Saturday, March 17, 2007

The Big M.O. (...on the Buy Side)

No, I don't mean Modus Operandi although I do sometimes wonder what makes certain people (mostly Realtors) tick. What I am referring to is the other M.O.--the acme of all residential real estate negotiation scenarios; one of a handful of situations in the constantly fluctuating Buy/Sell world of Property where someone will definitely lose if all parties play it out to the end; the number one 'case in point' I'll always make for securing experienced Buy side representation. I'm talking about the...Multiple Offer i.e... Two Buyers + One Property= One Winner + One Loser---perhaps.

And I see this occuring just as much now in a relative Buyers market, (high inventory to Buyer ratio) as it was in a so-called Sellers market, (low inventory to Buyer ratio) a few years back. The best examples in each price point bracket will always be first in line to get Offers. And when more than one party presents an Offer at the same time, the highest level of expertise is required on the Buy side of the deal. My next post will address the List side of the M.O. which can be equally as nerve racking for the Seller.

"Two people are in love with me...what to do?" Seller.

"Marry the one with the most money," Seller's Agent.

Whenever there is a large surplus of inventory like we are experiencing presently--a Market flush with Condominiums, Single Family Houses, Multi-Units or just good old vacant Land--there are many fine Properties from which to choose. And it's always the best of the best Properties that generate the most 'buzz' and end up with more than one contract on the fax machine at the end of the day.

The following pointers are therefore in order:

First, and foremost...have Realtor representation. Even the least experienced Agent in our office negotiated more transactions so far this year than most Buyers have experienced in their lifetime. And a 'top producer' (10-20+ million dollar annual volume) has the ability and savvy to structure an initial offer in ways you might never imagine on your own. And contrary to my short romantic dialogue above, it is not always just about Price--Close dates, Contingencies (of which there are many that can kill a deal instantly), Tax Pro-ration and Stamp 'language,' Closing Cost Credits and Buy-Back Clauses (New Construction), Addendums, PITI clauses, Inclusions, Exclusions.... all come into play.

Next, have a pre-plan. I always let my Clients know about the possibility of an M.O. before we submit an Offer. I explain that the majority of the time, going to 'Full Price' might still only give us a 50/50 chance at getting the property depending on how the Sell side is handling the negotiation of the Offers.

"How much do we love this Condo?" are words I've uttered many times in my career.

Be able to work the Sell side of the Offer. I'm not going into detail about this here but trust me, the real professionals can get enough 'scoop' to obtain a 'house advantage' (pun intended) in most M.O. deals. At the very least, we know which questions to ask about the 'ground rules' set by the other side and how to keep them to their word if things start to go sideways. I always research the Closed history of the Listing Agents to check out their List Price/Closed Price ratios. Then I always ask who the other Agents are involved in the M.O. and research their Closing history as well.

Be able to advise when its time to bow out and 'get back in the car.' I don't win every Multiple Office because there are occasions when it's best to just stop and let the other party pay too much. Other times the Seller just 'likes' the other deal better, all things equal, and you lose out anyway. People are funny. 'Funny how?' Don't get me started. But as we approach the 'tipping point' of any deal in which more than two parties are involved, I'll always pose the following question to my Buyers...

"How would you feel if you left this deal then found out later that the other party got the Property at a price you would have paid?" The answer to this question has a lot to do with how we proceed in the negotiation.

There are several strategies when it comes to negotiating a Multiple Offer and your Buy side representative needs to be well versed in all of them. Quick response time and the ability to 'appraise' the value of any given Property are but two of the qualities you must require of your Realtor. And equally as vital is his (my) ability to know when its right to just 'go for it' and get the deal done simply walk away and let the other guy 'win' that one. It is a Buyers arena, after all these days. So if you're going to jump into the Chicago Real Estate game, you have to be prepared for the big M.O. when it comes into play.

photo by velocitypress

Geno Petro

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