BUYER NEEDS A STRONG ALLY IN NEGOTIATIONS
by Chris Sicks
What can your Realtor do for you? For years, the answer most often was: "sell your house." Realtors were the folks who listed your home in a big database, put a sign in your yard and ran some ads for open houses.
Potential buyers showed up, usually alone, and spoke to your agent about buying the house.
In the past decade, those buyers have stopped shopping alone. Buyer's agency, the formal relationship between a buyer and a Realtor serving the buyer's interests alone, has changed the way people shop for homes.
And it has saved many people a nice chunk of change.
The idea of agents representing a buyer began in California about 15 years ago, not really taking hold in our area until around 1990.
Today, most Realtors will tell you they will represent you as either a seller's agent or a buyer's agent.
Some companies believe agents should divide their loyalties more sharply and that specialization can make them more effective.
Exclusive buyer-brokerage started in the Washington area in 1992 at the Buyer's Edge in Bethesda. Other companies, including five Buyer's Resource locations, add up to a total of about a dozen offices in the metro area where Realtors represent buyers only.
Whether you use an exclusive buyer's agent or a traditional Realtor who is working for you as a buyer-agent, having that professional on your side can be very powerful.
Last month, Dave Kolakowski, associate broker at the Buyer's Edge, brokered a deal that had two sellers bidding for one buyer.
It's not unusual to have two buyers bidding for one house they both want, but calls to many local real estate offices failed to find anyone who has heard of two sellers feuding for one buyer.
The client in this case, a physician and practicing attorney in the District, told Mr. Kolakowski, "I want to buy, but I'm not in a hurry. What I want is the best possible deal."
The buyer works in Dupont Circle and is frustrated by the frequent construction that goes on, particularly on bridges. So one of his requirements was that he would not have to cross any bridges as he drove to work.
"So we looked in the Kalorama area and found two condos he liked," Mr. Kolakowski says. "Each had two bedrooms and two baths. One seller was asking $215,000, the other $199,000."
"He liked both homes almost equally, so together we came up with the idea of bidding on both of them."
It's important to note that a bid in our area is written in the form of a contract, one that is binding if the seller accepts the terms offered by the buyer. To work around this, Mr. Kolakowski had his client leave the contract unsigned, and he included a cover letter explaining what they were doing.
"We wrote the same letter to each seller, saying that we were bidding on more than one house at a time. It was really a letter of intent, and under it was the completed, unsigned contract. We also included an earnest-money deposit and a pre- approval letter from a lender."
Both of the sellers made a counteroffer, to which Mr. Kolakowski and the buyer responded. At that point, the seller of the $215,000 home declined to continue negotiating. The other seller, however, was willing to deal and eventually agreed to sell for a net of $182,000 ($189,000, with the sellers paying one point and all closing costs).
Now, this wasn't a distressed property with an uneducated seller whom Mr. Kolakowski and his client took advantage of. The home had been vacant for four months but was in great condition, and the seller well, she was a real estate agent herself.
They settled less than 30 days later.
"I think that was a really neat deal," says Jerry Boutcher, principal of MBH Settlement Group. "I've never heard of anyone doing such a thing. What he did was turn the tables, getting the seller to make an offer to the buyer. Of course, the thing that might have really motivated that seller was the organized and complete offer, promising a quick and painless settlement."
Another home purchase Mr. Kolakowski brokered recently was for a new home in Prince George's County. His client picked a model with a base price of $361,000. The buyer wanted to add a lot to the home, so the price the builder's agent totaled up with all the options selected was $433,000.
After negotiating with Mr. Kolakowski, the builder wound up taking just $395,000 ($405,000 with $10,000 in closing costs paid by the builder).
"Builders don't make much money on the base price of a house," Mr. Kolakowski says. "They make all their money on their options. And so they have more room to be flexible on the price of the additional features."
Also working in this buyer's favor was the fact that the community was a new development. That can be an advantage when negotiating a price with a builder who is often eager to get things moving in a new project.
"But something people should also consider about new developments is how long they will be in their new house," Mr. Kolakowski says.
"If the community isn't finished when you try to sell, the builder will essentially control the price of your house why would someone buy your used house when they can get a brand-new one on the same block?"
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