Volume 174, The "Money Call!"

"This is a money call," my son said. (Of course it was, why else do college age kids phone home?). "I need to buy dress shoes." (Okay, I wasn't expecting that.)

A few weeks ago, Case revealed that he'd decided to rush and been accepted into a fraternity (Phi, Kappa, Sigh . . .) Now that he'd been admitted, a makeover was clearly in his future, thus the impromptu phone call home. With dress shoes in hand, can pleated khakis, a sport coat and a tie be far behind? (Probably not.) I suspect this will only be the first of many such "money calls." Still, if it takes a fraternity to elevate my son's sense of style, I will happily support his decision and (less  enthusiastically) write the checks.


"Less than enthusiastic" is how sellers often feel when they receive the dreaded "money call."  Having negotiated and agreed upon price with a willing and qualified buyer, and having waited out the inspection and appraisal periods outlined in the contract with patience and good form, it can often be downright sobering news when buyers ask for - or demand - credits. More unsettling still, is the request for a price reduction in return for closing the transaction. Wait a minute - what just happened here? I thought we had a deal! (Not so fast.)

What happened is a shift in power between buyer and seller realities. Not that there aren't popular homes that still attract multiple offers in our marketplace (there are) but the vast majority of listings are taking longer to sell and when they do, negotiating back new discovery is "de riguer." It's the 80/20 rule: 80 % of the pending sales are experiencing aggressive negotiations while 20% are receiving so much attention that the buyers have little room in which to maneuver, which creates an understandable, but very real, disconnect. 

So where does that leave you?

As a general rule, you should absolutely expect some push and pull in today's more conservative marketplace (think Dr. Doolittle) even in the case of multiple offers.

Here's the good news - you're in contract (!) and that's news worth celebrating, but don't pop the champagne just yet.  Getting from the "accepted offer" stage to the "close of escrow" reality can often be a veritable minefield and regretfully,  just slightly less painful than a root canal. (Throb!)

These nuanced negotiations are in large part the reason why, Realtors haven't gone the way of the travel agent - or the Dodo bird -  nor should they, especially in our more topsy-turvy world. Now more than ever, you absolutely need third-party negotiators to navigate the home buying and selling "waters."

This is delicate stuff folks.  Not only are we talking numbers, we are often dealing with emotionally charged decisions around the sale as buyers start to "second-guess" their love affair upon receiving an encyclopedic stack of  "disclosures" (thump!) while sellers simultaneously begin to feel "insulted" at the microscopic examination their previously "lovely" home is now undergoing (twang!).  Of course, the combination is highly volatile.  Should we expect anything less?

Yes, we should - which is where thoughtfully outlined expectations come into play, as well as the experience of a seasoned agent and a "hands on" local broker (think The GRUBB Co.).  With all due respect to the "win-win" school of thought, real estate transactions are often adversarial by nature . . . 

So here's my list of GREAT Expectations:

• Expect some negotiation to take place - even if you have sold with back-up buyers in place. Once in contract, the last thing a seller should want to do, is walk away from the deal and thereby "taint" the house. The first offer is typically the best offer AND usually represents the most motivated buyer.
• Expect an invasive inspection process - That's fair.  Buyers want and need to know the full scope of their purchase - and you want them fully informed.  Inspections not only protect the buyer - they protect the seller as well.  In the final analysis, inspections are typically, a very good thing. 
• Expect faults to be pointed out. I've yet to sell the "perfect" home - no matter how beautifully maintained it is.  ALL homes have imperfections. Relax, it isn't personal. One's home often represent one's single largest asset, so buyers tend to get a bit nit-picky (so do their inspectors). Roll with it - it's an inevitable part of the process.  A smart agent will "reset" the buyers' perspective and restore balance in good measure.  
• Expect the appraisal process to be uncertain. With tough new requirements in place with respect to appraisals and lending institutions, appraisers now come from locations far and wide.  Some are great while others, quite frankly, haven't a clue as to the micromarkets in our surrounding communities. This latest wrinkle is why purchase offers that have waived the "appraisal contingency" are often worth their weight in gold.  Strong terms can be more advantageous than extra dollars in today's world and CASH really is KING!
• Expect loan officers, bankers & mortgage brokers to ask for everything, short of your first-born child.  Justifying the loan and documenting your income is what should have been required all along. Your lender WILL chase financial statements up until the day you fund, as well as track your spending - so be frugal.  This isn't the time to buy new furniture for the house or acquire a family van. WAIT until after you close escrow if other major purchases are on the horizon. 
• Expect to give credits or a price reduction once all of the reports have been completed and compiled. Okay, this is where we cut to the bone. It may not be pretty, it certainly isn't fun and it may take a few anxious days and several heated arguments, but with cool heads and good intentions (buyers, this isn't your opportunity to "skewer" the sellers) almost any gap can be reasonably bridged.   

This is the "money call," but as long as its backed with facts instead of emotions, there's likely a middle ground that's fair to everyone involved - when presented with quantifiable numbers. On the other hand, if it's an "emotional" decision that's driving the demands or the reduction in numbers, the deal is done.  No amount of money or list of promises will put it right. Walk away and begin anew.

So there you have my list of Great Expectations.  Please note, you were warned.   

Got to run, my son is calling . . . I'd better find the checkbook!

 

btw- my favorite response to last week's question"What sign best describes you?" came from a loyal reader who wrote to say that her moniker would have to be "Work In Progress!" That sums up today's market in a nutshell.  (I couldn't have said it better myself.) Thanks to all who participated.