Do Miracle Deals Exist? That Haystack Needle?

Too frequently, I get an email from somebody that has been following my blog and tweets for months and is now ready to buy!

I get the details of this person’s dream home, including number of bedrooms, lot size and location (don’t get me wrong, most buyers still do their own searching). But then they end the email with a catch. “Oh, but the only problem is our maximum is $400k.” Meanwhile, homes in this area sell for $550k.
What to do with buyers wanting the IMPOSSIBLE?

1) Reply that they are nuts and spend an hour explaining why.

2) Ignore the email or a quick reply saying I’m too busy. (But do I look too busy? Watch Video)

3) Lie. Accept the “challenge,” but in reality hoping they would come to their senses. Many agents that are hungry (anybody see the site, how hilarious is that? Do you bring them bagels at each meeting?) will say yes to several of these types of customers, hoping that one will stick. Knowing (lying) that they can not get the client what they want… a miracle.

4) Save a tree and send them a link to this post.

If I do send you this and tell you that you are nuts, I’m not trying to upsell you. I’m trying to educate you. Save you from wasting your time (cough, cough*, and mine). Don’t be offended. This route is much better than #3. Homes are expensive. Really expensive. Maybe you should rent. No harm in that (see 2006 video on Buying Myths and Renting Benefits, notice the full head of hair. How many people would have saved $500k by watching that in 2006!)

Whatever gut feeling price target you have, increase it by 10-15%. Again, not an upsell, just our society which tends to have taste buds just outside of our gut feeling “reasonable” price (see blog post on buying a pricier home).

* Make sure when you cough to cough into your shoulder, not into your hands. Stop the spread of H1N1.

5) Still want that miracle deal? Skip your agent (because the “seller pays” doesn’t apply). Go buy a courthouse Foreclosure (see my video at the Courthouse). Not an MLS listed Foreclosure, short sale or REO, but a real courthouse auction. Look through the notice section of your newspaper or search the Washington Post trustee search (which blows since a search for a zip code can bring up hundreds of results if the law firm’s zip code happens to be in that city). People who do this, THEY get homes for $100k below market. Easy money? If it was, I’d be doing it.

But wait, there is more! Here are the pitfalls for #5:

a) Professionals doing this have 3 employees going to dozens of auctions in hopes of getting ONE property (good for an investor that doesn’t care about getting a “home” but more about a “steal.”)

b) Research 20 homes. No photos. No entry into the house. No home inspections. 100% as is.

c) Only 1 or 2 of those homes will be sold at any decent price. The rest of the 18-19 times the seller reclaims the property in time (think Brady Bunch movie saving the family home from auction) or the bank, which is too busy to get a proper value on the home, will buy it back for the loan amount, which is way over market.

d) Oh, and do a title search first for each home. It might have a hidden $100,000 trust or IRS tax levy that is NOT disclosed and you have to pay for it.

e) Win the house and in some states, the homeowner can still get it back.

So, I digress. A good agent will help you get the best price possible. A great agent will be willing to lose a couple deals for you (this about that for a second. LOSING a deal can be a GOOD thing) because you came in just under the “price that would pass the seller’s laugh test.” A fabulous agent might tell you to read this post because what you want is impossible. If you let it (the customer) free, it will come back (is that how the saying goes?)

See related 2008 video: lowballing doesn’t work

Written by Frank Borges LL0SA- Broker

(NVAR members, have you voted yet? And customers with agents, tell your agent to go to to vote me onto the NVAR Board of Directors before Oct 8th 2009)
Nuts by Sergei Golyshev , H1N1 by Guerry, Needle by naughty architect

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  • 28
  • September
  • 2009

12 Responses to “Do Miracle Deals Exist? That Haystack Needle?”

  1. Hi Frank, This was very interesting post and you did very well on your video. How to low ball, I hadn’t heard of that but I suppose someone writing such things ( especially if written in a humorous way, could make the point very well. Too funny. 15 to 20 % less, Wow. Considering listings in our area tend to be from 1 to 7 % over the recent comparables. The published list price is very often arbitrary. Value is the key as you mentioned but it is important in CA to provide accurate data and allow the Buyer to make their own judgment about value and offering price.

    I wrote a low ball for an investor ( already a past residential cleint) on an REO , made my case, included 20 photos and the Buyer got it. The bank actually concurred with no issue. Closed all cash 21 days and the property has been fully restored and it is credit to any neighborhood. I will write of the before and after. Naturally he wants me to repeat this as often as I can. Which for the most part, I don’t expect to happen very often.

  2. Frank LL0SA Broker says:

    Oh yeah, California is a completely different pricing beast. So is Miami.

  3. cara says:

    How about the other obvious alternative? If the buyer truly doesn’t want to allocate more of their wealth/income to housing than $400k or whatever price, tell them that if they want to buy now (as opposed to saving up more money and buying in all cash eventually, after renting for 7 more years in someplace truly cheap) then they need to pare down their list of “requirements” to a list of actual needs. And then pick which of the former “requirements” are most important to them, and maybe get 1 or 2 out of 3, rather than 3 out of 3.

    Kids don’t need their own individual bedrooms, or their own personal backyard, especially if there are great parks and walking trails nearby. No family of 5 or fewer people needs more than 2 bathrooms. Cars don’t have to be in a garage. These things aren’t needs, they are wants. If you want to buy a roof over your head because you think it’s a better long term financial plan than renting (for instance if it’s cheaper than renting already) then that financial security and flexibility is what you are buying. If you want to buy your housing wants, you need to be willing to pay for them.

    If the buyer’s think that their dream house “should” only cost X, because someone with their salary “should” be able to afford it, and they honestly think the market is going to make that happen, then they should wait, and keep saving up a larger down-payment in the meantime, because if they’re saving up fast enough, then whether the market moves this way or that, eventually they will be able to afford that dream home, or they’ll get frustrated enough with the prices in this area to move to another city.

  4. says:

    You are spot on! I’ll update the post. Thanks Frank

  5. cara says:

    Of course the other virtue of looking above your price range is what happened in our case. You can find out that in order to get what you really want? You don’t just need to go up 15-20% but double. To get a house that would be truly our ideal home, we’d need to be between $400 and $500k, whereas to just get what we actually need (and will be very happy in), we’re looking at $240k if you include the cost of the improvements we’ll be making before moving in. So looking above your price range also tells you that it costs X to get a 1 car garage or Y to be move-in ready, or Z to have 400 more square feet or W to get a yard. And then you can decide which of those costs is one you’re willing to pay for that attribute? If the rest of the your neighborhood is willing to pay way more than you are for a garage, and you’re okay with passing the no-garage discount onto the next buyer? Then don’t buy a garage.

  6. Another issue I’ve been running into aside from getting what they want in a certain price range is the unrealistic expectation that there are countless sellers (including builders) with their homes on the market just waiting (begging) for a buyer to submit an offer. And some of these buyers are blaming their agent for “not finding them what they want”. That’s ludicrous!

    Why is it ludicrous? Because inventory is down – WAY down – and there are about 30 to 40 percent of the homes on the market today as compared to 2007/2008. This includes For-Sale-By-Owner (FSBO) properties, foreclosures, short-sales and traditional resales – on and off the local MLS. Wherever you look, you’ll find fewer properties to choose from – period.

    Some say “Educate them!” – that only works if they want to listen. Some buyers just need to find out on their own. Unfortunately, them finding out on their own often times means they’ve wasted their time and that of at least one, if not more, hard working and very capable agents in the process.

  7. REdealSEEKER says:

    I’m sure you’re either shaking your head or rolling on the floor laughing, seeing my “blog handle.” Excellent post, excellent information for people like myself, looking at all possibilities–foreclosures included–for finding a deal. I’ve been seeing that to get what we want, we have to scale down house size to live in Herndon, or stay out in Leesburg, where there are properties (listed) for 400k, (usually sold for about 20k more). Cara’s right about paring down expectations, or else that new house will remain a pipe dream or turn into a debtor’s nightmare.

    I have a question about foreclosures: I have seen a few short sales go under contract, and then I see the foreclosure sale publications for them in the newspaper. After the foreclosure sale, they’re still listed as being under contract. Since you have the best real estate site of all that I’ve seen (I like the map feature of redfin, but I use yours to get more detailed information, like on other homes that have sold in the area, and feel like I’m much more informed than I would otherwise be), I am wondering why your site doesn’t capture information about short sales that have fallen into the foreclosure hole. Would it make sense to do so?

    Basically, today, my family drove by one of these under contract homes that was supposedly bid upon at the courthouse steps….so, why was the under contract sign still up on the lawn? Why is it listed as being under contract on franklymls? The courthouse sale took place two or three weeks ago. Won’t it be coming onto the market again as a foreclosure?

    I’ll bet you’re chuckling, since I’m trying so hard to pounce on that discounted deal….btw, I also really learned a lot from that blog entry about looking for homes with kickout contracts — great stuff! Makes me spend more time at your web site!

  8. says:

    Hey ReDeal,
    How do you know it sold at the courthouse steps? Because it was in the paper, or you saw it with your eyes?

    Those advertised auctions frequently don’t happen. They get postponed at the last second. So if a home is under contract, YES, the bank can still foreclosure, but oftentimes they will postpone it (but still advertise the sale, so they have the option to sell it).

    Why not put a back up offer on it? With short sales, the kickout, or non kickout doesn’t matter. Oftentimes the bank hasn’t said yes, and until that time, you can pounce.


  9. Frank,

    Great blog and website. Found you through CJ Brasiels’ blog, in San Jose, CA. Really liked your video on low ball offers. Congratulations on the Inman award last August.

  10. Cheri says:

    Hi Frank,

    I loved the video on lowballing. I’ve gone around and around with buyers that say they refuse to pay full price for anything in this market because they want to get a deal! It takes a long time to educate them that “the deals” are priced incredibly well to begin with. I’ve gone so far as to tell a buyer that someone is going to make a full price offer for this home. Do you want it to be you or someone else? One of my favorite stats is the sales price as a percentage of list price. The next step with these buyers is to show them stats for homes that sold in the first 30 days on market. The average sales price is 105% of list price. Yep! Homes that sell in the first 30 on the market in Bend, OR are selling for more than list price! Now tell me you want to make a lowball offer.

  11. Palomino Griff says:

    Frank: as a potential buyer, I appreciate you sharing your insight. Keep up the good work.

  12. anonymous says:

    Hi Frank,

    Great stuff. I am shopping for a foreclosure and have come upon some addendums where the banks insert the foll clause in their addendum during contract ratification to the effect of

    “if the seller comes back and pays off the mortgage then
    he can claim the house being foreclosed upon.”

    Do they expect that the sellers will come back and claim the
    property? Also recently read an article where in some states banks are foreclosing even without having any right to foreclose? This gets makes everything a real mess…

    Anyone had such experiences or care to share if this is
    something to look out for?


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