Real estate really is a game. It's a game where the rules are constantly changing, and no two rounds are the same. I've spent well over a year reading up on every aspect of the process, both nationally and locally, and still was regularly surprised by what happened during my own search.
Case in point: about a week after I turned down (or was rejected by) the Mateo Avenue condo, I got a call back from Regina. The sellers were wondering if I would be interested in seller financing. I was fairly familiar with this idea based on my research; the basic idea is that, since I had offered $X and they wanted $X+30k, they would lend me the $30k in a separate loan. There can be some advantages to seller financing - you can get a better rate than from a bigger lender, and you can more easily get approved. I figured that the sellers probably realized that I was the only serious buyer they had encountered, and that they thought I wouldn't go above $X because it was the most I could afford. In reality, I could afford more than their asking price, I just didn't think it was worth that much. I wasn't interested in taking out a $30k loan for an overpriced home.
I told Regina that I wasn't interested in financing, but, if they were willing to drop their price, I'd still be interested in the property. We went through some back-and-forth, and they ended up coming down $20k. That was still $10k over my initial offer. I mulled it over for a while - it was more than I thought it was worth, but it seemed like this might be my last and only chance to get a decent condo that I could afford in the area I wanted. In the end, I decided that I'd go for it.
Rather than put together a new offer, we got back a counter from the sellers with the agreed-upon price. It also came with an "as-is" addendum. I talked with Regina for a while about what this meant - basically, it said that the sellers wouldn't be making any repairs for stuff that had already been disclosed or for "minor" problems found during the inspection. It's intended to acknowledge that this is an older property and that stuff won't be perfect, and that I'm buying it with that understanding. I wanted to make sure that I wouldn't be giving up any rights to ask for repairs or credits for major issues found during inspection. I was safe on this front, so I signed the counter and the addendum, and we entered contract.
Showing posts with label negotiating. Show all posts
Showing posts with label negotiating. Show all posts
Friday, November 12, 2010
Friday, November 5, 2010
Ball One
I knew that my lower offer would have a tougher chance of getting accepted, so I made clear to my agent that I was happy to do anything outside the price to make the offer more attractive. I included a sizable 3% earnest money deposit (the maximum allowed for liquidated damages under California law), and offered a 30-day closing window - I had been pre-approved through Provident Credit Union, and was ready to move forward with them, plus since I'm in a month-to-month lease, I could move out of my current place whenever I wanted.
Because of the slight delay getting the disclosures, we ended up submitting the offer on a Monday instead of a Friday, and gave them 48 hours to respond. I was expecting a "Yes," "No," or, more likely, a counter. Instead, I got a pseudo-counter - the seller's agent wanted to know if I'd be willing to pay just $10k less than the listing price. My response was, "Uh, no." Again, having done my research, I knew that that was way too high. Regina wanted to know what my final offer would be; I let her know that my initial offer was basically my max, but that I would be willing to go a few thousand higher to close the deal. That still left a hefty gap between us. She called back in a bit to say that they weren't interested. I shrugged, went "OK," and moved on.
I was kind of surprised by how well I took it - it was the closest I had come yet to buying a condo, and it had seemed like it had the right potential to work. It was a rare unit in the area I wanted, small enough to fit into my price range, and overpriced enough to scare off competition. Again, I continued taking a break... it seemed like by this point I'd exhausted all my options, and, barring a price drop at Belamor, I'd be best served deciding whether to switch my search to another area or resigning myself to renting. Still, I wasn't too disappointed - since I had based my price on facts and not on emotion, I could confidently say "No" and not second-guess myself.
Because of the slight delay getting the disclosures, we ended up submitting the offer on a Monday instead of a Friday, and gave them 48 hours to respond. I was expecting a "Yes," "No," or, more likely, a counter. Instead, I got a pseudo-counter - the seller's agent wanted to know if I'd be willing to pay just $10k less than the listing price. My response was, "Uh, no." Again, having done my research, I knew that that was way too high. Regina wanted to know what my final offer would be; I let her know that my initial offer was basically my max, but that I would be willing to go a few thousand higher to close the deal. That still left a hefty gap between us. She called back in a bit to say that they weren't interested. I shrugged, went "OK," and moved on.
I was kind of surprised by how well I took it - it was the closest I had come yet to buying a condo, and it had seemed like it had the right potential to work. It was a rare unit in the area I wanted, small enough to fit into my price range, and overpriced enough to scare off competition. Again, I continued taking a break... it seemed like by this point I'd exhausted all my options, and, barring a price drop at Belamor, I'd be best served deciding whether to switch my search to another area or resigning myself to renting. Still, I wasn't too disappointed - since I had based my price on facts and not on emotion, I could confidently say "No" and not second-guess myself.
Friday, October 15, 2010
Searching through the Rough
Around this time, I started to have a crisis of faith. By this point I'd been closely following the Millbrae-area market for about half a year; the more I learned, the more I liked the area, but also the more I realized what a difficult thing I was looking for. There just are not that many condo developments in the area. As a matter of fact, I had a complete list of every one in the whole city.
Burlingame had just a handful of options:
I decided to take a little break - after all, the commute wasn't killing me, and perhaps the situation would change. Along the way, I kept monitoring an interesting property. In addition to my Redfin emails, I also had subscribed to Craigslist RSS feeds that reported on condos advertised in Millbrae and Burlingame. Most of these duplicated information in the MLS, but some were FSBOs, and one in particular caught my eye: a FSBO condo on Mateo Avenue. It seemed overpriced, but otherwise matched what I was looking for. I decided to wait and see what would happen.
The property didn't seem to be advertised too heavily; after that first Craigslist post, nothing else came up, and I never saw it on any of the major FSBO web sites. About a month later, it popped up again, this time with agent representation but without being listed on the MLS. I decided to keep my distance - it still bore the same high price, and without the MLS connection I wouldn't be able to use Redfin. It also had mysteriously lost about 90 square feet between the time it was a FSBO and when an agent took it.
About a month after that, it finally hit the MLS. Still at the same price. I decided to wait for now - I didn't want to play my hand by seeming too eager, and by now I knew the market well enough to feel pretty sure that it wouldn't get snatched up at the current price. I knew from advice and observation that well-priced homes were selling quickly while overpriced homes languished for a month or more, so I figured that waiting for a while would give the seller time to adjust to more realistic expectations.
After a couple of weeks, the seller hosted an open house. I still wasn't ready to officially tour, but decided to drop by. It's kind of funny that I didn't do my first open house until towards the end of my search; I'd been scared off by warnings early on about attending open houses without representation. Listing agents can use them to scout for new clients, and if you aren't already represented by an agent and decide to make an offer after attending an open house, the listing agent becomes your agent, which leads to a conflict of interest. By now, though, I was happily represented by Redfin, and didn't think I'd have a problem.
As it turns out, I needn't have worried. I attended two open houses, and both were very pleasantly low-key, with no pressure to sign a register or do other stuff I was worried about. First I attended a house-house open house: an interesting, very old small house on Magnolia Avenue that had dropped by hundreds of thousands of dollars from its initial listing, and, if it dropped another two hundred thousand, would finally hit my range. It was nothing spectacular, but still intriguing: nice large lot, cute small house, a bathroom that had probably been renovated in the 1940's, an old-fashioned detached garage, very little set-back from the sidewalk. I thanked the agent and moved on to Mateo.
Once again, I had timed my visit to coincide with the arrival of Caltrain. The open house was on a Sunday, so I had a narrower window. The building is on the east side of El Camino Real, about a block from the tracks, but set much farther back than the California Avenue building had been. The agent greeted me when I arrived, then took a call while I wandered around. The train came by while I stood near an open window. It was audible, but infinitely better than the California Avenue one, and without any vibration. With time, I was confident that it would just become background noise, like a passing car; similarly, my current apartment is near a light rail line, and after the first few weeks I no longer noticed the sound.
The unit itself seemed crowded, but mainly because of all the furniture. It was occupied by tenants, and while it had been cleaned up, it didn't show as well as the other condos I'd seen. Still, nothing seemed wrong with it, and it was in better shape than the Palm Avenue unit that I had started making an offer on. I wandered around, checked for mold, looked under the sinks, played with the doors and light switches. Everything seemed in good order.
Still, the fact remained that it was overpriced. This wasn't just a subjective feeling, and wasn't taken from the popular online home estimation tools like Zillow and CyberHomes. I kept crunching possible values based on different methodologies, and kept coming up with a pretty consistent price range that was quite a bit less than the asking price. At the simplest end, I took the price per square foot for similarly sized and aged units in Millbrae/Burlingame that had recently sold, and adjusted it for this unit's size. I also took the most recent sales prices in the complex (which required going back to 2004-2005, during the boom but before the peak of the bubble), and tracked where those prices would go assuming that they followed the same overall price changes of Millbrae as a whole. Doing this quantitative work helped me gain a lot of confidence, and made me more secure in deciding to wait until I could get a better price.
- Park Broadway - Nice, but expensive, and too far away from the station and downtown for me.
- 88 South Broadway - Insanely expensive.
- Belamor - Too expensive, uncertainty around construction status.
- Palm Avenue - Perfect location and nice size, but worrying HOA situation.
- 15 Magnolia - Only 10 units, never available.
- 75 Magnolia - Only 4 units, never available.
- Mateo Avenue - Only 10 units, more on this later.
- 1396 El Camino Real - Too far away from the station and downtown, practically in San Bruno.
- Windwater Mills - On a busy street near the high school, plus some worrying online reports.
Burlingame had just a handful of options:
- California Avenue - Great units, but pricey and too close to the tracks.
- Ogden - In retrospect, I wish I had pursued the one-bedroom from here at the end of last year, but I had been too focused on Belamor. Nothing else entered the market during the spring or summer of my search.
I decided to take a little break - after all, the commute wasn't killing me, and perhaps the situation would change. Along the way, I kept monitoring an interesting property. In addition to my Redfin emails, I also had subscribed to Craigslist RSS feeds that reported on condos advertised in Millbrae and Burlingame. Most of these duplicated information in the MLS, but some were FSBOs, and one in particular caught my eye: a FSBO condo on Mateo Avenue. It seemed overpriced, but otherwise matched what I was looking for. I decided to wait and see what would happen.
The property didn't seem to be advertised too heavily; after that first Craigslist post, nothing else came up, and I never saw it on any of the major FSBO web sites. About a month later, it popped up again, this time with agent representation but without being listed on the MLS. I decided to keep my distance - it still bore the same high price, and without the MLS connection I wouldn't be able to use Redfin. It also had mysteriously lost about 90 square feet between the time it was a FSBO and when an agent took it.
About a month after that, it finally hit the MLS. Still at the same price. I decided to wait for now - I didn't want to play my hand by seeming too eager, and by now I knew the market well enough to feel pretty sure that it wouldn't get snatched up at the current price. I knew from advice and observation that well-priced homes were selling quickly while overpriced homes languished for a month or more, so I figured that waiting for a while would give the seller time to adjust to more realistic expectations.
After a couple of weeks, the seller hosted an open house. I still wasn't ready to officially tour, but decided to drop by. It's kind of funny that I didn't do my first open house until towards the end of my search; I'd been scared off by warnings early on about attending open houses without representation. Listing agents can use them to scout for new clients, and if you aren't already represented by an agent and decide to make an offer after attending an open house, the listing agent becomes your agent, which leads to a conflict of interest. By now, though, I was happily represented by Redfin, and didn't think I'd have a problem.
As it turns out, I needn't have worried. I attended two open houses, and both were very pleasantly low-key, with no pressure to sign a register or do other stuff I was worried about. First I attended a house-house open house: an interesting, very old small house on Magnolia Avenue that had dropped by hundreds of thousands of dollars from its initial listing, and, if it dropped another two hundred thousand, would finally hit my range. It was nothing spectacular, but still intriguing: nice large lot, cute small house, a bathroom that had probably been renovated in the 1940's, an old-fashioned detached garage, very little set-back from the sidewalk. I thanked the agent and moved on to Mateo.
Once again, I had timed my visit to coincide with the arrival of Caltrain. The open house was on a Sunday, so I had a narrower window. The building is on the east side of El Camino Real, about a block from the tracks, but set much farther back than the California Avenue building had been. The agent greeted me when I arrived, then took a call while I wandered around. The train came by while I stood near an open window. It was audible, but infinitely better than the California Avenue one, and without any vibration. With time, I was confident that it would just become background noise, like a passing car; similarly, my current apartment is near a light rail line, and after the first few weeks I no longer noticed the sound.
The unit itself seemed crowded, but mainly because of all the furniture. It was occupied by tenants, and while it had been cleaned up, it didn't show as well as the other condos I'd seen. Still, nothing seemed wrong with it, and it was in better shape than the Palm Avenue unit that I had started making an offer on. I wandered around, checked for mold, looked under the sinks, played with the doors and light switches. Everything seemed in good order.
Still, the fact remained that it was overpriced. This wasn't just a subjective feeling, and wasn't taken from the popular online home estimation tools like Zillow and CyberHomes. I kept crunching possible values based on different methodologies, and kept coming up with a pretty consistent price range that was quite a bit less than the asking price. At the simplest end, I took the price per square foot for similarly sized and aged units in Millbrae/Burlingame that had recently sold, and adjusted it for this unit's size. I also took the most recent sales prices in the complex (which required going back to 2004-2005, during the boom but before the peak of the bubble), and tracked where those prices would go assuming that they followed the same overall price changes of Millbrae as a whole. Doing this quantitative work helped me gain a lot of confidence, and made me more secure in deciding to wait until I could get a better price.
Saturday, November 14, 2009
Kicking the Tires
Sorry for the delay between posts - things have been quiet, but they are moving forward.
I've been collecting real estate agent recommendations for a while. Early in November I interviewed one particular agent and we started looking at homes. The process has been extremely fun, extremely interesting, and extremely frustrating, all mixed together.
First of all, the agent: one of the things I liked was that he was a first-hand recommendation, from someone who had recently bought a home through him. Most of my other names were from people who knew agents, or who had friends who had used agents. Second, the agent is really friendly, with a great personality. We met in his office and chatted a bit - what I was looking for, my timeline, my finances, but also talking about mutual friends, music, and so on. So that was nice... I'm mainly looking for an agent, not for a friend, but if you're going to spend a lot of time with someone it really helps to get along with them.
My time frame is still extremely fluid; under my original plan, I still have about 4-5 months left to go, and I would be totally fine with extending that further. Really, I'm talking with agents now because of my original schedule more than any specific burning desires; mainly, I want to be set up so that if something great comes along, I can jump right on top of it, and not need to waste time lining up an agent first.
So, when I had first reached out to the agent, my message (email, yay!) was along the lines of, "I'm looking for buying X in Y area. This might be really premature, but I'm looking for a buyer's agent, and am wondering if you'd be interested in representing me." He enthusiastically responded, and we set up a time to meet.
He managed to surprise me in our very first meeting by showing me an available property that I hadn't been aware of. I've been running RSS feeds on Craigslist and Zillow for many months now in my target area, and had managed to convince myself that I was seeing everything that was for sale - not much, especially in my price range. But the very first property he pulled off was something that looked like a perfect location, and while it was above my limit, at least the far-left digit in the price was correct. He had also prepared about a dozen other properties from a wide range of geography, price, age and style. I read through them all, and later told him that the first was the only one I was really interested in, but that I'd like to look at a few others if he had time, just so I could get a feel for what was available in the area. I think I've mentioned before that I haven't been doing open houses, so I really don't have a whole lot of experience when it comes to looking at properties.
The very first place we visited was the one I was interested in. It was cool, and also depressing. As I was walking around outside, I realized that the street it was on was quite a bit busier than I had expected. It's a few blocks away from El Camino Real, and when looking at it on Google Maps I had thought, "Oh, all the through-traffic will be on El Camino, so this should be quieter." That wasn't the case, though... I'm not totally sure why it's as busy as it is, but a nearby grocery store may have something to do with it, and some people may just be trying to avoid El Camino. The unit was on the first floor (although the first floor is above the garage, so it's raised a little) and faces the street, which is a shame - I don't think I'd be able to enjoy sitting out on the porch with a book. On the inside, it was a better, though still a mixed story. The agent did a great job at describing what I was seeing and pointing things out - a wet bar, electric burners (boo!), real hardwood floors, badly hung window, cracked molding, un-level floor. Honestly, it was a bit overwhelming, though pretty enjoyable. As people who know me can attest, I take a while to process new information, so a lot of time was spent just absorbing my surroundings.
From there we went and visited the other three places I had selected. One was a HUGE three-bedroom condo that was built in the 60's. It had things that I've never seen before, like an electric range that slides out of the wall, and four-pronged electrical sockets. We saw a great but expensive condo in Burlingame. And then we looked at a new condo development in South San Francisco, which was quite interesting. All along I've been saying that I don't care about luxury amenities, that all I want is location and value, but I have to admit that I responded strongly to the all-new construction there. (It wasn't crazy or anything, but did have really pretty wood, nice big windows, marble countertops, and so on.) After the new condo, we stopped at one more place that the agent thought I should see, a nice, older, good-sized condo on a quieter residential street.
After the tour, I could definitely appreciate the benefits of working with an agent. Other than the new construction, at each place he could use his Supra lockbox thing and let us in with the key. It's extremely convenient to have that kind of access, to not need to worry about scheduling around an open house or dealing with other people who are there. And, again, I might not have found out about that first property if it wasn't for him.
At the same time, though, I am now realizing what all the books say: "YOU are in charge of your home search." Which makes sense; I'm the one who's spending the money, and I'm the one who knows what I want and what I don't want. I really liked the agent, but I needed to remind myself not to get frustrated when he encouraged me to look at places that I wasn't interested in, or when he checked to see whether I could go above my maximum price. He's doing his job, which is to find me a place and make sure the transaction goes through. I need to focus on my job, which is finding the place that I want at a great price.
So, we'll see where we go from here. Weirdly enough for this late in the game, I'm actually starting to look at Redfin - at a minimum, their web site has gotten crazy good and vaulted above Zillow as my go-to spot (though there is still an annoying registration process - thank you, BugMeNot!). I realized after the fact that Redfin listed the property that I had missed from Craigslist and Zillow - since they're plugged into MLS, they have access to the same data that "real" agents do. And, given that I've spent close to a year tracking prices and thinking through what I want, I have an increasingly loud and cocky voice in my head saying, "You should just go for it! You know what you want, you have the Internet, you have all the time in the world... do it on your own!" I do like the self-driven aspect of Redfin, which aligns nicely with how I approach everything else in my life.
Anyways, that's where things are for now. As always, moving forward, but very slowly. Huzzah!
I've been collecting real estate agent recommendations for a while. Early in November I interviewed one particular agent and we started looking at homes. The process has been extremely fun, extremely interesting, and extremely frustrating, all mixed together.
First of all, the agent: one of the things I liked was that he was a first-hand recommendation, from someone who had recently bought a home through him. Most of my other names were from people who knew agents, or who had friends who had used agents. Second, the agent is really friendly, with a great personality. We met in his office and chatted a bit - what I was looking for, my timeline, my finances, but also talking about mutual friends, music, and so on. So that was nice... I'm mainly looking for an agent, not for a friend, but if you're going to spend a lot of time with someone it really helps to get along with them.
My time frame is still extremely fluid; under my original plan, I still have about 4-5 months left to go, and I would be totally fine with extending that further. Really, I'm talking with agents now because of my original schedule more than any specific burning desires; mainly, I want to be set up so that if something great comes along, I can jump right on top of it, and not need to waste time lining up an agent first.
So, when I had first reached out to the agent, my message (email, yay!) was along the lines of, "I'm looking for buying X in Y area. This might be really premature, but I'm looking for a buyer's agent, and am wondering if you'd be interested in representing me." He enthusiastically responded, and we set up a time to meet.
He managed to surprise me in our very first meeting by showing me an available property that I hadn't been aware of. I've been running RSS feeds on Craigslist and Zillow for many months now in my target area, and had managed to convince myself that I was seeing everything that was for sale - not much, especially in my price range. But the very first property he pulled off was something that looked like a perfect location, and while it was above my limit, at least the far-left digit in the price was correct. He had also prepared about a dozen other properties from a wide range of geography, price, age and style. I read through them all, and later told him that the first was the only one I was really interested in, but that I'd like to look at a few others if he had time, just so I could get a feel for what was available in the area. I think I've mentioned before that I haven't been doing open houses, so I really don't have a whole lot of experience when it comes to looking at properties.
The very first place we visited was the one I was interested in. It was cool, and also depressing. As I was walking around outside, I realized that the street it was on was quite a bit busier than I had expected. It's a few blocks away from El Camino Real, and when looking at it on Google Maps I had thought, "Oh, all the through-traffic will be on El Camino, so this should be quieter." That wasn't the case, though... I'm not totally sure why it's as busy as it is, but a nearby grocery store may have something to do with it, and some people may just be trying to avoid El Camino. The unit was on the first floor (although the first floor is above the garage, so it's raised a little) and faces the street, which is a shame - I don't think I'd be able to enjoy sitting out on the porch with a book. On the inside, it was a better, though still a mixed story. The agent did a great job at describing what I was seeing and pointing things out - a wet bar, electric burners (boo!), real hardwood floors, badly hung window, cracked molding, un-level floor. Honestly, it was a bit overwhelming, though pretty enjoyable. As people who know me can attest, I take a while to process new information, so a lot of time was spent just absorbing my surroundings.
From there we went and visited the other three places I had selected. One was a HUGE three-bedroom condo that was built in the 60's. It had things that I've never seen before, like an electric range that slides out of the wall, and four-pronged electrical sockets. We saw a great but expensive condo in Burlingame. And then we looked at a new condo development in South San Francisco, which was quite interesting. All along I've been saying that I don't care about luxury amenities, that all I want is location and value, but I have to admit that I responded strongly to the all-new construction there. (It wasn't crazy or anything, but did have really pretty wood, nice big windows, marble countertops, and so on.) After the new condo, we stopped at one more place that the agent thought I should see, a nice, older, good-sized condo on a quieter residential street.
After the tour, I could definitely appreciate the benefits of working with an agent. Other than the new construction, at each place he could use his Supra lockbox thing and let us in with the key. It's extremely convenient to have that kind of access, to not need to worry about scheduling around an open house or dealing with other people who are there. And, again, I might not have found out about that first property if it wasn't for him.
At the same time, though, I am now realizing what all the books say: "YOU are in charge of your home search." Which makes sense; I'm the one who's spending the money, and I'm the one who knows what I want and what I don't want. I really liked the agent, but I needed to remind myself not to get frustrated when he encouraged me to look at places that I wasn't interested in, or when he checked to see whether I could go above my maximum price. He's doing his job, which is to find me a place and make sure the transaction goes through. I need to focus on my job, which is finding the place that I want at a great price.
So, we'll see where we go from here. Weirdly enough for this late in the game, I'm actually starting to look at Redfin - at a minimum, their web site has gotten crazy good and vaulted above Zillow as my go-to spot (though there is still an annoying registration process - thank you, BugMeNot!). I realized after the fact that Redfin listed the property that I had missed from Craigslist and Zillow - since they're plugged into MLS, they have access to the same data that "real" agents do. And, given that I've spent close to a year tracking prices and thinking through what I want, I have an increasingly loud and cocky voice in my head saying, "You should just go for it! You know what you want, you have the Internet, you have all the time in the world... do it on your own!" I do like the self-driven aspect of Redfin, which aligns nicely with how I approach everything else in my life.
Anyways, that's where things are for now. As always, moving forward, but very slowly. Huzzah!
Wednesday, April 29, 2009
Tips & Traps when Negotiating Real Estate
Oh, look at what we have here: Another book summary! Please don't expect this pace to continue - there really are just a handful of real estate books that I plan on reading, I just happened to grab a bunch of them on a recent trip to the library.
I'm paying particular attention to the topic of negotiation as I lay the groundwork for an eventual purchase, mainly because it's as aspect that starkly divides home shopping from almost any other American act of commerce. I consider myself to be a savvy shopper, and pride myself on getting the best price for almost everything. However, you can't negotiate with Amazon.com, or with Best Buy, or with Whole Foods. For most commerce, getting the best price means searching among a large number of sellers until you find that price, and then acting quickly enough to take advantage of it. In real estate, the search is still a big part of it, but even after you have found what you want, the negotiation phase can modify the price by tens of thousands of dollars. This is the sort of thing I'll only experience a few times in my life, and I want to make sure I do it right.
I was pleased to see that there is a book out there that specifically covers the subject of negotiation within the context of home shopping, and it was pretty well reviewed at Amazon. "Tips & Traps when Negotiating Real Estate" is written by Robert Irwin; this is the first thing by him that I've read, but apparently he writes a lot of real estate-related material, and also runs a web site with an annoying and intrusive registration requirement.
The book itself is extremely well written, though. Unlike "Your New House," this book is written by an expert in the field, and it shows - he regularly recounts anecdotes from his decades in the business, and speaks with a strong air of authority. The structure is very sound as well. On the broad scale, it is soup-to-nuts, covering every aspect of negotiating that you may run across. On the small scale, each chapter is focused on a particular topic, and usually includes a specific example or two to illustrate the importance of a particular type of negotiation. As he talks through the importance of a given topic, the main text is punched up with occasional "Tips" - things you can look out for to gain advantage - and "Traps" - potential mistakes that could cost you a deal or money.
If there is one overriding theme to the book, it would be, "In real estate, EVERYTHING is negotiable." Nothing is off-limits, even though it is in other people's interests to make it seem so. Brokers' commissions, sales prices, the swing set in the back yard... everything can become a part of the deal.
At the same time, the most crucial tools you can have as a negotiator are knowledge and leverage. Knowledge is crucial so you can recognize when something is a good deal, identify a reasonable price, know how hot or cold the market is so you know how much you can push the other side, and know the right questions to ask. Leverage is crucial to get the best terms possible. Whichever party has the most leverage can drive the other party. In a hot market, sellers automatically have leverage, since if they don't like an offer or buyer they have plenty of others to choose from. However, Irwin also describes ways that you can increase leverage in any market. These all make sense, although I wouldn't necessarily have thought of them on my own. For example, simply investing time can increase your leverage. If you and the other party put four hours into making a deal, and then you mention that something is likely to be a deal-breaker, the other person will be much more likely to want to accommodate you and close the deal than they would be if you had brought up the deal-breaker when you first met. Personally, I'm very Type A and I like to act quickly on everything, so I ordinarily wouldn't even consider engaging in a long conversation with an uncertain outcome like that, but Irwin's reasoning seems very sound.
The book is also valuable in the way it continues to re-emphasize things that I've read or heard from other sources: Buyers should always get a private inspection. Make sure that your agent represents you and not the seller. Give yourself enough time so you don't rush into a bad situation.
While everything is negotiable, you need to recognize that not everyone has the power to negotiate. It's a bit of a waste to spend an hour chatting up the husband if the wife is responsible for all decisions. New homes can be negotiated, but the front agent at the desk may not have the authority to change terms; you might need to get directly in touch with the builder. Similarly, loan products are usually sold as prepackaged products by salesmen, but if you already have a loan or get in touch with a loan officer, you might (in the right market) be able to change terms.
I have to say, Irwin does seem like a formidable opponent, and I'm not sure if I would necessarily follow every one of his recommendations. While he never recommends doing anything unethical or dishonest, he is a big advocate of taking a very hard line to get the best possible deal. A late chapter describes why in some cases you might want to negotiate without using a real estate agent. As he points out, even if the agent is representing you, the agent is also concerned about their reputation in the industry. They don't want to be known as the mean person, or the person who brings in the lowest price (and hence lowest commission) for sellers. You, on the other hand, will never see any of these agents again, and have no reason to hold back on arguing for the best deal you can get. When he puts it that way, I can certainly see the advantage, though it's a role I wouldn't want to play often.
A lot of the negotiation-specific things he describes are worth keeping in mind. For example, "Never negotiate at offer that cannot be closed." He cites a hypothetical: A buyer comes to you and asks, "Would you accept $390,000 for this house?" You reply, "We're asking $450,000, but I could go as low as $425,000". You've just given away $25,000 - and, worst of all, you haven't gotten anything for it. The person hasn't made you an offer - negotiations haven't truly begun - but you're already arguing from a weaker position. The correct response is, "Are you offering $390,000?" Ask them to put the offer in writing - in a form that can be closed - and only then begin negotiation.
I do feel pretty good about my overall chances in this field, thanks in large part to the knowledge and leverage pillars. By investing as much time as I plan into researching the market and educating myself, I hope to get a great feel for what's a good deal. Leverage may go up or down based on how the market is doing later this year, but even if the market warms up, I think I'll be in pretty good shape. I plan to focus my search in the fall-winter period when sales are generally slow, and because I have such a wide time frame to work with, I'll be able to take my time to look for a good deal without feeling pressure to choose any one property. As Irwin points out, at the end of the day you need to recognize when a deal just isn't possible and walk away. (And be prepared if it turns out that the other party is willing to negotiate further after all - presto, instant leverage!)
All in all, this was a great book, Irwin's praise of Nixon notwithstanding. I'll probably revisit it once more before I head out into the field for real. After all, this will be one of the most expensive purchases I make in my entire life, and I want to get every advantage that I can.
I'm paying particular attention to the topic of negotiation as I lay the groundwork for an eventual purchase, mainly because it's as aspect that starkly divides home shopping from almost any other American act of commerce. I consider myself to be a savvy shopper, and pride myself on getting the best price for almost everything. However, you can't negotiate with Amazon.com, or with Best Buy, or with Whole Foods. For most commerce, getting the best price means searching among a large number of sellers until you find that price, and then acting quickly enough to take advantage of it. In real estate, the search is still a big part of it, but even after you have found what you want, the negotiation phase can modify the price by tens of thousands of dollars. This is the sort of thing I'll only experience a few times in my life, and I want to make sure I do it right.
I was pleased to see that there is a book out there that specifically covers the subject of negotiation within the context of home shopping, and it was pretty well reviewed at Amazon. "Tips & Traps when Negotiating Real Estate" is written by Robert Irwin; this is the first thing by him that I've read, but apparently he writes a lot of real estate-related material, and also runs a web site with an annoying and intrusive registration requirement.
The book itself is extremely well written, though. Unlike "Your New House," this book is written by an expert in the field, and it shows - he regularly recounts anecdotes from his decades in the business, and speaks with a strong air of authority. The structure is very sound as well. On the broad scale, it is soup-to-nuts, covering every aspect of negotiating that you may run across. On the small scale, each chapter is focused on a particular topic, and usually includes a specific example or two to illustrate the importance of a particular type of negotiation. As he talks through the importance of a given topic, the main text is punched up with occasional "Tips" - things you can look out for to gain advantage - and "Traps" - potential mistakes that could cost you a deal or money.
If there is one overriding theme to the book, it would be, "In real estate, EVERYTHING is negotiable." Nothing is off-limits, even though it is in other people's interests to make it seem so. Brokers' commissions, sales prices, the swing set in the back yard... everything can become a part of the deal.
At the same time, the most crucial tools you can have as a negotiator are knowledge and leverage. Knowledge is crucial so you can recognize when something is a good deal, identify a reasonable price, know how hot or cold the market is so you know how much you can push the other side, and know the right questions to ask. Leverage is crucial to get the best terms possible. Whichever party has the most leverage can drive the other party. In a hot market, sellers automatically have leverage, since if they don't like an offer or buyer they have plenty of others to choose from. However, Irwin also describes ways that you can increase leverage in any market. These all make sense, although I wouldn't necessarily have thought of them on my own. For example, simply investing time can increase your leverage. If you and the other party put four hours into making a deal, and then you mention that something is likely to be a deal-breaker, the other person will be much more likely to want to accommodate you and close the deal than they would be if you had brought up the deal-breaker when you first met. Personally, I'm very Type A and I like to act quickly on everything, so I ordinarily wouldn't even consider engaging in a long conversation with an uncertain outcome like that, but Irwin's reasoning seems very sound.
The book is also valuable in the way it continues to re-emphasize things that I've read or heard from other sources: Buyers should always get a private inspection. Make sure that your agent represents you and not the seller. Give yourself enough time so you don't rush into a bad situation.
While everything is negotiable, you need to recognize that not everyone has the power to negotiate. It's a bit of a waste to spend an hour chatting up the husband if the wife is responsible for all decisions. New homes can be negotiated, but the front agent at the desk may not have the authority to change terms; you might need to get directly in touch with the builder. Similarly, loan products are usually sold as prepackaged products by salesmen, but if you already have a loan or get in touch with a loan officer, you might (in the right market) be able to change terms.
I have to say, Irwin does seem like a formidable opponent, and I'm not sure if I would necessarily follow every one of his recommendations. While he never recommends doing anything unethical or dishonest, he is a big advocate of taking a very hard line to get the best possible deal. A late chapter describes why in some cases you might want to negotiate without using a real estate agent. As he points out, even if the agent is representing you, the agent is also concerned about their reputation in the industry. They don't want to be known as the mean person, or the person who brings in the lowest price (and hence lowest commission) for sellers. You, on the other hand, will never see any of these agents again, and have no reason to hold back on arguing for the best deal you can get. When he puts it that way, I can certainly see the advantage, though it's a role I wouldn't want to play often.
A lot of the negotiation-specific things he describes are worth keeping in mind. For example, "Never negotiate at offer that cannot be closed." He cites a hypothetical: A buyer comes to you and asks, "Would you accept $390,000 for this house?" You reply, "We're asking $450,000, but I could go as low as $425,000". You've just given away $25,000 - and, worst of all, you haven't gotten anything for it. The person hasn't made you an offer - negotiations haven't truly begun - but you're already arguing from a weaker position. The correct response is, "Are you offering $390,000?" Ask them to put the offer in writing - in a form that can be closed - and only then begin negotiation.
I do feel pretty good about my overall chances in this field, thanks in large part to the knowledge and leverage pillars. By investing as much time as I plan into researching the market and educating myself, I hope to get a great feel for what's a good deal. Leverage may go up or down based on how the market is doing later this year, but even if the market warms up, I think I'll be in pretty good shape. I plan to focus my search in the fall-winter period when sales are generally slow, and because I have such a wide time frame to work with, I'll be able to take my time to look for a good deal without feeling pressure to choose any one property. As Irwin points out, at the end of the day you need to recognize when a deal just isn't possible and walk away. (And be prepared if it turns out that the other party is willing to negotiate further after all - presto, instant leverage!)
All in all, this was a great book, Irwin's praise of Nixon notwithstanding. I'll probably revisit it once more before I head out into the field for real. After all, this will be one of the most expensive purchases I make in my entire life, and I want to get every advantage that I can.
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