Tuesday, May 27, 2014

How to Handle Multiple Offers

 This is an excerpt from a post last year. It is still relevant enough that it bears repeating. With the continuing dearth of inventory, multiple offers are commonplace and buyers need to expect that possibility and respond in the manner that is most effective for their situation. Best to leave emotion and distrust at the door.

[from July 2013]
Let's revisit multiple offers. I had an interesting encounter with a buyer last week who thought multiple offers should include multiple chances to do "best and highest". It doesn't work that way. Typically in our market, if more than one offer is received at the same time, the listing agent will go back to all buyers' agents and give them the opportunity to bring their best and highest offer to be presented to the seller at the same time. This is risky for the seller as the pervasive distrust of real estate agents means that they run the risk of losing one or all of the buyers. I was involved in one situation where both buyers withdrew their offer when asked to bring their best and highest. The condo ultimately sold to an entirely different person for less than at least one of the first buyers was willing to pay. If your buyer's agent tells you that the listing agent has called for "best and highest" because there are multiple offers, you have three choices.
  1. keep your offer exactly the same in hopes of being the winning offer
  2. increase your price and/or better your terms in hopes of being the winning offer
  3. withdraw your offer because you "don't play games' or believe the agent/s are lying to you
The seller also has choices of how they want to handle the multiple offers once received.

  1. They can accept the offer they like best and proceed to closing. Note that the best offer may not necessarily be the highest. Closing date and terms may win out over price.
  2. They can choose not to respond to any of the offers if none are good enough.
  3. They can counter one or several of the offers. If none of the prices are acceptable to them they can offer the same counter-price to all and accept the first one (if any) to respond. Or, if one is clearly better than the others, they may choose to counter that one alone with a change of price and/or terms.
How a buyer responds when asked for his best and highest offer is entirely his decision. How a seller responds to the offers she receives is entirely her decision. The buyer I mentioned who was upset with the process was bothered that he didn't get a second chance to better his "best and highest" when someone else made a more attractive offer. The seller chose to negotiate with the offer that she preferred. That offer was apparently good enough that she saw no upside to re-approaching the lesser offer. It was her decision to make. Also note that in the event of multiple offers, a seller doesn't have to call for best and highest. She has the right to choose the offer she likes best without giving anyone a chance to do best and highest.
At this stage of our market, multiple offers are the name of the game for any priced-right listing so be prepared for this if you're offering and don't let it deter you from participation. You decide what price and terms you're comfortable with and then hope for the best. You might win just by staying in the game without changing the offer at all. If you don't trust your agent enough to be honest with him, find another one.

By the way, the most common reply that I get when I inform a buyer of multiple offers is "Do you think they are just playing games with us?" There seems to be a widely held belief that listing agents routinely use phantom offers to milk more money out of a buyer. In my experience this is just a myth. If a seller wants more money, they have just as good a chance of getting it by negotiating in the normal manner. Lies and phantom offers are not necessary and a straightforward counter-offer doesn't run the chance of chasing away a perfectly good but skittish buyer.

However beautiful the strategy, you should occasionally look at the results. Winston Churchill

Tuesday, May 20, 2014

Acid Trip Followup

I promised a followup on the Short Sale Negotiators on Acid story. It's almost as crazy as the original story.

The first short sale failed because a greedy first right owner stepped in and screwed up the process after the bank had agreed to $36,000. This was after a 14 month saga of crazy negotiations with Wells Fargo. The listing expired. Amazingly, a new listing agent took the listing two weeks later as a short sale and started all over. Rather than list at the bank's previous take it or leave it number of $63,000, she listed for $45,000. A new buyer signed a contract and the short sale process began for the third time. Either the negotiator at Wells Fargo had developed a tolerance for his particular hallucinogen or, more likely, a different negotiator was assigned. At any rate, the short sale was consummated and closed four months later in December 2013 for $55,000.

One month later, in January this year, after nicely remodeling the little one bedroom unit, it was relisted for $99,000. It closed yesterday for $94,000. This trip is over.

"I am not a pig farmer. The pigs had a great time, but I didn't make any money. "  Willie Nelson

Thursday, May 08, 2014

Chugging Right Along

April 2014 was another busy month for real estate in our beach communities. There were 50 closed MLS-listed condos and townhomes in Cocoa Beach and Cape Canaveral in the month. Over 60% of all sales closed for cash. Activity was particularly heavy in the lower price range with over half of all sales closing for $150,000 or less. It's still amazing to me that a condo with two or more bedrooms, a short walk from the beach can be had that cheaply. Sixteen of the under $150,000 sales had multiple bedrooms.

The highest priced condo sale of the month was a resale Magnolia Bay fully furnished corner 3/3 that closed for $550,000 after only six days on the market. Second highest sale was a northeast corner top floor Ocean Oaks 3/3 in Cape Canaveral that also sold fully furnished. It brought $525,000. Speaking of Magnolia Bay, a milestone was reached last week when the last developer-owned unit went under contract. This marks the end of a long and grueling process. Or does it? There is still the site of the fourth building that has rested vacant since the market crashed. Can units be built there and sold for enough to make a profit? I can't predict. I will try to put together a history of this project from my first involvement up to this point as best I remember it and post it in the near future. It was drama from the very beginning and there was a lot of collateral damage, unintended consequences and hard feelings along the way. Congrats to the residents and the developer for hanging in there and seeing it to the end..

Other condo sales of note included;

5th floor SE corner Xanadu of Cocoa Beach 3 BR, 2.5 BA for $450,000 in 39 days

Xanadu direct ocean 15th floor nicely remodeled 2 BR, 2 BA for $397,500 in 30 days

2nd floor Cocoa Beach direct ocean southeast corner Windrush 3/2 for $317,000

Ground floor direct ocean Marko Villas south Cocoa Beach 2/2 for $200,000

South ocean view 3rd floor Majestic Seas 3 BR, 2 BA. Sold for $390,000 in 16 days.

1st floor Stonewood D bldg. 3 BR, 2 BA for $340,000

4th floor direct ocean Las Palmas 3/2 for $300,000

4th floor D building Mystic Vistas corner 3/2 with a peak of the ocean for $280,000

And, my favorite, a 2nd floor canalfront 2 BR, 2 BA Lookout Point downtown Cocoa Beach with garage and boat slip that went for $163,875.

Single family home sales were brisk in April as well with nine closed in Cocoa Beach and two in Cape Canaveral. Over half were over $400,000 including the highest recorded price ever for a single family home in Cocoa Beach of $1.9 MM for a beautiful oceanfront home in south Cocoa Beach.

Distressed sales represented 14% of the total closed sales compared to 6% of the current for sale inventory. There was but one short sale out of the 60 closed sales in the month. There are 70 single family homes offered this morning and 285 condos. Over 20% of the current condo inventory has been offered for over a year, quite a few for multiple years. Some of those are yet-to-be-built, others are developer owned units that have been for sale at outrageous prices for years, and the others are just over-priced. If a unit has to be asking within 15% of current market value to be "really" for sale, I'd put the "real" for sale condo inventory in our two cities at less than 225 units. It's tough to find the good ones. Tough but not impossible. I can help if you're looking.

Hope everyone has been enjoying the recent beautiful weather. If this week is any indication, we might be in for a hot summer. The ocean water temp is already in the high 70s and offers a welcome dip for beachgoers. The beach re-nourishment project finished up just as turtle season began on May 1. If one knows where to look, there is an abundance of beautiful olive shells that were apparently transported to the beach with the new sand. Due to their cylindrical shape, they tend to accumulate at a certain place on the beach at a certain time. Speaking of turtle season; no lights are allowed to be visible from the beach after 9 PM. Turn em off and close the blinds or risk a $350 fine.

"I don’t stop eating when I’m full. The meal isn’t over when I’m full. It’s over when I hate myself."  ___Louis C.K.

Friday, May 02, 2014

Public Service Announcement

I'll make this short. Buyers hoping to purchase a condo in Florida shouldn't even consider using a lender if the loan officer handling their loan is not in Florida. The loan on a Florida condo is as much about the condominium association's worthiness (as defined by the lender) as it is about the borrower's credit. Far too often I see very experienced and capable loan officers from other states fail to close a loan because they weren't able to anticipate the hurdles involved with the Florida condo approval process. A local Florida lender who does condo loans here all the time will be in front of these bumps and will stand a much greater chance of closing the loan and hitting the contract date. The distant loan officer who will fail will assure you that they can do just as good a job as any Florida lender. Don't fall for it. Repeated history tells a much different story.

"Ignorance and confidence are constant companions."  __John McAfee