Jello & Real Estate Deals

Firming Up a Deal (Literally)

What do real estate deals and jello have in common?

They both harden -- or "set" -- as they progress.

Which is why it's important to get all key terms on the table early on.

Negotiating vs. Arguing

Real Estate Negotiation 101

Real estate agent and trainer Rich Levin is the author of "Top Ten Negotiating Rules for Realtors."

I can personally attest to the validity of the first two:

One. Don't go back and forth between a buyer and seller more than twice.

Two. Don't let the buyer and seller come to dislike each other.

In fact, rules #1 and #2 are very much inter-related.

In my experience, a real estate deal with one or two rounds of back-and-forth is a negotiation; three or four (or more!) usually becomes . . . an argument.

Deal . . or No Deal?

Submit Your Offer . . . Then Wait (and Wait)

Where: 29xx Ewing Ave. South, in Minneapolis' Sunset Gables neighborhood (just southwest of of Cedar Lake)
What: 1932 Tudor with 4 BR/4BA and 3,400 FSF
How much: $425k list price
Tax assessed value: $547.5k
When: went pending 7/21/09

Yes, the Kitchen was a bit dated and the home had some deferred maintenance. And the backyard was mostly eaten up by driveway. But this handsome, rock-solid 1932 Tudor just southwest of Cedar Lake had tons of period detail, 4 large bedrooms up (a rarity), and a particularly large Master Suite.

Factor all that in, and the asking price was easily $100k low.

What happened next?

The predictable "foreclosure feeding frenzy."

Scuttlebutt was that there ultimately were at least ten offerors on this home, who then had to cool their heels the next two weeks as the listing agent continued to show and market the home.

How much behind-the-scenes maneuvering do you think was going on in those two weeks?

How much do you want to bet that whatever discount there may have been originally was whittled down (or eliminated) during that period?

"First Come, First Served" -- Not

I'm certainly not a boy scout, and see nothing wrong with maximizing the owner's selling price -- after all, that's what Sellers pay their Realtors to do.

However, as remarked on this blog previously many times, the foregoing "sales strategy" -- vs. a more open, timely and fair approach -- leaves many Buyers feeling manipulated and cynical about how the real estate business works.

At least with respect to this corner of it, you'd be hard-pressed to argue that they're wrong.

P.S.: So, the Seller was someone who foolishly overpaid at the top of the market and got what they deserved, right? Not exactly. According to tax records, they bought in 1991 for $236k. You'd guess that they took out equity by borrowing against the home, then fell behind.

Sadly, this scenario appears to be increasingly common these days.

"Such a Deal"

Is it REALLY "Below Market Value?"

As many Sellers already know, it's a tough market out there, especially in the higher brackets.

So, to let prospective Buyers know that their home is a deal, more Sellers (or their agents) are peppering their marketing with phrases like, "asking price less than market value."

Is it?

"That's Easy For You to Say"

Without doing the "comp's" (comparable sold properties) or knowing the neighborhood, it can be hard to tell. And if it's a property that you love and want to buy, you may not to wait around to find out.

However, if a home really is under market value -- and it's not north of, say $600k -- it'll sell, quickly. Even in today's Buyer's market.

If it lingers for weeks (or months, or longer) . . . by definition, it's not "less than market value."

P.S: And no, asking less than tax value doesn't automatically make a home "below market value" these days. Depending on the part of town, I'd estimate that perhaps 50% of the homes currently listed for sale are under tax assessed value.

P.P.S.: one of my favorite New Yorker cartoons shows a father and son standing in front of a storefront covered with signs screaming "Must Liquidate," Going out of Business!!,""90% Off!," etc.

The caption: 'some day, son, this will all be yours."