Find The Good In Every Offer

Every Offer we receive is better than the Offer that was not submitted.  I think I am a logical thinker  when my client receives an Offer to purchase from one person who looks at the house and no Offers from five parties who also looked at the house, the one offer in my hand is better than any of the Offers that were not written.  Regardless of the terms, this Offer is a good thing and here’s why:

  1. There is at least one favorable term in every Offer. The Offer is an invitation to talk about terms.
  2. The Offer the seller will not accept has terms only the seller and buyer will know. Any buyer sitting on the fence will be told “An Offer is in.” What’s more likely to inspire a person to move off center better than anything known to man? The fear of loss.
  3. Zero Offers leave you two Offers short of a competition. One Offer is half way to a seller’s market.

I have a chuckle when listing agents refer to Offers as “low-ball”. That comment is driven by unmet expectations, and  likely some fear of the seller’s displeasure. In the hand of a Realtor with an attitude of abundance,  that unacceptable Offer can be the most important piece of the puzzle for a client to go from here to closing in a hurry. Be grateful for any Offer and let the buying side know you appreciate what they’ve given you.

Cooler Heads Prevail

Anger and tears, intended to manipulate, have a painful affect on good people and Realtors® are people. We know anger and tears are human conditions which can be two extreme methods of control. The they cause to Realtors® is serious. Everyday, good people are being bullied, badgered, and manipulated by folks who use anger and tears for intentions only they know. Quitting the business is an option to avoid this disrespectful behavior. It’s sad to see good people  forced out of earning a living by radical reactions. Why not be kind to ourselves and establish boundaries of tolerance?

Before we build our boundary, let’s agree that anger and tears are rooted in fear. Fear of loss of pride,  ego, money, time, prestige, property, perceived safety,…etc. It’s not a lack of empathy to disconnect from participating in the drama. It’s a practice of self respect and preservation. Our ability to be a part of the solution depends on our well being.

Foundation of your boundary: You’re a good person with good intentions. You’re smart. You have a family who cares who you be. 

First layer of the boundary: This exists to give time between a person’s reaction and your participation in the conversation. It makes it clear that you are in the solution circle and not in the conflict battle ground.

Upper layers of the boundary: Make it evident so there isn’t any confusion that the boundary exists and it’s firm.

Clear messages on the outside of the Boundary:  For communication to licensees, you are well within you right to require Notices and Amendments for communicating desires of parties. Phone calls, texts, emails, do not have to be permitted from licensees who have proven they intend to intimidate. In person meetings with customers and clients are more likely to be civilized. It takes a special person to be uncivil in person…and those folks might be better served by someone who isn’t you.

Cooler heads are able to resolve problems caused by hot heads. When necessary, retreat inside of your boundary and let the situation calm down. Be careful with contingency deadlines. Anticipate that the closer we get to closing the more anxiety unfulfilled contingencies generate. Follow the terms of the contract. This is the agreement the parties committed to. Be willing to let people walk away. The less attached we are to outcomes and more focused we are to the terms, the less stress we will absorb.

You can be the cooler head. You’re smart, talented, and deserving of a career you can be proud of.

 

 

Building a House: Own The Lot, Control The Price.

Outcomes are determined by control. The residential home building process is  all about control.  Your satisfaction of the process will depend on your ability to maintain control and your wisdom to relinquish control to responsible people.

When you control the building site, you have the upper hand in everything from design (to the extent building restrictions permit) to completion date. If the outcome matters, this might be a strategy to employ.

  1. Locate a building site that fits your lifestyle, and is not connected to a builder. Unless the builder will let you build with a builder of your choice on the lot she or he is selling to you, keep looking.
  2. Get an accepted offer with necessary contingencies to do your due diligence on the lot, and include a contingency like this:  This Offer is contingent upon buyer executing a residential building contract with a builder of buyer’s choice within ________days of acceptance of this Offer. (Allow sufficient time for design, pricing, and selecting a builder.)
  3. Before you  close and take ownership of the lot, you want to know the lot is sufficient for your purpose and you have a plan that can be built by a responsible builder at a price, with the amenities you can afford.
  4. Work with an architect to design a plan.  Architects will save you time and money even if the plan is relatively simple. They should know the current building codes and have smart ideas on wise use of the space. An architect will specify materials and construction methods.
    1. While the architect is working on your plan, study up on Building Science.  Be prepared to know best practices in construction.
  5. Take your plans and specifications to builders of your choice. Ask them questions about their construction practices. Knowing a little bit about Building Science will help you ask prudent questions.
  6. The time you spend getting your specifications nailed down will come back to you in dollars and cents. Every decision made with builder’s bidding against each other is one less place for the builder you choose to have you accepting her/his price later.
  7. You’re going to get a bid from a builder. Make sure that bid includes a copy of the builder’s warranty, construction schedule, and a copy of their contract. At the end of the day, it’s a leap of faith you take with the builder you choose, but the contract is your rule book…your attorney may have some ideas to keep the rules favorable.
  8. Take out your own construction financing. If the builder tells you they can save you money by acquiring the lot from you and you buy the house as a “turn-key” finished product, ask for proof. Remember, he who has the control of the lot has the control of time and money.
  9. Include the architect in the process of reviewing the construction. The building plan is called a plan for a reason. Contractors may choose to deviate from the blue print for their benefit, but the cost to the next subcontractor on the job is your problem. Someone, and don’t expect it to be the builder, has to make sure the house is built to plan. Builders charge for change orders. You can charge for deviations and the corrections to get back to the plan.
  10. The builder gets the final payment at the time you take occupancy. If you work with an attorney on your side, you will not make the final payment without 100% of the work finished. If you do take occupancy with loose ends, an escrow of more than sufficient funds is a good idea.

As you navigate this building process, keep control in mind. Either you have it or someone else does. Control is divisible by nothing.

 

The Financing Contingency is NOT a contingency to get financing

The Financing Contingency is not what it says it is. From the date of acceptance of the Offer, until the moment the lender approves disbursement of funds (at the end of the hour of closing when all papers are signed) the buyer and seller are proceeding with a leap of faith.  The buyer does not have a protection of their obligation to close being contingent on obtaining the funds to close from a lender. And, satisfaction of the Financing Contingency is  no assurance that the seller will receive any money on the date of closing.   The Wisconsin Offer to Purchase Financing Contingency, unless modified, is only a contingency for the buyer to be able to obtain a Commitment Letter….nothing is said about the offer being contingent on getting the money.

Financing Unavailable. It happens that the loan approval process uncovers a reason that the otherwise ready and able lender is not willing to issue a mortgage commitment letter for the buyer on the terms of the Offer, or on any terms. According to the contingency stated in the contract, the buyer agreed to send written notice to the seller stating the financing is unavailable and provide a copy of the lender’s rejection letter. The next step is for the seller to take up to 10 days to finance the transaction on the same terms…unless the buyer’s agent filled out the Offer as suggested with a name of loan source.  Because it is common practice to write in “Conventional Loan” even though the offer prompts in capital, bold letters (INSERT LOAN PROGRAM OR SOURCE), buyers are sometimes in an unattractive spot waiting up to ten days for sellers to release them from the contract.

 

 

 

 

 

Will It Work?

Nahum Waxman, author of Cooking Dumb, Eating Dumb gets asked, “Will the recipe work?” His answer is deeper and clearer than a yes or no. Nathan says in essence,  It is they who must work, and think. They must apply intelligence to ideas.

The moment you sit down with a blank real estate contract and a client with hopes, you apply your intelligence, your insight, your creativity to crafting a plan. Whether the plan works depends on whether you think, work, apply your insight.

You can do it.

She’s 78 And Selling 262 Homes in WI

Born in 1938, at the height of the Great Depression Fannie Mae has aged well. Like your grandma, Fannie Mae is kind, easy to get along with, and unlike Grandma Lucy, she has about  262 homes in  Wisconsin for sale. Fannie is smart. She didn’t set out to be a titanic real estate owner, she got there the new fashioned way…people she guaranteed would never, actually did, walk out on their home mortgages. (NOTE: No judgment (on the public) here. Public policy, corporate greed, lender malfeasance, illegal real estate practices, forced people into decisions they would never have made.) And just like that Fannie’s phat with homes for everyone. And by phat, I mean she’s EXCELLENT!

Want to be a home home owner or  a hero to someone? State at Homepath.com . Fannie is internet savvy. She built a fast, accurate, easy to use on-line process for finding homes and making offers. It’s so easy, us Realtors® can use it. Full disclosure, my first time through I challenged the system because, well because I do that. And I learned for you…don’t do that. Don’t challenge the system . Roll with it. Fannie isn’t demanding you jump through hoops; more like fill in the boxes. Follow these steps and you’re on the path home:

  1. Fill out your State Offer to Purchase Form
    1. Skip the inspection contingency and financing contingency…Fannie has her own
  2. Fill out the Fannie Mae Addendum…basically this form says we agree everything we  have for conditions in our State Offer to Purchase form attached is over ridden by this Addendum. That’s cool. The Addendum is easier on the Buyer than the WI Offer to Purchase which has a seller advantage slant.
  3. Fill out any other (there may be one other) Fannie Mae form
  4. Have your buyer sign in ink. If Fannie is accepting digital signatures today I’m not aware. Do it old school…sign in ink. Black ink. Use your best penmanship…Fannie want’s Catholic school quality cursive.
  5. Find the home you’ve written the offer for on Homepath.com and click on Make An Offer
  6. You  are now just entering digits and short summaries of contingencies…that’s easy!
  7. Last you upload your documents:  Affidavit of owner occupancy (investors are not permitted for the first 20 days), pre-approval letter, Offer to Purchase, Fannie Addendum)
  8. Submit your Offer and wait mere hours for a response…Fannie doesn’t work on weekends, but she’s efficient.

Go and be bold. Be fearless. Be Humble. Fannie is fair but firm…play by her rules and you’ll be happy. She guarantees it.

 

 

Rejecting the Broker Offer of Compensation…Why do we do THIS?

You’re the Agent of the Buyer. You have a Buyer Agency Contract with your client to pay you 3.0% of the Purchase Price at closing as your Buyer Agent Broker Fee. You draft an Offer to Purchase on a property listed by a Broker member of the Multiple Listing Service you belong to. The Offer of Compensation made by the listing  broker to your broker is 3.0%.   Why does your buyer client’s Offer include a provision that states their broker (you) reject the Offer of compensation from the listing broker, and require the Seller to pay your 3.0% buyer agency fee at closing?  These are the mythical reasons we still  do what we’ve been doing for years:

  1. If I don’t accept the broker’s offer of compensation the broker can not take me to arbitration and recover the commission on the grounds that I did not procure the buyer. Not true since January 2005 when Article 17, Standard of Practice 17-4 was amended. If you didn’t procure the buyer you’re not safe from arbitration. You might have the money in your account but you are at risk.
  2. The listing broker might reduce the commission without my permission. This can’t happen. Article 3, Standard of Practice 3-2. Once the Offer is submitted, the fee to the cooperating broker is set as disclosed. You can agree to receive less, but a unilateral reduction is violation of the code of ethics…you can collect in arbitration.
  3. I will get my check at closing instead of waiting fro the listing broker to send it to my broker a week after closing. Back in the day that was true. Today the title company issues the check to the selling broker and a check to the listing broker.
  4. That’s the way we always do it. and That’s the way my broker told me to write the Offer.  Yes. That’s probably why,  but it’s not reasonable.

Are you interested in an idea as to why we might not want to include that language

  1. When the Buyer Broker fee is paid by the Seller as part of the Offer, the fee is as open to negotiation as the price, closing date, included items, and everything else that might make a difference to the Seller’s bottom line.

If you have another opinion based on a fact, I’d like to hear your thoughts.

 

 

Hottest Trend in Real Estate; Price Escalation Clause

Smart homes, modern kitchens, latest paint colors, big houses, not-so-big houses, the trends never end. This year’s popular trend is not in a can, a box, or a store. It’s an idea. Before you pick out paint, new kitchen appliances, or the latest in bathroom fixtures, you’ve got to get your Offer to Purchase on the house accepted. It’s  seller’s market in South Central Wisconsin where Necessity has once again proven to be the Mother of Invention. Her latest creation is the “Price Escalation Clause” and it’s a powerful idea.

Here’s how it works: House comes on the market at $300,000. Buyer A makes an offer for $300,000. Buyer B offers $310,000. Buyer C, knowing nothing about the other offers, is determined to get her offer accepted. She’s qualified to purchase up to $350,000, and this house is perfect for her. Buyer C writes her offer  as a Purchase Price of $298,000, with a clause to escalate her price if the seller has any offers for more money than the $298,000 she offered, to a price of $1,000.00 higher than any bona fide offer, with a maximum purchase price of $315,000.  Seller likes all of  the offers but likes $315,000 best. Buyer C goes from 3rd best offer to Accepted Offer because she let the seller pick the price, provided it was only $1,000 more than any other offer and not higher than $315,000.

Pretty easy right? Maybe not. Real estate brokers and lawyers recognizing the opportunities for foul play crafted  contingencies which may be more complex than necessary. Everyone has an idea and it seems every idea is incorporated into one of the dozens of versions of an escalation clause. Typical of first generation vehicles, these non-uniform contingencies are overbuilt and cumbersome to navigate.

Here’s a simplified price escalation clause  to help you understand the concept. Check with an attorney before using a version of any escalation clause. This one is only for an example, not to be used in your offer.

The purchase price of this Offer shall be $1,000.00 greater, up to a maximum price of $_________(a), than the purchase price of any bona fide offer the seller has received at the time of acceptance of this Offer.  Along with this accepted Offer, Seller shall send written notice to buyer stating the purchase, which shall be no more than $1,000.oo more than said bona fide offer and not more than $___________(a). Buyer and seller agree to promptly execute an amendment to state the purchase price as the amount given on said Notice from Seller to Buyer.

Broker and lawyer crafted contingencies call for the seller to provide the buyer a copy of the competing offer to prove the purchase price of the other offer. You’ll even see the term Net Price used to account for credits and concessions before calculating the escalating buyer’s offering price. Both conditions are good ideas. Whether or not they are necessary depends on the buyer. I believe the need for proof of existence of other offers is overblown, and calculating Net Price is splitting hairs.  Everyday as long as there have been more than one buyer for a property, buyers have offered more money than they might have otherwise, because they knew or thought another offer was coming in to the seller. Never, ever do those buyers require proof that their offer wasn’t already better than the one that did or did not come in. I believe in requiring the sharing of competing offers, we’re are adding a solution where no problem exists.

The easiest offer for a seller to accept is one that is easy to understand, and includes a  preferred price. Keep it simple and legal to have a better chance of being the next owner of the home of your  dreams….oh yes, there is still the issue of appraising for the purchase price. Seller’s be careful…make sure you are protected against appraisals below that escalated purchase price. Appraisers and underwriters are not as inspired as buyers and sellers to put unsupported values on properties.

Always use an attorney to review your contracts.