* * * * HARD CORE REAL ESTATE TALK * * * *
LESSON FOR BUYERS AGENTS: Information contained in listing REMARKS and about $3 will get you a cup of coffee at Starbucks.
I COULD HEAR THE ANGER IN HIS VOICE. I received a telephone call today from a broker (former agent) who had just lost a bid for a short sale. His big complaint was that he relied on the REMARKS in the listing and yet they lost the bid. The agent was hot. Sadly, he didn't get any sympathy from Lenn. He was really complaining about the 5 hours he felt was wasted in preparing the offer and the additional hours previewing homes and showing the buyers homes in their approved price range. Fact is, if the agent learned anything, the time wasn't wasted.
Lenn's Law #127. Don't believe a word you read in the short sale listing REMARKS. Or, REMARKS in any listing for that matter. The listing remarks said: "Lender approved for $210,000. The buyers were pre-approved for $210,000. They wrote a contract offer for $215,000 with $5,000 closing. 
There's more. In the area of Montgomery County Maryland where the buyers need to buy, every single listing meeting the minimum needs are priced $210,000 or less is a foreclosure or short sale. Since the buyers can't qualify for more, they already have a 47 ratio, they either have to look farther out in the county, or they will have to wait for prices to come down more, which may or may not happen. In fact, I have shared similar experiences with other agents in my network about short sales and especially foreclosures selling for far over list price. The lesson is simple. Don't rely on the list price or REMARKS.
There's more. The market value for similar town homes in that area is about $235,000 to $245,000.
The agent relied on the REMARKS in the listing. Big mistake. An experienced agent knows to do their own research and advise their buyer based on the results of the research, not based on what is written by the seller's agent in the listing REMARKS. The agent has no way of knowing when those REMARKS were entered in the listing. Most agents enter a listing and then, no matter what transpires, with the exception of price changes, never revise the listing details or REMARKS. As it turned out, once the offers started to come in, the bank raised the minimum acceptable bid and may raise it again. None of that is reflected in the listing REMARKS. Nor does it have to be.
DON'T LET THE FOX GUARD THE HEN HOUSE. Buyers Agents should not rely on listing agents or sellers for information. Between the time the information is conveyed, the sellers could have a complete change of mind, which is the case in this scenario. Do your own research and advise your buyer/clients accordingly. If the buyers insist on making low offers, losing one should teach them a lesson. If not, perhaps they need to work with another agent. Agents and brokers are experienced in market research for non-foreclosure / short sale listings. We know when a home is overpriced and advise our buyer / clients about offering ranges. We can do the same for underpriced listings. Just because it's priced below market doesn't mean that your buyer will be successful trying to buy below market. Factors such as average market prices, days on the market, condition, market trends, pre-approvals, contingencies, inspections, price range, etc. affect successful offering prices and negotiations
Knowing that short sale and foreclosure listings have recently been priced low to attract bids, it's doubtful that this buyer had a chance with any listing in this area. In fact, we've discussed this between agents and brokers to alert them about the pattern evolving. Bait and switch listings are nothing new here, but they're usually auction listings.
WHAT DOES LOSS MITIGATION MEAN? We know that the bank is going to take a loss on the short sale listing. It just makes sense that if they list low and several higher bid come in, that they would revise their "minimum acceptable bid". REMARKS like "Bank approved for $XXXX" are totally unreliable and meaningless. The departments in the banks that process short sales and foreclosures have a title. Loss Mitigation means that the bank mitigates their loss on a transaction.
DUE DILIGENCEmeans that an agent or broker does their own research, their own CMA and advises their buyer client accordingly. If the listing is clearly below market for the area and condition, the agent must expect that there will be vigorous bidding for a property and walking a fine line with qualifying and offer price just doesn't compete. First time home buyers and buyers for lower priced homes are back in the market. If the buyers are bidding at the limit of their qualifying range, they are not likely to be successful.
This is a good agent. I don't believe he'll make the same mistake again.
ADDENDUM: This reminds me of the real estate market in 2004-2006 when the question was not, how much do you want to offer? But, rather, "HOW MUCH OVER LIST DO YOU WANT TO OFFER". If Short Sale listings and foreclosure listings are going to be low to attract bids, it puts more responsibility on the Buyer's Agent to do good research into value and not rely on listing agents to price properties.
Market value research takes experience and this makes it hard for newer agents not accustomed to the nuances of CMAs and market value education for buyers. However . . . . .
If agents are going to jump into the deep end, they need to learn to swim.
NOTICE: 8/29/08 @ 1:08 P.M. Goodness! I'm kerschmulked!. I just got a call from a broker in our network about the One Year Home Warranty that I advertise. We will not sell a home without a home warranty. Agent who accept my referrals understand that. All attempts to get the seller to pay for it is encouraged. However, the seller refuses, we pay for it. This agent was seeking clarification on that matter. I said why wouldn't the seller pay for it? The answer astounded me.
"It's a foreclosure and the bank addendum said that the bank wouldn't pay for home warranties."
GOOD GRIEF! The message I've been trying to get across about not accepting what the listing agent says in the listing also applies to the bank addenda. THAT STATEMENT COULD HAVE BEEN COUNTERED by the agent before submitting.
BANK ADDENDA ARE NEGOTIABLE. They're not going to tell you that, but I know from experience that they are fully negotiable. I've sold many foreclosures and negotiated termite repairs, plumbing repairs, etc. There is absolutely no reason to accept the language in the bank contract addendum that says that they won't pay for a home warranty. Nor do I believe it to be fact.
EVERYTHING IN REAL ESTATE IS NEGOTIABLE.
VIRGINIA RAILWAY EXPRESS OFFERS TRAFFIC FREE COMMUTING TO PENTAGON AND WASHINGTON, DC
