getting a home offer accepted
When most Sacramento home buyers envision buying a home, they tend to view their first home as a place to live in-lieu-of an investment. This means they want the home to be in tip-top condition without any defects. They strongly care about the sales price only if nobody else does. If there are no other offers, in today’s fall market, they might offer less than list price in hopes of negotiation. Yet, if the house truly meets their needs, home buyers will pay what it takes.
I think about how this compares to some of the homes I’ve bought in my life. I came into real estate as a buyer’s agent for investors, and I started at a small Newport Beach real estate company, which I later bought. My training was untraditional but valuable. Today, I strongly believe that every agent should at least work a few years for a major broker before trotting off on their own, if that’s what they desire, because there is so much to miss by not having the proper training and absorbing social etiquette about the business. It’s only in retrospect that I see this about myself. I was lucky in my ignorance.
When this Sacramento real estate agent decided to buy her third house, I found out everything I could about the seller. I had been watching this particular home in the Sunday open house ads (before the Internet). It had a white picket fence — a Dutch Colonial. It was so darned cute, oozing curb appeal. The listing agent was informative and told me things she probably should not have such as the sellers had bought another home across town and moved out months ago. She told me where they moved, which was a very expensive part of town. People just blab if you ask the right questions.
The house had many problems. It was overpriced; featured a lovely gaping hole in the living room ceiling; the hardwood maple floors were in terrible condition and the wallpaper was atrocious.
I made an offer that the listing agent said would not get accepted. It was less than list price. My earnest money was $500 and there was no down payment. This was 25 years ago, when loans were assumable, and I offered to assume the existing financing. My offer meant that the seller had to take money out of a savings account to pay the commission and closing costs, because there was no money generated in the offer to pay these things.
The listing agent expressed doubt that the seller would take my offer and actually said that in all her years in the business, nobody writes an offer like that. That’s because she was in traditional real estate and not investment real estate. In my mind, I figured I would fix up the house and increase its value; make it my own. I can tackle just about any home improvement project by myself. DIY is not difficult.
To help the agent submit the offer, I drew up a list of benefits for the seller, explaining why the seller should take the offer. I laid out how much the seller has already spent over the past 6 months or so trying to sell the house. Mortgage payments had to be made even if the seller wasn’t living there. I compared that sum of money to the smaller amount the seller would need to pay to close escrow. I pointed out that banks might be reluctant to loan money on a home with a hole the size of a small car in the ceiling. And I ended it by documenting the release of liability from the loan that the seller would obtain when I formally assumed the loan.
The seller signed the offer. The agent practically fainted. This was very different from the way homes are sold today. But sellers still sell because it’s a benefit to themselves to do so. That part has not changed.
I think home buyers pass up some great opportunities in the Sacramento market by insisting on buying a move-in ready home. They can’t personalize the home or express themselves when it’s already done for them. And they pay more for updated homes, making them completely dependent on future appreciation and principal reduction to build equity. But I just go with the flow and help everybody achieve what they want. That’s my job.