is a seller’s market. It is not.

    You state that good property, in good location, priced well moves quickly. Of course it does. But a look at the inventory on the market for more than 30 days shows me that there are hundreds of properties that are not great properties, or in a good location or priced well.

    Putting a time limit on a bid attmepts to get the Seller realize that there is no room for negotiation.

  7. Craig

    If you live in an area ravaged by foreclosures and short sales, making a full price offer can make sense because prices are probably below fair market value. But in Hoboken you don’t see very many underpriced properties. I would never place a full asking price offer in this market unless an agent can show me a lot of comps proving the property is underpriced. I find it unlikely that the other 2 offers on the property Lori references were full-price offers either. If offering at a minimum 2-3% off asking price means I lose the property, so be it. I don’t care how much I love the place – there are hundreds of others to choose from and I’ll find another. My heart will never outrank my wallet.

  8. UPennAlaskan

    The nyc metro area real estate market on the whole does not appear distressed. And the regional economy is relatively strong. The Fed continues to juice up the asset prices and shoveling money to the banks. Also fast approaching is the stock market rally that traditionally occurs in Year 3 of a presidential cycle (ref GMO Grantham Q3 Letter).

    2011 will be just fine. 2012 is the real story.

    http://www.newyorkfed.org/newsevents/events/regional_outreach/2010/ppt_reg_press_briefing_101910.pdf

  9. JD

    When an agent representing the seller is telling the potential buyer or potential buyers agent that there are “multiple offers” on the property, when in reality there was never an offer, what recourse is possible? Just came across this situation in North NJ but I provided the buyer with some background info on the seller/property proving otherwise.

    Do any of you agents/brokers come across this situation a lot? Telling a party there are offers when in reality there was nothing?

  10. Howie

    As much as I would love to tell you that type of deception never happens, I’m sure it does. I can’t say how frequently – but when an agent that does little business tells me that an overpriced property that’s been on the market a while has multiple offers, I’m suspicious.

    Realtors have a fiduciary obligation to be honest and fair, but let’s face it – in every sales occupation be it life insurance, used cars or toasters, there are going to be honest straight-shooters and low lifes. I can tell you that most of the successful real estate agents I deal with do not need to resort to lies to do business. It’s one of the many reasons I recommend that people choose their realtor based on earned reputation, demonstrated expertise and proven production. Don’t just pick a relative, or someone whose kids are in your kid’s play group. Friends are friends; business is business.

  11. Lori Turoff

    When an agent says there are other offers we never really know if that is true but we do have the right to present our own offer directly to the sellers. If the agent was lying, we would find out by the sellers surprise (unless they were in cahoots). As a practical matter, when agents tell me there is another offer that beat my buyer’s bid, I should see that property DABO’d in the next few days and, believe me, I check. Most importantly, though, the Hoboken agents who do most of the business here all know each other. Our reputations are crucial to our success. If someone pulled that, word would get out and I would expect that agent could be subject to sanctions and possibly a lawsuit.

    As for paying over asking, when I fell in love with my house it was worth the extra dollars to me to get it but that’s a personal decision. Ten years later, we both believe it was one of the best decisions we ever made in many ways. So money isn’t always everything. Emotions do matter.

    Finally, as a follow up to this post, the listing agent told me that my buyer’s offer was not an offer the sellers’ would take seriously. I can’t reveal more than that right now except to say I am truly stunned! How foolish. What seller (assuming the seller even said that) would ignore a totally reasonable offer in today’s market when a property has been sitting for a while?

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