And you can laugh-off "Oklahoma", but you know that Texas is too large to be considered a local marketplace.
I don't have my questions sorted by area. I just view the latest Trulia Q&A, and respond to those questions that interest me. If I restricted my answers to only my local region, I would never have met the online presences that I now consider online friends... like JR, and rockinblu among others.
If I were solely interested in gaining "clients" from Trulia.. you're right. I would only be answering local questions. But that's not my purpose here. I enjoy the challenge, I enjoy sharing my knowledge and training with the public, and for the most part, they seem to be appreciative and pleasant.
I try not to get involved in troll-fights, and try to remain respectful and calm. (not always easy). It is, after all, a national forum. Again, thanks for the respect and calm response, it's much appreciated.
Do you really think that Plano agents have different reasons as to why they don't want to make low ball offers, than New York Agents, or Chicago agents, or Des Moines agents? And if they do have different reasons... I'd posit that Plano agents must have different reasons than Austin agents, San Antonio or El Paso agents.
Texas is a big state, but you're claiming that any Texas agent should be the only agents who could reasonably answer this question. An agent in Shreveport Louisiana, or Norman, Oklahoma is closer to the Plano market than an agent in Amarillo or El Paso. Your logic is flawed.
This is as generic a question as they get, and can be answered by any agent nationwide, just as well as any Plano agent.
JR is correct (as she often is), that "she doesn't like lowball offers, for the same reason as any other agents..." regardless of their location.
I think Plano hit the nail on the head: whether it's a 75,000 offer on a 175,000 house, or a 500,000 offer on a 700,000 house, they are "trying too hard to buy in an area they can not afford. People need to be realistic with what and where they are buying. "
But if you read my original answer, which represents an 80% offer, which I "do" consider a lowball offer, we felt it was probably a waste of time, too. And it turned out to be an accepted offer.
Now, maybe the two of you can put away your "tape measures", and behave like professionals. huh?
Because an offer originated as a "low ball" or whatever, should not be a concern of ours. There isn't anyone holding a gun to the seller's head to force them to accept this offer. If it's unacceptable, the offer is rejected and it is over.
Is is fair for agents to view themselves as the protector of a real estate market. The market is what it is, and is created by willing buyers and sellers not agents with self imposed super powers.
Actually, many investors (myself included) prefer to operate this way--especially when investing in non-local markets.
Jeanie, I've also had similar experiences where sellers who rejected my comps and offer only to entertain them later.
Tom, you need to get beyond that "20%" figure. Some buyers are shopping for homes, and others are shopping for investments. The latter group--myself included--typically shop for homes that the prior group won't buy, and we're simply not going to offer to pay market value for those properties. Basically, there are 2 reasons why a property won't move: 1) ugly property, or 2) ugly price. We like to buy ugly properties with CDOM >= 90 days (or 120 days in my case). Those ugly properties typically will require acquisition, rehab, holding, and marketing costs which typically end up running around at least 20% of the market value of the subject property--hence the reason why we make our offers. We're in business to earn a profit just like you. The only way to price in your (or another agent's) commission, inspection/appraisal/legal fees, taxes, repairs, and other expenses is to lower that offer price.
"I have an offer of 60% of list for this well kept home....do you want it?"
"let's say that the buyer wants to offer $4 on an immaculate home with a list price of $150,000 . . . then what?"
I'll address the previous 2 questions here. A simple answer is: yes, the seller's agent is obligated to present the offer in both cases, but the clients may opt to accept/reject each respective offer. Yet, both questions were posed with insufficient context to determine whether or not either offer is or is not reasonable. What if the value of EUR/USD had plummeted 3.75M% the week before that buyer made the $4 offer (in last week valued dollars) on that $150K property, and what if that buyer had purchased $4 worth of euros before that crash? Keep in mind that $4 would have grown to the euro equivalent of $150K (in last week valued dollars). The offer would be reasonable. What if the "well kept" or "immaculate" homes were built on top of a leaking toxic waste dump, and if the problem were only discovered recently via environmental tests ordered by the buyer? Depending upon the extent of the damage (and scope of the repairs), those offers might in fact be reasonable.
I once offered 60% of the list price (technically it was 65% of the market value--the house was listed at 5% above the market value) on a REO, and the listing agent defiantly rejected my offer without asking me why I made that offer. It turns out that property had lots of code violations, required lots of repairs beyond the code violations, had been on the market for a while, and most conventional lenders wouldn't lend on such a property. Ultimately, that property sat on the market for another 6 or so months, and that agent ended up accepting another offer around the same price as mine.
"where do you draw the line?"
"where do realtor ethics come into play?"
The best way to address those questions is to consider the surrounding context and the current market conditions. Also, I believe agents/brokers should operate as consultants do. As a fledgling consultant, I was taught to provide my clients with all of the information they need to make a decision, and then to LET the client MAKE that decision. If a client asks me for my opinion, then I'll share it sometimes; however, I'll never push my opinions on a client, because I only know what the client opts to share with me about the context of an issue, and the client is the one who will have to live with the results.
Now, I'm going to ask some related questions: Where was the indignation from sellers' agents for their sellers accepting offers far above the list price during the sellers' market (2003-2006)? Were the sellers concerned about driving up the comps and possibly gentrifying their neighborhoods, or did they simply take their money and go their own way? Should sellers' agents set a ceiling price that they'll accept in behalf of their clients? Where did the sellers' agents draw the line? How do you think sellers' agents responded to buyers' agents who questioned the ethics of driving up the comps? (I'll give you a hint on this one: most sellers' agents I know stated that this was one of the costs of doing business during a sellers' market.)
No offense, it's a buyers' market now . . . many--if not most--sellers had no problems exploiting their position (and options) during every sellers' market. So, I personally have no problems with playing the same game by their rules in this market. It's nothing personal; it's strictly business. Every industry operates in cycles. Prices escalated during the previous phase of the business cycle, and now they're falling. Guess what? This ALSO is one of the costs of doing business during a buyers' market.
Don't hate the player; hate the game.
if the buyers are patient and can wait, they may be able to come to an acceptable price at a later date.
The market area has a limited number of properties, so it is usually more advantageous to show the buyers these homes if they have the time to wait for the sellers to adjust, and then come back a second time.
Hope this helps.
Actually, that statement isn't entirely accurate, and neither is the inverse statement (areas which didn't see the year-after-year, double-digit appreciation are doing fine). For example, the property values in most parts of Northern Virginia (NoVa) soared--appreciating annually by double digits [like elsewhere along the east coast]). Some property values in parts of NoVa (ie parts of Herndon, Sterling, Ashburn, Woodbridge, etc) have dropped 20%-25%; whereas, the property values other parts of NoVa (ie Burke, some parts of Fairfax and Vienna, etc) haven't dropped much. Plus, according the the reports I read, the CDOM is lower in NoVa (92) than in DFW (100)--albeit not by much. Additionally, the property values in Greater Cleveland (GC) appreciated similarly to how the property values did in DFW, but some parts of GC are getting slammed with foreclosures--albeit for different reasons. Nevertheless, the point is that one can't generalize; different things happen in different markets for various reasons.
JR, that too is part of the game. :) Sometimes we'll win, and sometimes we'll lose.
I don't make lowball offers, but I do purchase properties for my business at wholesale prices--just like other businesses acquire their supplies at wholesale prices. Besides, I don't go for the immaculate properties; I leave them for the retail buyers to pursue. I go for the ugly ones, that have been on the market for at least 120 days, that most retail buyers will avoid. I know that some people here will think I'm playing semantics (with lowball and wholesale offers), but I see distinct differences. IMHO, lowball offers are low offers that are made without any rhyme or reason; whereas, wholesale offers are low offers that are made incorporating lots of factors (CMA, inspections, appraisals, surveys, market trending, repair costs, etc).
Another key difference between the 2 is that the market often will support the wholesale offer price. For example, the listing agent (in my previous comment) rejected my offer--only to accept a similar offer later. Stated another way, the market validated my offer (independently via the due diligence of another buyer and via the eventual sale).
By the way, Plano, I agree with you partly in spirit. I don't believe in trying to juice a seller; rather, I believe in structuring deals where everyone can win. Although my offers can be aggressive, they're also fair, and logical; plus, you could independently validate the analysis of each offer by running the numbers yourself. Furthermore, I also structure all of my deals, so that I can sell the properties to other buyers slightly below market value (to give them some instant equity in the property). I know a lot of other investors who operate similarly.
No matter how wealthy any of us get, we can't take it with us.
That happens frequently, Dp. Sometimes one buyer knocks the seller down for the next guy. I have some lowball buyers who have knocked the price down for someone else a few times already. He has terrible timing.
But...I don't care that my lowball price lowers the market value of the house I'm buying. That will clear out after a while and free market forces will hopefully give me a great return.
The RE Agent cares that you just lowered the value of all the houses on the market, they operate off a percentage. The more it sells for the more they make.
FOLLOW THE MONEY.
You have to determine if the buyer is serious, or just trying to "game the system". If the buyer is serious, it's up to you (the agent) to write the offer. Just because you feel that the offer doesn't have a shot, isn't a good reason to refuse to write the offer.
and if the buyer is just "playing", then you have to take a stand, and "fire" the buyer. If you're not going to fire the buyer, then you have to agree to write their offers, regardless of your opinion of the offer. If you're going to continue to represent the buyer, you have to agree to write the offers he wants.
... I don't know where you draw the line, but certainly .0002% is well below the line. An 80% offer might have a chance to be accepted... a 60% could possibly be accepted, even a 50% has a glimmer of hope.
If you're a buyer in this market and your background work indicates that a house is overpriced, make an offer you think is appropriate and fair. Two years ago, you would have analyzed SOLDS as a basis to establish your bid. Today you need to focus on ACTIVE listings. That's the "market", the competition, the homes other buyers will consider in the competitive set. A comparable home, in a comparable area, at a lower price will always sell first. Buyers are trying to find that house.
A buyer ultimately determines value; the Seller determines whether to make the deal at that price, or not. LOW BALL offers are valid offers. An agent should work them and get a fair market price for the Seller.
For us, the definition of lowball would be different from a place that has seen 30% drop in values. J Lo commented on local buyers who have had properties slip through their fingers because they listened to Cali Realtors saying to offer half off. Ain't gonna happen here.
I agree with those who said we must do what the buyer wants, but we also have an obligation to advise clients that a p.o.'ed seller is not going to deal with them. Counters that are full price or full price plus a dollar are common responses to lowball offers. It isn't always about getting a deal. There are plenty of buyers here that still want location, location, location.
The good news for those 'deal' buyers is that most banks will at least look at asinine offers and sometimes actually agree. Ordinary homeowners with emotional ties to the property get offended by offers down in the gutter. Builders, banks and people in the business take a more pragmatic view.
Frankly, I don't care about "lowering values" of a neighborhood. My little transaction in a sea of thousands of sales isn't going to matter a tinker's dam, and the invisible hand of Adam Smith will smite me if I object.
But if I personally get the rep of handling idiots for buyers who always take a mile when offered an inch, no one will want to respond to me. We all know those Realtors that you roll your eyes when you see the caller ID or the name on the fax. So, my first order of business is always to find the expected value of the property. Someone wanting 30+% equity is probably not going to get it, and is wasting their time as well as mine and the seller's side. I try to advise them of the likely outcome of lowballing before just chopping down a tree.
Long term the market will find itself where it needs to be regardless of what I do or say. So, Plano, while I get buyers like that who want to tick off sellers without purpose, we have to recognize that willing buyers and willing sellers set prices and if the popular mindset (as seen on TV) is to bring down average prices, then that is going to happen -- you might as well get something for it.
But I don't agree that they have hurt themselves more than they've helped themselves. They have just bought a home in the neighborhood at a lower price than many. Yes, it will be used as an ongoing comp, but since they purchased at the comp price, they haven't hurt themselves.
I don't hesitate to help buyers make lowball offers. It doesn't cost us anything to make the offer... and in today's market, we've found a number of sellers willing to accept.
I recently wrote an offer on a home priced at 449,000, which had been on the market a long, long time, without a price reduction. My client's maximum was $360,000. She asked if there was any point in writing that offer... I told her we had nothing to lose, the worst they could do is say "no". Would you believe, after a minimal negotiation, they said "yes" to our $360,000?
Did we hurt ourselves? I don't think so... I think we got a bargain.
I've had to school a few clients and get them off of the thinking that they are going to pick up a steal if they just keep looking and bidding low. Here are a few tips to buyers and their agents.
If a home is priced well below market, it either needs work and won't pass a lenders inspection, it's a short sale which will take 30 plus days to get a response on, and will likely have multiple offers, or you'll have to outbid others because the list price is obviously a starting point and not a target.
If a home is in immaculate condition and the comps justify the price, insulting the seller with an oddball bid will not work in your favor.
If a buyer wants a new home for $95,000 in most of DFW area with a light an bright kitchen, sorry. Usually a mistake of the first time buyer not knowing the values.
These are usually easy to overcome, but if they just won't listen, there is not much a Realtor can do but refer them out, which I've done a few times as well.
I'll have to differ with you on the "comparable" argument though, appraisers usually remove highest and lowest sales as well as foreclosures from their opinions. And if they have to, go older than 6 months or outside the neighborhood.
The second offer on a 1 bedroom condo, which was also low, but again according to recent comps, again fell on deaf ears. I am waiting to see what will happen with the third.
MY question is WHY AREN'T AGENTS preparing their sellers for these low offers and telling them where the comps are at so they can be prepared for them! In all three cases, my buyers were willing to negotiate some, but due to "market conditions" do not want to overpay for their home and are very concerned when it comes to appraisals. I had one buyer come to me with comps that his lender's appraiser told him she would be using...what's a buyer's agent to do?
Any advice there? Do I stop showing homes that are simply overpriced due to recent comps?
William Davis Realty
BTW Northern VA has enough military and government to keep the market fairly stable. Decent amounts of moving in and out. IMHO
No, not all of what I say is relative in every market, but generally speaking it does. So I think.
Cost of being a capitalist nation. No one cares about anything but a quick buck. How about everyone stop trying to become over night millionaires and conduct business in the best interests of everyone and not themselves. BUT... I don't see that happening anytime soon. So until then, I just read Trulia and have a little giggle from time to time.
One even said that they see 60% of list price offers get accepted. Of course, that doesn't happen here.
So, I guess we really have more than one question going on in here.
Plano doesn't want to submit low offers.... I don't blame her. But does it fall under some rule of realtor ethics that she MUST?
Oklahoma? That's just the biggest town in N. Texas. LOL
I see a TON of questions on here daily.... all from Texas because that is the way I have them sorted for my email notifications.
How do you have the time to answer questions outside of your market anyway?
I know those realtors who will submit 50 low ball offers for a client. I won't work with that caliber of agent.... My realtors treat their colleagues and me with respect.
And I don't think that Plano was talking about that one deal where the market is all screwed up and the houses all need work... no, not that low ball. I think she is talking about the 'bad agent' lowballer.
Ya'll have fun in here.
But then again, if you are in FL or CA... yes, bring all absurd offers because apparently they work. Sucks those states prices got out of hand to begin with.
Our average appreciation was between 3-5% per year. Does anyone actually believe that a house that is priced reasonably could potentially lose the last decade plus of gains? I've never seen a house go for 50% of it's value. I have seen some homes go down by 20% because they were overpriced by 20% in the first place.
I'm not against writing low offers, but if they are unreasonable I can certainly tell the client that I'm not the agent for them. That is neither unethical or unreasonable.
Notice, I asked Bill about the responsibility of the agent.....
And... I only presented my opinions along with a hypothetical.
If I were an agent and a buyer was presenting insulting(stooooopid) offers, I would drop them like a hot potato(e)
I am in the Great State of Texas where real estate has dropped a whopping 2%(my area is up).
I presented that earlier to provide a basis for why I believe what I believe.
I see realtors from, outside of Texas come in here and answer TEXAS questions all of the time... and most leave me scratching my head!!
Hi Chris... Do you own a riding crop?
Real estate is very regional. We in Texas did not see the outrageous skyrocketing prices that you did where you are. I somehow doubt , when the average price increase per year in our area was 3%, that the last ten years of equity built into a home should be wiped out because values elsewhere are down.
So, the agent should call the seller agent and say: "I have an offer of 60% of list for this well kept home....do you want it?"
What is the fiduciary responsibility here?
Me, personally, I would not represent that buyer. But I agree that an agent should not discourage any bid if they choose to represent the idiot.
1. Overpriced homes.
2. There's some chance it will get taken (estate sale, foreclosure, = amt of equity in the home.)
3. We've also used low balls on properties that were overpriced and on the market forever.
Even when the price did not get to the lowball, the seller came down significantly to something more
I think you have an interesting point about comp values now, especially since one appraiser told me he MUST use a comp that has sold in the last month. So we see a $100sqft neighborhood with one foreclosure that goes for $70 and he wants to use that for a comp. Appraisal doesn't make and perhaps the home doesn't sell. Do that often and you could create a whole neighborhood of homes that don't sell and subsquently foreclose.
Maybe that is something we need to look at in the stimulus package.
Sometimes you just have to get 1-2 lowballs out of them, before they come to reality that lowballs are not a shotgun strategy, but a targeted one. If you are in the right neighborhood and you do a good education on them they'll get realistic after they miss one or two. Hang in there.
What price range are you in?
David is in Florida, which is a completely different market.
So what David might experience, isn't going to be true in Texas..... Were we have lost a whopping 2% of value.
If I were an agent and I had a buyer wanting to act like you have described.... I would tear up the buyer's agreement right there in front of them and wish them good luck.
No professional would work with that client.... But I know some real estate agents who would.
I have buyers in the last year who submitted the following (keep in mind these are "all cash" second home buyers):
asking 625,000 offer 560,000 counter None (home subsequently taken off market)
asking 699,000 offer 575,000 back and forth to 600,000. "buyer" said they'd pay 600,000 if seller (builder) added a patio. Result: no sale (home subsequently sold 629,000)
asking 645,000 offer 575,000 back and forth to 600,000 "buyer" said they'd pay 600,000 if seller (another builder) switched out granite in kitchen. Result no sale (home subsequently sold 600,000)
asking 589,000 offer 460,000 accepted offer at 517,000. "buyer" backed out (home subsequently sold for 450,000)
asking 575,000 offer 520,000 counter None(home subsequently taken off market)
asking 389,000 offer 260,000 counter 345,000 "buyer" walked (home still unsold)
asking 640,000 offer 575,000 back and forth to 600,000 buyer walked (home subsequently sold 580.000)
Personally I think lowballs are a waste of time, The homes the subsequently sold for less than my buyers offered underwent further reductions, and sold near what the last asking price was. My conclusion is, sometimes a house will sell for a lot less, but not till the price is reduced). But what do I know? I just unlock doors. :)
That said. It is certainly a way to separate the "have to sell" from the "fishing for a high price".
You're right. If the house is listed at 200K and the comps support it then an offer of 115K is just killing a tree. Unfortunately what will happen is the buyer will tender a few offers, loosing out on some great houses and move on with other Realtors thinking it's the agent, not their offers. Not a productive use of their time, yours, the listing agents or the sellers.
I'm talking the house is listed at $200k.... and comps support that number but then coming in at $115k..Not only does that make most sellers mad but If that is accepted, then YES that will be used as another comp in the future. (I realize David will probably have something smart to say here, but I am in an industry where I work ALL OVER THE U.S.... so I see trends of every kind, in every city and state) Other people will see this and think they should offer this low on all the other $200k dollar homes in the area... creating a domino effect. I am not saying agents should not present any and all offers but more of buyers not understanding the logistics of it all.
I had one seller who was annoyed and actually increased the asking price as a counter.I had one seller who countered with a one dollar reduction from list price. In this market there are foreclosures where you can get a good deal but even the banks take weeks to agree to a price that is too low.
What I typically do is to explain to them that many times if we offer too low on a home the seller gets offended. Their comeback is typically going to be worse than it would be if a reasonable offer was tendered. I've seen sellers get offended and basically say "if you want my home then you're going to take MY terms" which doesn't help at all.