Some Realtors think their job is to make client’s feel all warm and fuzzy by making the buyer think that they got a “Good Deal.” Kind of like how almost everyone who buys a car walks out thinking that they got a steal of a deal!
I don’t believe in this. I am not hired to be a comforter. I’m hired to get the most suitable property at the best price possible, and to do so aggressively, if that is what the client requests.
While the client might have landed a “better deal” than other active or sold listings, it is only a “good deal” years later when they sell it and the cash is in their bank account. Even those appraisals that are done while you are under contract, they can come in $10k or $20k higher, that means nothing to me. Appraisers sometimes like to make their loan officers, who hired them, happy by padding the numbers to make the buying client feel warm and fuzzy.
Good deal vs a better deal. Here is an example, I had a client, a close friend of mine, that desperately wanted to “grow up” (in his words) and get in on the action. This was during the bidding war days. I rarely give my opinion (instead giving data and evaluating it with the client) but I told him he was crazy. Yet, he gave me marching orders to “get that condo at whatever cost.” He was scared that if he missed out on this condo, the next condo would be $25,000 higher.
We “lost” the bidding war. Thank God. This $350,000 750 sq foot condo received 8 offers and went up to $400,000!! What a fool that “winner” was! Yet, I bet the winning Realtor assured their client that they got a “good deal” as they ran to the bank to spend the commission.
So what next? Well I had information that maybe only 10 people in the bidding process were privy to (the contract price is only published after the close 30 days later). This building was about to reset $50,000 higher so we had to move fast, since he felt he “needed” a place ASAP.
I immediately sent out inquiries to the entire building. I was able to find him a unit that was 1100 sq ft or about 35% larger… that we negotiated for $395,000. The seller thought he got a great deal, but he didn’t know that the unit he was using as a comp, was just bid up $50,000, and it surely wasn’t my job to tell him that. I work for the buyer, not the seller (in this case).
Side note: I know FSBO’s (For Sale By Owners) love “saving” on those damn Realtor commissions, but how much did this guy “save” by selling it for $50,000 under market price?
So while this might sound like a “Good Deal” it was merely a “Better Deal.” I DID say it was a BETTER deal than the 750 sqft unit, but again, nothing is a good deal until you cash out.
Sure enough, the market immediately took a nose dive. He blames the entire nations price drop on the fact that he made his purchase and that bad things follow him. All I can say to that is thank goodness he didn’t buy the other unit that was significantly smaller. Hopefully the market will come back and if he gets into the positive territory again AND he sells it, then and only then will it be a “Good Deal”
More recently I had a client (that found me 100% through this blog) that I helped put a house under contract for a good deal… I mean for $40k under similar recently closed units. We did the home inspection and found $1,500 of items that we hadn’t seen during our two visits. (I don’t believe in going after imperfect items that we already know about at the time of contract, I’ll deal with those on the initial contract such as a broken step or broken window). The listing agent (did a great job fighting for her client) kept saying that her client dropped their price so much to accept our offer and that they felt they were selling at the bottom of the market and my clients got a “GREAT DEAL.”
To that, I proposed the follow (my clients loved it):
Dear listing agent,
If your clients are so certain that this is the bottom of the market, lets forget the $1,500 for now and instead put $3,000 in escrow. If within 12 months, one house sells lower than our purchase price, my clients get the $3,000, if three sell for more, your clients get the $3,000 since that might signal the bottom of the market. Frank
They accepted the $1500 adjustment.
So no matter what the market is, at the top, at the bottom, near the middle, it is always important to get the best deal possible at that time, even if you are certain “prices can only go up from here.”
And I am NOT talking about % below list either. Oftentimes people get caught up in the “I saved 30% shopping today at Sax Fifth Avenue outlet mall.” So don’t get caught up with % off list and instead look at the value. Value Value Value will be an upcoming blog.
I’d rather have a client buy a $500,000 place for $510,000 which is “worth” $550,000 (based on comps) than buy a $100,000 overpriced house listed at $650,000 for “$50,000 off” list. Focus on VALUE, not on % off list. Some agents will price things to move (see my CRA system featured in RealtyTimes.com) in a week, while others will overprice to get the listing, knowing that it won’t sell but they will get paid sooner or later after price drops (the CRA can tell you this!!).
So even if you buy for 20% off (allow for the slight exaggeration), that only makes it “probably” a good deal. What if another unit next door sells for 40% off? And of course, the longer you hold your house (5-15 years) the better the chance of getting a “Good Deal.” But ultimately you never know, and it is only a “Good Deal” if you can you CASH IN!
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– Written by Frank Borges LL0SA- Virginia Broker/ Owner FranklyRealty.com
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