I showed a short sale listing this week that caused me to experience the following epiphany: I’m doing it all wrong. Also: What a total sucker I am.
I know, you totally thought I knew what I was doing and was an expert, didn’t you? Me, too. But clearly I’m utterly useless at the main objective of my profession: making as much money with as little effort as possible. Wait, you thought I was going to say ‘closing escrows’ or ‘helping people to find a house they love or sell a house they need to get out of’? Pshaw. I’m actually really good at those things. I kind of am an expert there. But the other? Dude, I think I might be a complete failure.
This house was a great house, in a fabulous neighborhood, for the right price for my client. She was thrilled and about 10 steps into the house she was talking about putting in an offer. We’ve been looking for quite awhile and she knows now that when a house like this comes on the market she has to get in quick and pull the trigger even faster if she wants to be in the running. By the time we left she’d given me the go ahead to put the offer together and send it over to her.
When I got back to my computer, I pulled the listing up on the MLS and saw there was necessary paperwork attached in the ‘Documents’ section. This isn’t uncommon for a short sale or foreclosure property. Often the listing agent will put addendums in here that detail out the specific process the lender or negotiator requires for this property. I was not, however, prepared for the magnitude of ridiculousness and bullshittery contained in these documents.
In order to make an offer on this property we needed to be prepared for:
1. $1000 earnest money up front and held hard for 90 days. If the buyer chose to exit the contract before the 90 days were up, the $1000 goes to the listing agent’s ‘negotiating service’ (a company that totally coincidentally has the same name as the listing agent’s last name. How weird!).
2. The buyer’s agent will only be paid a commission of 2.5% regardless of what the bank agrees to pay (so if the bank agrees to 6% like my last three short sale banks have, the listing agent would make 3.5% and the buyer’s agent would make 2.5%).
3. The contract will automatically request 3% of purchase price to be paid by the bank toward the buyer’s closing costs. Aw, that’s so nice of you to do that for us! My buyer totally needs that three percent and we were going to ask for it anyway, but how considerate of you anticipate our needs! Out of the buyer’s closing costs a $1250 ‘negotiating fee’ will be paid to the listing agent’s ‘negotiating service’ (I’m sure Nelson and Bridges Associates Negotiating Service is completely unrelated to listing agents George Nelson and Tom Bridges, right?). Oh. So my buyer’s paying for the negotiating of this deal. Got it.
This is when I had my epiphany. I’m doing everything completely opposite. I consider the ‘negotiating’ of the short sale part of the job I was hired to do in the first place and totally don’t charge an extra fee! What was I thinking? Clearly making phone calls to the bank to request status updates and faxing in paperwork that is requested requires an additional degree (it’s practically a medical degree when you think about it) and I’m entitled to an arm and a leg in compensation. Also, that will probably make me look more professional if I charge it. The seller won’t mind because I’m not charging them and they’ll assume I’m $1250 more awesome because I’m making someone pay me for it!
And DUH, of course I should get paid way more than the buyer’s agent. Why the hell have I been automatically splitting the commission the bank agrees to pay with the buyer’s agent? That BA only had to drive that buyer around to 843 houses and make offers on 75 before getting under contract with my listing. I have to make a whole lotta calls. Cell phone bills are way more expensive than gas, right? Oh wait…
Plus, hello, that $1K earnest money from the buyer is totally an occasional random paycheck. Any opportunity to squeeze extra cash out of someone should be snagged, right?
Well, I wrote up the offer for my client and sent over the additional documents with a note that she should review them carefully before signing and call me with any questions. And whaddayaknow? The extra clauses totally scared her off. She felt trapped and nickel and dimed to death. She decided to wait for a nice, reasonable foreclosure with a 20 page lawyer’s addendum. At least those don’t feel like they’re stealing your last dollar just because they can.
So… apparently tactics like this can scare off buyers? Maybe I’m not doing it wrong after all. If you can’t get the buyers to write an offer, how do you make any money?