Is "10 Steps to Win Over Sellers" a winner?
Regular readers—usually I append this with "both of them", but I have a feeling I'm up to three readers—know that I sometimes take exception to the real estate advice offered by the mainstream media. Regular readers also know that I just showed a gift for understatement.
But occasionally I find an article that makes sense, or at least partial sense, or at least wants to make sense. I'm happy to say that "10 Steps to Win Over Sellers", which appeared August 3 on MSN Real Estate, is such an article.
We'll get into MSN's sure-fire formula for charming the pants off sellers in a moment, but first I'd like to relate that the reason this topic appealed to me may have something to do with the fact that I'd just spent the afternoon winning over a seller and her agent with nothing more than an offer $150k below list price (already reduced $200k from the original list) and whatever gifts God gave me. Of course, it was otherwise a good offer, every "i" dotted and every "t" crossed, well-packaged and well-presented if I say so myself. I even wore a tie, which seems to be a real hardship for some agents.
Now let's see how MSN would have approached the task at hand.
1. Buyers should be pre-approved "so that they can close in about 10 days". I know that in many parts of the country, buyers still get by with the old-fashioned quickie "pre-qualification" letter, but in this area virtually every seller is going to want to see that the lender has taken the time to look the buyer over closely, verifying income and assets. Because you can bet that some underwriter is going to look that buyer over with a magnifying glass, once she gets in contract, but by then it's a little late to protect the seller from an exploding buyer. Which is why every buyer here has to be pre-approved to be taken seriously. As far as "closing in about 10 days", that's a neat trick these days unless you're an all-cash buyer. Heck, it takes an underwriter ten days just to put on his green eyeshade and sleeve protectors. Not that they're getting picky, but I heard of one underwriter who disapproved a loan because the buyer's credit card statement showed he'd bought take-out in Modesto, thereby "proving" that he lived in Modesto, not in the Bay Area city he claimed as his residence. And this buyer was putting down, not 20 percent, but a full 40 percent.
2. Have the sellers made an offer on another home, or are they working against any other kind of deadline? Certainly good information to have, assuming their agent is willing to share it.
3. Make a clean offer, one without contingencies. Presumably, MSN means doing without the contingencies buyers normally have to verify property condition, their ability to get financing and the home's ability to appraise at the contract price. To which I say, sure, but has MSN ever had that conversation with a buyer, especially a first-time buyer convinced the home is riddled with costly defects? Or worried that he really will get the financing the lender promised him? Or that the home will appraise? The phrase "throwing your brains out the window" may come up, and your credibility with your client may go out the window too. Sure, the first concern is usually just first-timer jitters, but given the squirrelly state of the mortgage industry these days, the latter two are legitimate.
4. Offer to top the highest competing offer by $500. It gives you insight into the cost of homes outside this area to learn that out in the hinterland an extra $500 might be enough to tip the scales in your favor. Here the sweetener would have to be at least $5000, and most likely $25,000 or more. But it sounds like a clever idea, right? And it even has a name or two: "sharp bid" or "relative bid". Sharp bids had a brief flurry of notoriety back during the dot-com market, and again during the most recent boom, but they scare brokerage attorneys because the seller doesn't have to show you the offer you're trying to top, which apparently leads to all kinds to misunderstandings, which apparently leads to all kinds of litigation.
5. Offer a bonus if the deal gets done quickly. First of all, I want to point out that the preferred word here is "transaction", not "deal". "Deal", as a veteran agent in my office recently pointed out (and not gently) to an agent complaining about the tough "deal" she'd just had, is a word wheeler-dealers use. Second, I'm not sure what kind of bonus MSN refers to, or even who gets it. Bribe the seller if he accepts the offer quickly? Then make the offer so good he'd be a fool to counter or think twice about accepting it. Bribe the seller if the escrow closes quickly? Sellers are rarely the reason there's a delay. Bribe the listing agent? Now there's an idea.
6. Offer a 10 percent earnest money deposit. Not a bad idea, and even a good one, given that the downside risk to the buyer is minimal—as long as the buyer doesn't bail after releasing her contingencies. Because if she does, there's no guarantee she'll get all or even part of her deposit back.
7. Waive the appraisal contingency. Back in the day, when appraisers were into their Will Rogers act and could honestly say they'd never met a home they didn't like, this was a buyer risk that wasn't: the home would appraise. Today it's no gimmee and, as MSN points out, "the buyer will have to be willing to pay any difference between the selling price and what the bank is willing to lend". Which the buyer might be wiling to do, if she had the cash, and if there was more certainty in the market.
8. Waive the inspection contingency. It's certainly done in hot markets, especially when the sellers have their own inspections to offer buyers. About a month ago clients of mine came in second (out of five offers) to buyers who were willing to accept the seller's inspections, even though those inspections were two years old. You've got to be either a very trusting or a very battle-scared buyer to accept two-year-old inspections.
9. Offer full list, preferably in cash. Well, MSN, it all depends. When you're competing with four other offers, full list will land you solidly in fifth place, at least in this area. But when you don't have competition, offering full list is offering too much, unless there's been a very recent and very radical price reduction. And by all means, offer cash for a $1.5M house, if you've got it.
10. "Write a love letter to sellers, telling them all the things your client loves about their home." Something I've been doing for years, except that I don't write the letter—I'm usually not the one who's fallen in love with the house—my buyer does. Because her letter is more heartfelt than mine could ever be.
Which brings me back to that afternoon I mentioned at the top, the one spent "selling" an offer well below list. Except that I didn't "sell" the offer and never have sold an offer: that's for wheeler-dealers (I think; I may need to get back to you on that). I believed in the offer, thought it a fair offer and probably the best offer the seller would get. My clients and I broke most of MSN's rules, but I did have them write a "love letter" and for once, the seller and her agent actually read it carefully. Because the letter assured the seller that my clients wouldn't tear down the home that'd been in her family almost fifty years, the home she'd grown up in. On the contrary, my clients cherished everything that made the home, an adobe built in the early '50s with lots of Spanish Colonial touches, so special to those of us who cherish special homes. And this was one time I'd fallen in love with the home as much as my clients.
Which suggests that when all is said and done, it's not about checklists. Checklists are for wheeler-dealers (I think; I may need to get back to you on that). It is about treating sellers as human beings. All of them deserve it. Most of them respond to it.