Some may read this and find it to be a bit harsh. That's fine, it's obviously not that kind of reader that this article seeks to reach.
I am speaking to the maverick. I am speaking to the man or woman who can look themselves in the mirror and unabashedly exclaim..."I am a Capitalist"!
This article is written to speak to those who are aggressive in their pursuit of profit. Steadfast in their sojourn for success, and ready to seize 2008 as the year that they have decided to make a change in the way that they do business. If you thought that 2007 was the Year of the Buyer, think again. It was merely a pre-cursor, a warm up, an appetizer for the capitalist feast of 2008.
Don't believe me, then you are not reading or understanding any of the stats, forecasts or projections.
If you choose to continue listen to Lawrence Yun of the National Association of Realtors paint a rosy picture of the housing market ...then pretty much you can stop reading now.
If you are hoping this all goes away, meaning foreclosures, short sales and massive REO's, then you can stop reading now.
This article is for investors, principals, the 10% of real estate agents who are actually doing something, and part of the other 90% who want to grow their business but don't know how or who have not been trained.
If you continue to think that there is no money to be made in this market or that agressively and voraciously seeking profit is wrong then you will not succeed in 2008, if ever.
On so many different fronts, in so many different facets of this business it is time for change.
To make this change, there are a number of caveats that must be understood and accepted from the outset.
1. There is no such thing as a lowball offer.
An offer is just that, an offer. It is the truest barometer of value in a free trade society. It represents what someone is willing to pay for a particular product or service.
You're a professional, understand for yourself and explain to your Seller, the simple Economics 101 principle of Supply and Demand.
Forget comps, forget CMA's throw them out the window. Buyers and principals, stand firm on what YOU want to offer. Ignore listing prices completely, The list price is the figment of a starving listing agent's imagination.
Listing agents listen up, it is absolutely imperative that you realize this and impart some wisdom to your Seller clients. You are supposedly the professional. Patients don't read x-rays, legal clients don't interrogate witnesses, Seller's seek your PROFESSIONAL opinion and it is your professional responsibility to truthfully explain to them the reality of the housing market.
All too often I hear from agents who say my Seller won't listen. If that's the case then either don't take the listing or let us all know you are dealing with an ignoramus.
You put everything else in the broker's remarks section of the listing. Why not insert a comment such as "Client is a moron and still thinks it is 2004″. Enough said, we won't bother you with the call that you won't answer anyway.
2. In today's real estate market, the Buyer has all of the power. Finally in the real estate industry, the customer is king!
It is amazing that in just about every other sales market, the customer is king. The customer, or the Buyer, is most assuredly who is in control and deservedly so. It is the Buyer who must be catered to, not the Seller.
When you walk into a fine dining restaurant, the Maître d' greets you with a smile and your "buying experience" begins and ends with people catering to your every need. When you buy a Rolls Royce the salesmen book you an appointment and lavish the Buyer with all kinds of goodies. Many fine oriental restaurant offer their customers hot towels so that they can refresh themselves and relax.
They all understand that the customer is king. He or she is in their establishment with the expectation of spending money and in return helping the establishment earn a profit.
If I was an agent in today's market I would wash Buyer's feet! I would pick their dry cleaning up, I would be a complete sales concierge. The customer is about to make one of the biggest, most expensive purchase of their entire life and most agents act as if they are being bothered!
So in speaking to you Buyers, investors and principals, you must understand and remember you are the one in complete control. You are the most sought after commodity in the real estate marketplace. Many Sellers and agents do not even know you exist.
What a great position to be in. Turn the tables, announce your presence and let the Seller and agent who truly want to serve you give you a reason to spend your money and time looking at their product. Make the salesperson actually sell. There's a novel concept.
The sellers need you. You don't need them. The agents need you. You don't need them. Your sole concern is getting the right property at the price YOU are willing to pay.
3. Be absolutely merciless on the Seller.
No I did not stutter. In a prizefight you absolutely seek to take your opponent down. When you sense weakness in an adversary it is time for you to absolutely exploit that weakness and to only show mercy upon complete submission. Be relentless and merciless on your opponent and recognize you have two opponents, the listing agent and the seller.
In this market, don't ever become concerned with what the listing agent or seller needs, wants or even show a modicum of concern for their situation. Don't even ask, you may have performed your own due diligence and you may be pouncing on a wounded animal but never show concern or care. Take them down and take them down hard!
In football, some of the most vicious hits take place during a sack. The intent is to completely destroy the will of the opponent. Afterwards we can all shake hands, but during the game, you need to not even show a hint of fear.
Don't care that little Johnny grew up in the house, don't care that they are losing the home to foreclosure, don't care if they are on the verge of bankruptcy. This is not charity.
When you go to a "going out of business sale" at a retail outlet do you care why they are going out of business? Of course not, you buy that couch and haggle for the best price and walk out of the store with the best deal you could possibly make.
Did it matter to you that the store took 40 cents on the dollar? No, you were on a mission, you smelled blood and you took advantage of the situation. You probably even made the salesman throw in free delivery. And you know what, I'll bet you dinner that the salesman at the store, even during a going out of business sale, smiled and treated you better than most listing agents do when they get what they consider a lowball offer.
4. You don't need to ask for any favors or concessions. You should demand them!
Don't just stand firm on your price. Unleash the flurry of body blows. You want to take this guy down and take him down hard. Make sure you ask for concessions and closing costs, even the rafts by the pool. Get it all. If they don't like it walk. Remember there is probably an additional 5-6% of additional discounting you can get beyond the concessions. It's called going after the listing agent's commission.
Obviously if the seller is upside down you have to work a short sale but that is your business on the back end. Get your deal in place the way you want it. Then work the short sale.
Hey listen, don't get upset with me. The Seller is not the only person I see blood trailing from. I see it and smell it from the starving listing agent. Do your homework and see if the listing agent has made any sales or earned any money recently. Chances are slim that they have had a sale and if that is the case then you have another wounded animal to put the screws to.
Screw the "win-win" attitude. Somebody has to lose and right now it's going to be the Seller. It's time most real estate agents understand that the commission is most often unearned, it is not sacred, and despite all the workshops they have taken about defending their commission, it's not your concern. You do not have any agreement with the seller. They have to submit your offer and if they have to take less in order for the sale to take place do you think the seller cares? Of course not. You're in a "going out of business sale" and everything is on the table.
I want the lowest price possible AND I want my concessions.
5. Never, ever, think that the listing Agent is your friend. get your own Buyer's agent and find your own pitbull.
Make sure you are on the same page and that your Samurai Warrior Buyer's agent understands you are not looking to take any prisoners. Hopefully you never have to experience divorce in your lifetime, but if you do would you want the lawyer who acquiesces to your scorned spouse's every demand or one who is ready to go toe-to-toe protecting your best interests.
So if you would fight and protect your best interests on the back end why would you not want to do so, on the front end?
6. Is this is my highest and best offer?
I love it when I get this call asking me this stupid question. No, I wasted my time sending you an offer that I really was not serious about. I just wanted to dance with you and waste my time going back and forth on. Highest and best offer? No it's my only offer and it expires in 24 hours!
Don't play this silly game. Houses are not selling. Sellers and listing agents are desperate. It's not like they are getting a bunch of offers. In fact yours may be the ONLY offer they have received.
Don't try to influence me into thinking there is some form of bidding war going on. You have my offer. If there is another offer then take it!
Don't accept counteroffers. Don't even entertain them. Unless it involves minor points like closing date, after all, we're not completely unreasonable.
However if the listing agent or seller persists in trying to negotiate, withdraw your offer completely. Wait a couple of hours and resubmit an even lower offer.
Let them know that each time they counter you are going to lower your offer. Send them a message and let them know that you intend on buying a property at the price YOU are willing to pay. End of story.
Obviously, these techniques require a great deal of intestinal fortitude. Imposing your will upon someone is not easy. It's extremely profitable, but it is by no means easy.
You also will not get many of your offers accepted, however you will get some accepted and when you do get them accepted it will be on your terms and at your price.
This market is still heading south. You must have that in mind when making your offers. You do not want to buy at a price today and then find out 6 months from now that you're your purchase has been further devalued because of the continual decline in the market.
Expect the future decline, build it into your offer, along with the equity spread you desire and make your offer accordingly.
No one can tell you how far down the market is going. You just need to know it is and build a safety cushion into your offer.
Most sellers know the market is declining and EVERY agent should know the indicators as well. All you have to do is check the history of the listing.
I have made offers on properties that the agent and seller considered low ball offers at the time. 6 months later they called back and asked if the offer was still good. I laugh when I get those calls. I simply ask are you kidding. That was the price 6 months ago...I re-assess and submit another offer, which in this market is far less than the offer they received months ago. Am I glad they never took my original offer!
I have learned and I impart that knowledge upon you. Build in a declining cushion factor in your offer. That's why it is important to understand that there is no such thing as a low ball offer in this market.
