Sunday, May 31, 2015

The Dude Abides

Multiple offers and the call for best and highest. These are stories of two very different multiple offer situations, one with a best and highest call and one without. I was on the losing side of both of these.

The majority of my clients live in other cities and states. Many start the process before they're ready to buy so that they have knowledge of the market and properties when the time does come. I typically take their criteria and wishes/wants list and send listings that I think might fit and we fine-tune our search in preparation of the day they're ready to pull the trigger. I had been going through this process with an out-of-state prospective buyer who had been casually looking off and on over several years. I had been sending new listings as they appeared that I thought would fit well with his criteria; under $200,000, at least two bedrooms and two baths and a "deal". He reviewed and commented on the properties I sent him and we fine-tuned our search over time. He kicked his search into high gear in the summer of 2013 and told me he was ready to execute and in an email "As I promised you awhile ago, you will be the person that represents me in finding real estate, regardless of when that time comes. I promise you I will not deal with any other real estate agent for any reason, period." My antennae twitched.

By this time we had narrowed our search to a specific floor plan in a specific riverfront condo complex south of downtown Cocoa Beach. In the summer of 2013 we had two very recent sales of that floor plan unit there, one 2nd floor for $167,000 and a ground floor for $174,000. Within days of the ground floor unit closing a new listing hit, second floor better condition than either of the other two sales and asking $179,900. I drove over first day on the market and took photos and looked the unit over. I sent the photos and called my client telling him that I thought this one was a good one and priced fairly considering the comps and the condition and would probably go for close to asking, $179,900. He agreed and instructed me to prepare an offer for $160,000 (still clinging to his hope for a "deal"). He commented that if they countered he wouldn't be going higher than $165,000.

Our offer was presented and the listing agent responded shortly with a call for our best and highest offer as there were multiple offers. After careful consideration he reluctantly upped his offer to his "best and highest", now $170,000. The seller chose another offer. His response when I told him that someone else's offer had been chosen was "Why didn't you give me a chance to raise my offer?" My response was "Unless the listing agent is unethical, a call for best and highest is just that and you get one shot, as I explained to you. You told me that $170,000 was your best and highest and that's what you signed and I presented." He told me that I had mishandled the process and that I was fired. He immediately called another agent and had her present an offer on another unit in the same building that we had earlier discarded in favor of the one we offered on. He offered $180,000 and closed three weeks later. The new agent wrote one offer, showed no properties and collected a check three weeks after her first contact with him. Larry got nothing for his efforts other than an education in the nebulous meanings of "best and highest" and "I promise". For the record, the nicer unit that he lost, closed for less than he paid for the second unit. His hissy fit cost him four figures.

I was involved in another somewhat different multiple offer scenario a couple of weeks ago. I was again representing the buyer. The listing agent was a well-known and respected broker from an office across a bridge from the beach. (That info disclosed to protect any honest and ethical beachside brokers from suspicion.) I presented an offer on his crazily over-priced listing that had been on the market for a couple of months. It was a Monday. The listing agent called back and said that the seller had told him previously that a number $10,000 less than our offer was "too low". Baffled, I encouraged him to consider and/or counter our offer of $10,000 more than the seller's "too low" number. No returned calls or emails the next day, Tuesday. He emailed me on Wednesday with "Presented it, seller still not happy, will let you know later today". Didn't hear anything else until Thursday afternoon when he called and told me that there was another offer "on the table".  Rather than ask for our best and highest he told me in a conspiratorial voice, "The other offer is $Y but the seller isn't comfortable with the terms. If your guys will offer $Y I feel certain he will accept." OK. I relayed this to the buyer and he raised his offer to $Y and I presented it Thursday evening. Agent emailed Friday with "seller is signing will have this evening ".

Nothing Friday evening and agent not answering phone or emails Saturday morning. Finally made contact Saturday afternoon when he answered the phone saying he was in Ft. Myers and ended the conversation five minutes later saying he was in Ft. Lauderdale. Speeding apparently. He said he had the accepted and signed contract and would send it to me. It took three email attempts over the next several hours before he successfully attached the signed contract and got it to me. One problem conveniently not mentioned: the seller had changed the length of the inspection period which meant the signed contract was not executed until the buyers initialed off on the shortened inspection period. Buyers changed inspection back to the originally asked for and apparently previously acceptable time period and I sent it back Sunday morning to the agent for seller's initials. Agent went radio silent all day Sunday and emailed me Monday morning with "Seller is withdrawing his counter, since there is no acceptance." I called to discuss and he told me the seller accepted another better offer.

We can't help but suspect that the other buyer, whether it was the original offer or another, was told the number and terms of our offer and allowed to better it, same as we were. The stalling and maneuvering would have given the agent time to get the other deal done before we had an executed contract. This is not how the vast majority of agents handle multiple offers but it obviously does happen. All it takes is an absence of ethics and/or some greed especially if the other buyer happens to be the listing agent's customer. I'll know the answer to the latter when the property closes. There are plenty of agents that I know and work with who I would never suspect of shopping my offer but my mental do-not-trust list has grown by one agent. Shame on you Mr Big Shot broker. Stay off the beach.

Don't work with an agent you can't trust. Looking back, this agent's behavior was suspicious from the get-go and confirmed when he told me the amount of the other offer. If your agent is acting shady, trust your sensors and look for one who doesn't light up the alarms.

"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."  _________Groucho Marx

Friday, May 22, 2015

Materially Different - Uh, oh!

Just as real estate agents and property sellers were lining up to get a second drink at the crazy party that is the current real estate market, a giant turd surfaced in the punchbowl. We have known the turd was in there since January but thought that maybe it wouldn't matter. It does.

First off, I am not an appraiser nor have I played one on TV. I am merely observing activity in my market, Cocoa Beach and Cape Canaveral, and speculating about possible causes from a curious participant's perspective.

In 2014 mortgage originators sold $434 billion of mortgages to Fannie Mae. By selling a new mortgage to Fannie the lender can then put that capital right back to work in another mortgage. Rinse, repeat, get fat year-end bonus. In order to qualify for sale to Fannie, a loan must meet Fannie's guidelines. I'm told that even if a loan isn't intended to be sold it can be prudent to still underwrite to Fannie's standards. Fannie has long used a desktop underwriting system to make it easier for lenders to make sure they are making qualifying loans. Fannie can require a repurchase of a mortgage that doesn't conform.

In January this year Fannie Mae implemented an additional tool, an automated risk assessment system for appraisals submitted to Fannie Mae called Collateral Underwriter. CU reviews appraisals by looking at specific information in the appraisal such as sales price, comparables, size, condition, room counts, quality of construction, etc. and compares it with appraisals of similar nearby properties among the millions of appraisals in its files. It looks for inconsistencies and generates a risk score and can suggest as many as 20 alternative comparable properties or it can issue a hard stop calling for correction. The system will notice that, for instance, a $15,000 adjustment for a garage is not in line with what other appraisals in the area have used or that it has no data to support an $18,000 adjustment for a boat slip. It may notice that the appraiser has been inconsistent with the condition grade of a comparable. When it finds an inconsistency CU will kick out an error message (flag) that requires action. While Fannie claims that "CU does not take a “lower is better” approach" it apparently does not flag low risk or low value but does flag several categories of items with "materially different" notes that suggest it is more strict with items that indicate "over-valued". I would love to hear from local appraisers on this. Several recent appraisals that I am aware of suggest to me that Fannie's post-purchase infrastructure shift "to a focus on increasing certainty through defect prevention" has had a side effect of lower appraised values. I am aware of five appraisals in the last three weeks in our market coming in from 10% to a whopping 30% below contract price. Coincidence? Maybe. Or maybe it's the fear of receiving the dreaded CU message # 0195 "Fannie Mae will not accept appraisals from this appraiser." Being black-listed by Fannie is a virtual pink slip.

Our take-away: For sellers, it makes sense to prepare in advance for a low appraisal and to decide what reaction will be productive. Buyers should always attempt to renegotiate down to a low appraisal number but shouldn't let a good property at a fair contract price get away because Nigel from Scared of Losing My Job Appraisals may have been practicing self-preservation. That is, of course, finances permitting. Cash buyers, your crowns are sparkling.

"A lot of people are afraid of heights. Not me. I'm afraid of widths."  __Stephen Wright

Wednesday, May 20, 2015


The real estate market here has been somewhat stressful in recent weeks. In fact, it has pushed some participants right over the edge. The message below was mailed yesterday by a local agent to every member of our county association of Realtors. It is presented unedited except for the city location for your entertainment and contemplation. Caution: profanity

"I have had a dozen showings on a vacant house in $City.  Only 3 agents left cards.  and nobody, actually nobody called to offer feedback.  and only 2 responded to email feedback inquiries.  Who the hell trained you?  or should I say, who did not train you?  If u dot want to leave a card or provide feedback, dont fuckin show any of my listings."

A followup email was sent to all members last night (probably with his broker's gun to his head) apologizing for the profanity but interestingly not withdrawing the order to not show his listings. It's pretty amazing that someone with people skills like this has listings. I wonder how well he'll handle an offer. I imagine he'll be as difficult to deal with as the wound-up agent I was negotiating with last week who took more than 24 hours to respond to every email and phone call. A negotiation that should have taken one day stretched to six because the agent was either too busy or too slack to professionally and promptly respond to the buyer's agent.

Folks, choose your agent carefully. Settling for an incompetent or cuckoo agent can be an expensive mistake. If your agent is too busy to respond to you promptly she is probably too busy to deal competently with the other parties to your transaction. If she can't handle the stress you can do better.

"I find it rather easy to portray a businessman. Being bland, cruel and incompetent comes naturally to me. "  __John Cleese

Friday, May 08, 2015


11 PM, May 7 and the first named storm of the 2015 Atlantic hurricane season, Ana, formed off the coast of South Carolina. We got a taste of this storm as it was percolating northward a few days ago with an inch of rain early Wednesday in Cocoa Beach but clear skies by dark. We have had some fun small surf from the storm and mellow longboard conditions are still lingering this morning, better south.

May is blueberry season and there are several places to pick for those interested. The photo is from Holland Family Farm in Mims where you can pick three different varieties for $3 a pound. Lots of fun and well worth the short drive from the beach. The kids will love it. No charge for the ones you eat while picking.

Our inventory according to the Cocoa Beach MLS this morning is hanging steady with 226 condos and townhomes for sale in Cocoa Beach and Cape Canaveral and 61 single family homes. Properties have recently been selling faster than new listings are appearing so it is reasonable to expect the inventory to continue to shrink. In the last four weeks there have been 54 new condo listings and during the same period 67 units were contracted. There were 13 new single family listings while 21 were contracted in the same four weeks.

Of the 61 single family homes for sale in Cocoa Beach and Cape Canaveral only one is distressed, a foreclosure. There are zero short sale single family homes. There are five foreclosed condos for sale and a lone short sale. In spite of the tight inventory, those looking for an oceanfront condo have several new  listings this week that deserve consideration at prices from the low $300s to the mid $600s. Several new riverfront listings as well. Those who understand the magic of south Cocoa Beach have several ocean and river units available. If you need a buyer's agent I'm happy to show any or all of them.

Cocoa Beach Firefighters golf tournament Saturday morning, May 9, 8 AM. Join us for a good cause. $50 for 18 holes includes lunch by Long Doggers and a shot at prizes with proceeds to benefit the CB Firefighters Charitable Fund. Weather is forecast to be perfect.

Happy Mother's Day to all qualifiers and to those in the bullpen.

"If you want to assert a truth, first make sure it's not just an opinion that you desperately want to be true."  ____Neil deGrasse Tyson