Negotiating an offer to purchase - something that makes me want to shout "NO"

By
Real Estate Agent with Keller Williams Realty - Lakeside Market Center

The other day I was in a Macomb County MI real estate office
(I won't share which office) when I overheard a conversation
taking place by an agent and hisOne of the things that make me want to shout "NO" buyers (paraphrasing below):

Let's just write the offer and get it accepted.  We know it really doesn't stand a chance getting past the appraiser price wise, so at that point we'll just go back and tell the seller that they have to accept the appraised price.

It took all I could to not go into that adjoining conference room and give my 2 cents about this tactic. 

 



In my opinion I would not be representing my clients interests if we took this tactic for several reasons:
   First, my clients will be paying out of pocket for a home inspection and an appraisal.  Secondly, a seller never has to renegotiate a purchase price once it has been agreed upon.  They can walk away if an appraisal comes in lower than the contract price.

Setting up buyer clients to fail with their purchase is never a good business practice.   If a savvy investor wants to use this tactic then by all means, let it fly.  For first time home buyers I would never advocate for this.  Falling in love with a home and then losing it is too heartbreaking and frustrating for most home buyers.

My negotiating tactic?  (For some reason I don't like that word..but it fits in this scenario)  Education.   I research the heck out of a home and the location prior to my clients writing an offer.  We sit down and go over the recent sales of homes that are similar to the home that they wish to purchase.   In doing so my clients are able to make an educated decision about how much to offer for the home and be reasonably certain of being successful in their purchase.

No guess work.  No delay tactics (using an appraisal).   Just good old fashioned hard work for clients.

EDIT: Please read the comment section and specifically, Lenn Harleys comment that deals with conventional mortgages and another concern with this type of pre-purchase offer tactic.



Photo courtesy of BiscuitsMLP via Flickr Creative Commons Licensing

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  1. Donald Bradbury 03/01/2009 08:38 AM
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appraisals coming in low on a home purchase

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Rainmaker
69,683
Loan Survivor Real Estate Financing Expert
Purchases, First Time Buyers, Pre-Approvals, Refinance - Birmingham, MI

Wow, I'm impressed with how many professionals on AR are against this type of practice.  If only the boards were this adament about professionalism.

Mar 01, 2009 03:57 PM #51
Rainer
73,749
Dan Magstadt
CrossCountry Mortgage - Lake City, FL

You're 100% right Kris, it would never be right to write up an offer knowing that it will never appraise.

Mar 01, 2009 04:25 PM #52
Rainmaker
608,070
Teri Eckholm
REMAX Results - White Bear Lake, MN
Acreage & Lakeshore REALTOR Minneapolis St Paul

Kris--Strange tactic for a professional to use. I would think that would be a risky play...what if it does appraise at the written price? Taking short cuts hurts everyone.

Mar 01, 2009 04:50 PM #53
Rainmaker
558,729
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Kris -- I agree, not a good tactic.  In our standard board-approved purchase offer forms, the earnest money is not at risk if the financing is not approved, but every area is obviously different.

I think this buyer's agent did a huge disservice to their client.

Mar 01, 2009 05:40 PM #54
Rainmaker
495,586
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

The right way to do this is to write a letter to the seller with supporting maket stats for the price your buyer is offering and educate them as to the why's of your offering price.  Our job is to represent the best interests of our buyer clients and to educate them.  This agent failed at both and it's great to see the professionalism of AR shining thru.

Mar 01, 2009 06:58 PM #55
Anonymous
Debbie Clifton

Kris that is why Realtors have a bad name. There are some out there that don't care. They do whatever they feel like doing and don't care who gets hurt in the process. I try to treat all my clients the way I would want to be treated. It works for me. I like referrals.

Mar 01, 2009 07:03 PM #56
Rainmaker
76,591
Jennifer Walker-Derby
Re/Max Westside - Marietta, GA
Real Estate Extraordinaire

agreed!  and I thought all the part-timers had been weeded out of this market by now!

Mar 01, 2009 09:01 PM #57
Anonymous
Celina Gleason, Realtor (AgentOwned Realty-Manning, SC)

Fantastic post and brilliant comments.  However, in my scanning them all, I did not come across any that mentioned the "heck-bent on having this house" buyer's syndrome.  I recently experienced this phenomenon - AGAIN.  I spent hours explaining the facts to my buyer.  We poured over recent comps and active listings all the while attempting to convey to the buyer that he really should not increase his offer any higher because it may make the appraisal questionable.  This time, my efforts were futile.  He was determined to try anyway.  Don't know about you guys, but in my state, when your "Client" tells you what his wishes are, you simply have to do it.  Our state laws concerning Agency clearly states that we are bound to our clients by obendience.  Of course, I explained the possible repercussions and had him initial my comp package.  Luckily, our state contract allows for the seller to revisit the sales price if the appraisal does not pan out, and if seller refuses, the buyer can walk away without penalty.  Also, a good buyers agent will include an Addendum that spells out earnest money safeguards.  Seems like there are exceptions to every rule and as badly as I hated to do it, I was bound by representation laws. The appraisal has not come in yet.  I'm holding my breath as I submit my two cents. 

Mar 01, 2009 11:31 PM #58
Rainer
80,229
David Painter
Keller Williams Realty - Spartanburg, SC

It is amazing what some agents will do to try to put a deal together. When it comes down to it, you are always better off to just tell the truth. But always have the numbers to back it up.

Our team sits down with our clients, both buyers and sellers and we explain the entire process. We have printed, bound booklets that we give to our clients. When clients enter into a transaction with us they have both eyes open.

Mar 02, 2009 12:00 AM #59
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Drew:   I wish I had heard the whole conversation, there may have been a reason for it.  To me though, the pitfalls would outweigh any good that could come of it, at least for first time home buyers.

Dan:  That would make me a nervous wreck waiting for the appraisal.  And my buyers I would think...

Teri:  Exactly.."what if?"  Lenn Harley pointed out in her comments what could happen in her area if it did appraise.  Scary.

Chris:  Unless there was something written stating the home must appraise for purchase price I could see real issues coming down the line...

Lora:   That's what I do here...educate with supporting data and write the offer that my clients want me to write. 

Debbie:   I like referalls also :-)   The meat of it is - did the buyers know there $$ could be at risk?

Jennifer:   I have nothing against part time agents, I was one myself years ago.  Tough road to go but I did it.  I also have no idea if this agent was full or part time.

Celina:  No need to hold your breath - your comment was welcomed and made sense.  You explained all the pitfalls to your clients and they really wanted the house.   They knew the risks.  Sounds like you did a great job.  As I said above often, I left the building so I don't know if the buyers in this case were told about the risks of doing such a thing, but I hope that they were.

David:   It's a continual education isn't it?  The whole time we're out with clients they're asking questions and we're helping them.   By the time we come to the offer period they can feel confident in their decisions.

Mar 02, 2009 03:42 AM #60
Rainmaker
144,725
TheMillsTeam YourSebringRealtors
ERA Advantage Realty - Sebring, FL
863-202-0729

I don't understand why the seller should come up with the difference. I'm assuming the contract is bilateral, meaning seller and buyer have agreed to a purchase price, which turns out to be higher than the appraisal. The seller doesn't have to accept the appraised price. The seller already accepted what the buyer offered.

Mar 02, 2009 05:32 AM #61
Rainmaker
179,805
Tara Camp
Keller Williams Western Realty - Bellingham, WA

Good Post, lots of great comments.  We also have the appraisel less than purchase price built into our financing contingency.  I think this can be seen as a liability or a negotiation tactic, depending on the way the agent writes the offer and the clients he/she is representing.  Do we have all the pieces of the puzzle? No...so who are we to judge? 

Let's just assume that the buyers had just said we're willing to pay the asking price, but we'd prefer to pay the appraisal price?  And to them he replied, we'll use this as our negotiation strategy...Let's just write the offer and get it accepted.  We know it really doesn't stand a chance getting past the appraiser price wise, so at that point we'll just go back and tell the seller that they have to accept the appraised price.

 

Mar 02, 2009 09:50 AM #62
Ambassador
1,290,674
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

I just had a similar case. Our buyer wanted a house that is seriously overpriced by at least $40k. I asked if the listing agent could provide better comps, because I was afraid it wouldn't appraise at anywhere close to list. Seller's agent said: write it up. It probably won't appraise and we'll deal with the issue then." He knows it's overpriced and perhaps is using our offer to get a price reduction???? No way. We wrote it up for what the comps came in at.

Mar 02, 2009 09:54 AM #63
Rainer
22,617
Celina Gleason
AgentOwned Realty - Manning, SC

In response to Andrea's comment:  In this particular case, the seller (not my company's listing) was not realistic with their list price to start with and has played a ridiculous game of hardball throughout the entire ordeal.  In this case, the Seller OUGHT to have to come up with the difference (in my opinion). 

Mar 02, 2009 09:54 AM #64
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Andrea:   That was one of the issues that I thought of - a seller never has to come up with the difference (unless of course that is something that is pre-agreed to in the contract)   Years ago I had a seller walk away from a deal rather than re-negotiating a couple of thousands of dollars.

Tara:   You are absolutely correct and is something that several people brought up - I did not hear the whole conversation and therefore was pointing out the pitfalls if a buyer (especially a first timer) does not understand the risks involved.  In the scenario you described I can see how that would play out and perhaps would be a negotiating tactic that is acceptable to fully aware buyers.

Erica:   I'm curious - did the seller accept your buyers offer?  

Celina:  The person that is hurt when a seller is having a difficult time understanding the market (and playing hardball as you said) is the seller.  The home rarely sells.  

Mar 02, 2009 10:26 AM #65
Anonymous
Anna Matsunaga

Wow, what did they propose to do if the appraisal came in @ offer price?

Mar 02, 2009 11:25 PM #66
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Anna, I don't know.  It would be interesting to find that out.

Mar 03, 2009 05:25 AM #67
Rainer
288,485
Diane Aurit
LKN Realty, LLC - Mooresville, NC
Lake Norman Real Estate

Kris, Thank you for sharing this story...it is way too common these days.  I couldn't agree with you more.  All parties get hurt in this case.  That agent is one of the reasons why Realtor's suffer from a low level of respect.  Hopefully this market will weed agents like him out!  Your clients are so lucky to have you!

Mar 03, 2009 09:07 AM #68
Ambassador
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

No seller rejected the offer with no counteroffer. Buyer walked.

Mar 03, 2009 06:54 PM #69
Rainer
339,851
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

Diane:   I hope there was sound reasoning behind this strategy, but I don't know that there was.

Erica:  Ouch for the sellers, but wise move by your buyers.

Mar 06, 2009 05:15 AM #70
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Rainer
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Kris Wales

Real Estate Blog & Homes for Sale search site, Macomb County MI
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