Google
from Local Attorney, Michael H. Wasserman

Tuesday, May 5, 2009

NEGOTIATING A BETTER CONTRACT - 6 THINGS EVERY SELLER NEEDS TO KNOW, NOW

Two days ago, I wrote about the re-emergence of multiple offer transactions. In response, I heard from a number of real estate agents who confirmed that they are encountering this phenomenon. I also have heard from another of others who essentially groaned and who all collectively wished for just one stinking offer, at this point, any offer.

They are, almost certainly, still be in the majority - which lead me to states an obvious truth:
These days, it (still) is really very hard to find Buyers who are willing to submit a written purchase offer.
and perhaps a somewhat less obvious truth:
That's just half the battle.
Its just as hard (harder?) to get contracts to close. Doubt me on that one? Ask any realtor or real estate lawyer, mortgage broker or loan officer. Ask at the title companies too. They will all likely sigh heavy and confirm it. A great many contract are taken that never close. Even the contracts that can and do close have their problems. These days deals are just as likely to close late as on time.

Some times it is the Seller's fault. Other times, it is the Buyer. More often than not, there is a mortgage lender on one side of the deal or the other that is going to shoulder some of "the blame."

Closing on an offer in no sure thing. Not with any reasonable degree of certainty, anyway. Until the markets stabilize, signing a contract is best viewed as a calculated risk for the Seller... an expensive one at that.

Whatever the reason, unclosed contracts serve nobody well. No home/shelter for the Buyers. No money to the Sellers. No commissions earned for Realtors or mortgage brokers. Everyone incurs costs. Other opportunities will have been lost. The time invested in putting the deal together? all for naught.

HOWEVER, with care and caution, savvy Sellers, and the real estate agents & attorneys that represent them, can minimize those risks of delay, disappointment and dashed hopes of a closing.

I have been studying several recent instances of canceled deals trying to understand why these contracts are not closing - and what can be done to improve the odds. I have looked at both deals I have worked on personally, and had some extensive conversations to debrief colleagues and other business associates about their recent transactions.

My research points to six critical steps that every Seller can (and should) take as they market their homes and consider offers from potential Buyers.

These ideas will be described over the course of several upcoming blawg posts.

Hello Old Friend

Ladies and Gentlemen, mothers, fathers and children of all ages,

please direct your attention to the center ring.

back from an extended absence,

returning to critical acclaim,

and the jubilant cheers of its many fans,

I GIVE YOU:

MULTIPLE OFFERS!

I don't have any statistical data to back me up on this one, but in talking to real estate agents over the past couple of weeks, I was pretty taken aback to hear multiple stories of buyers and sellers finding themselves in multiple offer situations (negotiations in which more than one buyer wants to purchase the same property... bidding wars). 

Bidding wars were well known in my practice, and in the larger marketplace during the go-go or boom years. Buyers were so desperate to win a Seller's acceptance that they were paying more than the asking price, and waiving protective contingencies such as inspections, mortgage financing and sale-of-other-property requirements. 

I had not, until just recently, seen one in many, many moons. But now, it seems our old friend has returned. Is this a good omen for the markets?

Yes. Clearly, yes. Multiple offers indicate that at least some Sellers have hit the right price point, low enough that Buyers are recognizing value opportunities and are confident enough to go forward with purchase offers.... in numbers large enough that more than one Buyer is ready to pursue these "right" properties. 

Multiple Offers make for winners and losers. Winners get to go forward on their deals. Losers, burned by the experience are (typically) quicker to move on to the next opportunity and will likely "pull the trigger" on an offer sooner, lest they miss out again. Other Buyers will also hear of these developments, which will also colour their perceptions of the market, add to their confidence levels and when this happens, the overall market velocity will (in my estimation, anyway) quicken. 

So what properties are the subjects of these bidding wars. Again, I have only anecdotal evidence to work with, but for the most part, I am hearing about multiple offers following in reaction to significant price drops for two specific types of properties; north side condominiums, and recently built but never sold single family homes  (mostly selling at or near $1 million). Again, this is only anectdotal, but the pattern seems pretty apparent from my vantage.

For me, the only question that remains is "who are the sellers?" If these are resales, then the news is even better. The market might be finding its bottom, and perhaps these particular sellers have even "under priced" their homes in relation to it. If these multiple offer deals have been mostly REO and pre-foreclosure sales, then perhaps the market still has a bit farther to go before reaching that bottom.

I am still seeing significant price differentials between otherwise comparable REO properties and conventional resales. Until that gap is bridged, non-distressed owners will continue to be at an ongoing disadvantage to the owners of the distressed properties.

The main point however remains. Whatever the circumstances of the Sellers, several (and hopefully, soon, many others) are finding that not only is there A BUYER out there who wants their property, there are actual SEVERAL BUYERS who do.