Aug. 25, 2010

The Standoff: an Epic Real Estate tale

Just wanted to share an experience I had recently.  It involved an offer I had written for a buyer.  This transaction was the heaviest negotiating I've encountered in my 5 years in this business.  I had backbone, I had stamina, I have a great Broker who guided me and supported me, and it still took its toll.  I also may have lost clients but have gained invaluable experience and knowledge and above all, kept my integrity.

Here is the shortened condensed version.

To give you some background on this client, I've been working with him and his wife for about 9 months, and he has been searching the market 3 years now.  Guess that should have been my first clue!   We ventured out on a couple of occasions looking at 4-9 houses altogether.  Then we came across one home that they really liked.  It was an older home ( 1983 built) in good condition with many major upgrades ( new roof, new furnace, new water heater), it had a great floorplan and ample square footage as well as sat on a good size lot (1/3 acre) and  just needed cosmetic updates.
My clients decided to submit a low offer with allowances, $30,000 under asking price, even after learning there was another offer in.   We learned the other offer was a contingent offer and although our offer was low, the seller decided to negotiate with us.  After two weeks of negotiating ( " back and forth beating up the seller"  is how my client described it),  the seller's final counter was $5000 over my clients offer with no allowances, and what seemed to be a deal going nowhere,  my client decided to offer up the agents commission.  As he stated  "It is not uncommon if a deal is close and the standard commission is 6% (split 3% to each agent), that in many cases the agents will agree to a lower rate lets say 4% for example to make the deal go through, especially when it comes to more expensive homes (6% on a 200k home is the same as 4% on a 300k home)".   Keep in mind "expensive homes" is relative to each different market.  (In Bellingham, WA  a $200K-$300K home is average).   This went nowhere.  I was willing to share some of my commission to help  a deal go through, I'm of the mindset that some is better than none, but the sellers agent was not willing.    So it seemed that this deal was dead in the water, at a standoff over $5000.  At this stage, my client again stated " there are plenty of other homes out there, we'll just move on" .

I awoke the next morning to find a message from the listing agent that the seller had agreed to come down to my clients price , but no allowances.  Woohoo!  Thought we were back in the ballgame again,  but no.....my buyer held his ground wanting his full offer accepted which included allowances.  Again reminding me that   " there are more homes out there".   There it was again,  " there are more homes out there".  I  wondered at a certain point in this negotiation process if he had this same mindset when he decided to propose marriage to his then girlfriend,  " oh well, if it doesn't work out, there are plenty of other fish in the sea".   I started to realize he had no real passion or desire for this home, as it seemed.  Here the seller had come down to his price albeit no allowances and he walked, sure that there were other homes out there waiting for his offer.  I'm still amazed every time I think about it.   Well it doesn't end there.

After a week passed and showing them a few others, my clients decided to try again on the previous home. Offers went back and forth again, but ultimately  we were at an impasse over $5000.  Granted this home was in need of updating, it was in phenomenal condition for its age.  Even the carpet ,which the seller was offering a $4000 flooring allowance, was in really good condition for its 27 years.  In fact, the buyers even commented initially that since they had wanted to get a dog, they might not be in such a rush to get new flooring.

My client could not understand why the seller had  increased  the price $5,000 from the last counter offer from round 1; he felt this showed that there was no hope for a mutual agreement, that she really did not want to sell her home!   Again I tried to counsel him and give him different perspectives, but he felt this had taken a " personal turn for all parties involved" and the sale was lost and " he was tired of the game playing".  They were done.  They were done with house hunting also,at least for this year.  Their lease was up .   They needed to find a home quick and purchasing a home would take too much time, as he thought.    So over $5000 he decided to continue to rent at a rate of $2200/month and he may need to get a storage unit to house all their furnishings, but he was not willing to accept a purchase price $5000 over what he had "budgeted" for this home and,... the seller is still sitting with her home on the market.

As I stated earlier, this negotiation had started to take its' toll.   When I sit down with clients and begin the process of writing up an offer or listing for that matter, I am committed to getting the job done.  In this situation, my goal was to succeed in getting an accepted offer for my clients and to achieve a win/win situation for both buyer and seller.  After all isn't that what we really want,  both parties to be happy?    As this negotiation continued " back and forth",  I sensed the frustration in my clients and seller because we could not come to an agreement.  I too became frustrated because I could see that the seller was really trying to work with my clients, but they were at their set dollar amount for their budget.  What's an agent to do?

The lesson  learned for me is that it is not my job to get personally involved or as my broker put it, " I needed to remove myself from the equation, to get out of my own way".  Part of this job of representing my clients includes keeping perspective, remaining focused and objective, not to get emotionally involved.  To think creatively and be resourceful, and to continually aim for the goal.   I can counsel, educate and guide, but it is ultimately a clients decision.

There is also a lesson here for sellers and buyers.  As we are all hearing, "it's a buyer's market".  With inventory high, sellers need to be realistic about pricing one's home and consider market value. Real estate has taken a beating in the last few years and our market is not what it was 5  years ago. Also, consider how long you may have to sit on the market.

For buyers, be realistic about what your budget will allow and look at properties within this price range.  If you are looking at homes above this range be careful when considering a lowball offer.  Remember, you want to purchase a house that has been a home, and therefore want to be favorable in the eyes of the seller, not insulting.

As we say in Real estate aim for a Win/Win situation.

Feel free to contact me with questions regarding buying or selling at 360-303-3898.

The photo is provided courtesy of Quentin Tarantino's Reservoir Dogs: Mexican Standoff.

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