The 7 Biggest Home Price Negotiation Blunders

Face time - it can be a good thing

CONTROLLED face time can be a good thing if you find that your negotiatons are hitting a brick wall. If you are a buyer, ask that your buyer's agent set up a meeting with you, your agent, and the seller's agent. This gives you a chance to articulate your position and have both sides represented.

If you are a seller, you can ask for a meeting involving your agent and the buyer's agent, with you present.

I do think that all parties should generally avoid buyers and sellers meeting independently, or even at all during the negotiating process. Emotions get in the way. Real estate professionals are not emotionally involved.

One thing that never ceased to amaze me as a realtor was this: Generally you are working with buyers and sellers who are working professionals or who have worked in a professional environment in the past. You would think that they would approach their real estate transactions with a level of professionalism. But often, that is checked at the door. Their ability to control their emotions (an ability that I assume they have utilized in their professional careers) often slips when it comes to the emotion-charged issue of their family's home - an extension of themselves, so to speak.

That's when a good Realtor, lender, insurance agent, inspector, appraiser, etc. can step in with objectivity and guide them to the best financial decisions.

Melanie Poland of TX @ Aug 10, 2008 14:21:41 PM

Mandatory Continuing Education Courses

IF YOU THINK M.C.E. COURSES ARE JUST A CHANCE FOR VISITING, AND A FREE LUNCH, YOU SHOUD TAKE THE CHAMPIONS REAL ESTATE SCHOOL M.C.E. COURSE ONLINE...IT COVERS A LOT OF REAL ESTATE INFORMATION...ESPECIALLY CONCERNING NEW R.E. LAWS, R.E.TRENDS, ETC., ETC...IT'S NOT A "CAKE WALK". I'VE HELD A R.E. LICIENCE FOR 44 YEARS AND HAVE NEVER FAILED A R.E. COURSE, BUT I FIND THE CHAMPIONS COURSE CHALLEGEING...YOU'RE ALSO ALLOWED TO CHOOSE COURSES/SUBJECTS THAT YOU FEEL THAT YOU DO NEED ADDITIONAL INFO/TRAINED IN, TO STAY ABREAST OF THE EVER CHANGING R.E. PROFESSION.. AND, YOU CAN TAKE THE COURSE IN YOUR UNDERWEAR!! SOCKS ARE OPTIONAL!!

R. PALMORE

TEXAS

RANDALL B. PALMORE of TX @ Aug 10, 2008 13:19:25 PM

The 7 Biggest Home Price Negotiation Blunders

In a lot of aspects it is too easy to get a real estate license compounded by the fact that most new agents are allowed to practice with little to no direction. Intially they start out "practicing" on friends and family until that pool dries up. Dealing with one of the if not the largest investment most people and families will make in their lifetime, it is not the place for "OJT". It's not in the client or customers best interest.

Negotiation is a large if not the primary part of our business, from agreeing on the listing agreement terms and broker fee, to negotiating a price reduction, to negotiating a sales contract between a buyer and seller, to negotiating repairs, to negotiating last miniute issues that may cme up at closing. Lets face it negotiations are our business!

Real Estate Agents should go through an apprentice program before they are allowed to practice on their own. Yes some companies have "mentoring programs" some work, some don't, some good, some bad. There is more to mentoring than a 50/50 split with the rookie.

Whoever, it's not just new agents who are an issue, there are a number of older agents and brokers who spend their 10-12 hours every two years in continuing "education". Education in a lot most instances amounts to a few lectures, visiting with other agents and brokers, maybe a sponsor provided lunch or two and their done for the next two years until it's time to meet and visit again.

Certifications and Designations should be a requirement as part of maintaining a license with representation and negotiation classes being mandatory as core classes. A refresher every 4-5 years for all would not hurt either. As a licensee it's my duty to clients to know and expand my knowledge and skills as REALTOR(R) and State Licensed Professional.

I have sat across from too many brokers who have no idea or indicate they were not aware of a client situtation, issues or NAR ethics violations until they received notice of a grievance or arbitration hearing they're been "invited" to attend with one of their agents with the option of having a lawyer in attendance.

KJR of TX @ Aug 10, 2008 12:54:50 PM

Buyer's Agency

Sorry - I just had to add something else - LOL.

A buyer's agent takes a big risk if they are working with a buyer and don't have a contract signed. Here's what they risk:

* Tanks of gasoline running buyers around for three weekends in a row showing them dozens of homes

* Buyers who want the access to the homes and the MLS but then go behind the agents' backs and contact the sellers directly

* Sellers who know their listing contract is about to expire and tell the buyers to wait just a few weeks and they can avoid paying the realtors altogether

* Buyers who use one agent to show them homes and then have their out of town sister in law who is an agent write up the contract - she gets paid and the showing agent gets stiffed

All that being said, in the five years I sold real estate, I never did insist on a buyer signing a contract with me. That's because I knew I was going to follow up with them, cover my bases, and stay in the loop. I also knew that if I didn't earn their business, I didn't deserve the commission.

The flip side is this: If I was working with a buyer and I noticed a lack of commitment to me, or a pattern of deceit or evasiveness - I would drop them like a hot potato. My time is precious too and I preferred to spend that time with ethical buyers and sellers who took their real estate decisions seriously.

I loved selling real estate and would still be in the business if I hadn't married and moved to a new area. Also, in a new marriage, the nights and weekends required of Realtors would have been a strain. But I respect the role that good realtors play in a successful transaction.

Melanie Poland of TX @ Aug 10, 2008 12:36:57 PM

Take Responsibility for your own actions

Ann Onymous, you sound very bitter. Maybe you got burned somehow in a real estate transaction. However, those homeowners who put low or no money down to purchase a home they could not afford and are now suffering from the mortgage crisis need to also take responsibility for their actions. They may have been taken advantage of by their realtor or lender as you say, but many knew they couln't afford the homes they were getting and are also guilty of being greedy. I am an insurance agent. While you think agents dont produce anything nor deal with the consequences, I beg to differ. Inusrers pay out millions, sometimes billions, in claims for wildfires, hurricanes, tornados, fire, water damage and more every year. I bet if your house burned down one of the first people you would look to for help is your agent. Obviously, bad apples come in all forms and professions, but there are many excellent realtors, lenders and others out there who assist financially qualified applicants in their home purchases on a daily basis. Those homeowners who purchased within their means are not suffering from the mortgage mess as much as those who did not.

Therese Belle of TX @ Aug 10, 2008 12:31:13 PM

Face Time

Having "Face Time" is your worst suggestion yet! The whole reason to work with realtors is so that personalities don't get in the way. Why should it be that just because you don't personally like the seller/buyer that negotiations should get meaner or if you do like the seller/buyer they should be "nicer". This is a business negotiation and there is not room for personal contact that could stand in the way of the goal of the buyer (to purchase a house) or the seller (to sell a house). We are not selling personalities here.

Carol Czitrom of NY @ Aug 10, 2008 12:18:24 PM

News Flash - Realtors didn't cause the mortgage crisis (DUH!)

As a former Realtor in Texas, I sold real estate in a booming local market (2000 - 2006). At the time, real estate in the neighborhoods I was focusing on was appreciating at 10-15% PER YEAR. Anyone with any sense, from buyers to sellers to real estate professionals, ought to know that sort of growth can't go on forever. It's each investor's responsibility to research the local market thoroughly before investing.

Nevertheless, I recall sitting down with several families and literally begging them not to buy homes that were out of their (logical) price range, financed by less-than-ethical lenders, or with an ARM loan. I also informed both buyers and sellers to consider that an inflated appreciation rate is a bubble that WILL burst - so proceed with caution.

Here's how a standard real estate commission structure breaks down: Say that the commission rate is 6% of the sales price. Most of the time, an agent from another brokerage sells a home that is listed by a different brokerage. In that common case, the 6% is split between the two brokerages - usually half and half. THEN the brokerage gets it's cut, which is usually between 30 to 50 percent of that 3%. The agent gets the remainder. Realtors are usually independent contractors -- which means that no taxes are taken from their earnings - and they also usually don't have any benefits package. They must pay for all of this, mileage, office supplies, signs, advertising, etc. No paid 2 week vacations. No medical coverage. No Workers Compensation. No free copies on the company copier. If their computer crashes, guess what - they pay for the repair. Those glossy ads in the Home magazines cost hundreds of dollars and they pay for them out of their pocket. And don't forget national and local licensing fees, continuing education expenses (mandatory), etc.

So let's do some math. Say you're buying a $250,000 home. Agent A has it listed and you're working with Agent B looking for homes. You make an offer of $225,000 and Agent A's clients come back with $240,000. You settle on $238,000. The difference to the Realtor is less than $250. Believe me, they aren't going to sabotage a chance to earn over $4000 for $200.

Now, let's look at that $4000. Automatically, deduct at least 30 percent of that for taxes. That leaves $2800. Now deduct health insurance and all those pesky operating expenses and you're down to probably $1500 or so. A good realtor would definitely have to work full time (translate that to lots of nights and weekends) in order to sell 2-3 homes a month. To do more than that requires luck, a team (splitting even these commissions usually), many more expenses, and/or years and years of establishment in a community.

One final note: It is absolutely RIDICULOUS to state that REALTORS caused the national mortgage crunch. I would say that greedy, less than ethical lending institutions ran hand in hand with BUYERS who refuse to live within their means. I can't tell you how many young home buyers came to me over the course of my real estate career and wanted to buy, as their first home, a luxurious brand new "SPEC" with all the bells and whistles that their parents worked a LIFETIME to enjoy. And they wanted it all with less than 5% down - sometimes even rolling their closing costs into the loan or putting the downpayment on a credit card. How stupid can people get? I can answer that - pretty dang stupid.

What's wrong with buying a modest home or with your kids sharing a room while you save up a down payment? Skip the big screen TV and SUV with built in DVD players and live modestly for a few years, how bout it"

In the lenders defense (if there is one) - they responded to market demand caused by impatient "I want it all right now" buyers who were unwilling to save, wait, and take responsibility for their actions.

Melanie Poland of TX @ Aug 10, 2008 12:17:04 PM

The Client Always Comes First!

I have been involved in Real Estate sales in the Pasadena, CA area for more than 15 years and built my business by putting the needs of the client first. Too often clients are in homes or situations that they should not be, and most of the time because their needs were not considered.

Real Estate is more than a commision and more than just a sale. Real Estate involves people, their needs and their whole family and our job is to look after their R.E. needs before anything else. Those of us that have built a referral-based real estate business earn more than just a commision at the end of the day... we end up with many happy clients and many long-term friendships!

Luther Tsinoglou of CA @ Aug 10, 2008 12:00:58 PM