Mary Beth Loves Denver

There’s a saying in the real estate world that “buyers are liars.” I don't necessarily like this particular phrase, because it sounds like we're saying that buyers are somehow dishonest.   And that's not at all what it means.  It’s not that buyers walk in and deliberately tell lies to their real estate agents. It’s more that what buyers think they want in a house and what they actually wind up wanting are often two very different things.

Case in point: my brother, whom I love very much and who is definitely not a liar. He wanted to buy a house. A house, as in “detached property with a yard.” He was very adamant about this point, because he has a very sweet yellow lab named Jake who needs space to run around and survey his empire and do his occasional duty. So we traipsed around town looking at lots of houses with lots of big yards.

And then I get a call. That very same brother is very excited. He’s spent the entire morning with a sales rep over at Riverfront. They have a great place that he really loves, and . . .

“Riverfront? Those are condos. What about Jake and the yard and surveying his empire and all that?”

“I think I can teach him to pee in a box on the balcony.”

That’s what realtors mean when they say that buyers are liars.

The point for you buyers is that, when you’re all pre-approved and it’s time to go out looking at houses, you need to keep a dialogue going with your agent about what you need, what you want and what you don’t want. Those needs and wants may change over time, once you’ve seen a couple of houses and get a clearer picture of what’s available. That’s okay. Just keep the conversation going.

The point for agents is that we need to listen carefully to what our clients are saying.  Not just as in "I want a condo with two bedrooms in this part of town," but why they want what they want.  What are their needs, their interests?  Are their other options that would meet those needs as well?

Most buyers have a pretty clear idea of what they want. Some have ideas that are too clear. (“It has to be made of stucco, sit on a corner, and have a kitchen with a window over the sink that faces to the south and looks over a peony garden that’s four feet wide by eight feet deep with a tree in the middle.”) Others aren’t clear enough. (“I don’t care what the house is like or what part of town it’s in, as long as it’s a good deal.”)

Buyers: the first time you meet with your agent, be clear about what you know you want – area, size, number of bedrooms, age and condition of the house, etc. He or she will ask you a lot of questions, so you don’t have to come in with a list all prepared or anything. Just talk to him or her about what you think you want, and why.

You may prefer a newer house. But would an older house that’s been nicely remodeled be an option for you as well? You may say you need four bedrooms, but is that because you need four bedrooms, or do you need three bedrooms and a home office? If it’s the latter, then a three bedroom home with a study might work for you as well.

People sometimes ask me “How many houses do buyers generally look at before finding the one they want?” That depends completely on the buyer and the circumstances. I had one buyer who decided he wanted the first home we looked at. (Well, the first one we looked at after he realized he wanted a house in Park Hill instead of a condo in the Highlands.) I had another who claims we looked at 70 houses before finding the right one for her. I stopped counting, but I don’t think we hit 70.

It’s okay to fall in love with the first house you look at. It’s okay to say “Look no more, this is it!” It’s also okay to walk into a house and say “No, this isn’t it” and walk right back out without seeing the rest of the house. You won’t offend your agent. He didn’t build the house, after all. It’s okay to say “this isn’t it” before you even walk in. You don’t even have to get out of the car if you’re certain you don’t like the house, or the area, or whatever.

Remember that you probably aren’t going to find perfect. But you will find “right” for you. I’m a big fan of giving buyers the time and space they need to find the best house for their needs. It may happen on the first outing. It may not. Some buyers are in a bigger hurry than others, and thus have to choose more quickly. However it works, you should never, ever be pressured by a realtor or anybody else to buy a particular home when you’re not comfortable with the decision.

The way I see it, the transaction will be over soon enough. But the buyers are going to live in that house for a long, long time. I don’t want them to wake up every morning cursing me because I talked them into buying something they didn’t really want.

Buyers and agents, talk to each other. Listen to each other. Your agent will probably have suggestions and ideas about your various options, about resale values and a host of other issues related to your search. Take all of that into account. And then remember that, in the end, the decision is yours, and yours alone.

Well, yours, and the sellers who accept or reject your offer, and the lender who will tell you whether or not you can have the money to buy it . . .

If anything is going to go wrong in a home purchase, it’s very likely going to have something to do with the loan. Borrowing money to buy property in today’s environment is very, very complicated.

Buyers -- for your sake, for the sake of your realtor and the sake of everyone’s sanity -- please choose a good, reliable loan officer with a verifiable track record of successful closings and happy customers. In today’s climate, a bad or lazy or irresponsible loan officer can make everybody’s life miserable, and can delay a closing or even completely sink a deal.

A few true stories:

I’m not the only real estate agent with stories like this. Fortunately, Colorado now requires loan officers to be licensed with the state. So if somebody screws up, they can be reported. This will hopefully, over time, sift out the riff-raff.

So how do you find a reliable loan officer? Start by asking your real estate agent. He or she has sat at enough closing tables to know who’s reliable and who isn’t. Most agents have lenders they deal with regularly. Those loan officers are probably going to go the extra mile for you, because they want those agents to keep referring business to them.

Other avenues? Ask your friends, family, co-workers what lenders they’ve worked with, and how it went. If they say “Okay, I guess,” move on. Look for the one who says “She was fantastic!”

Whatever you do, if you live in a state that requires loan officers to be licensed, be sure to work with a licensed loan officer. Not “well, I’m not licensed, but the paperwork will show an agent who is.” Work directly with someone who is licensed in your state. And, preferably, someone who actually works in your state. Laws vary widely from state to state. Unfamiliarity with your local laws and real estate customs can be deadly for your deal.

Part of being a good realtor is to negotiate well on behalf of clients. That, after all, is supposed to be the reason we exist as a profession — to look out for what is best for those clients when they’re buying or selling real estate.

But being a good negotiator is more than just the ability to be cagey or slick. It’s about understanding human nature and knowing what kind of behavior or “tactics” are appropriate in a given situation.

Case in point. Sellers get an offer on their house. The offer is significantly under market value, no doubt because the buyers have watched too much television news, and are convinced that all sellers are desperate and that they can swoop in and pick up real estate at bargain basement prices. The agent’s cover letter lists a couple of minor issues — like the color of the bedrooms and the “need” to replace a small area of perfectly good but not perfectly new carpet — as the reason for the low offer.

Sellers are annoyed, and have no interest in selling at the offered price. They’re preparing to counter at a reasonable price, and gritting their teeth because they suspect that even if they do reach a mutually acceptable price, these won’t be easy people to work with.

And then, lo and behold, another offer comes in. So it’s a multiple bid situation. (Yes, it still happens in this market — more often than you might think.) Throughout the negotiations, agent #1 and her buyers are clearly “playing the angles” — refusing to commit to or sign written counters, keeping their offers verbal, trying to stay as low as possible until the last possible moment and then suddenly bumping up. Meanwhile, agent and buyer #2 are cooperative and pleasant. Buyers don’t hide the fact that they’re in love with the home. They sign and return counters immediately. They work in good faith within the framework sellers have set up.

In the end, both prospective buyers have come up to a price very close to asking.  #1’s final offer winds up being slightly higher (after literally bumping it up $6000 in 5 minutes after realizing they were falling out of the running).

And yet the sellers choose #2. Why? Because a real estate transaction is about more than raw numbers. Determining a mutually agreeable price is just the first in a long series of negotiations culminating in the close of the sale. There’s inspection, negotation on what repairs will be done and when, and the host of unanticipated issues that can arise during the contract period. Even if buyers and sellers never meet, they’re working together. They know when the other party is being difficult, and it affects everybody involved in the transaction. I’ve seen it happen over and over again. When you get one party, be it buyer, seller or agent, who is overly defensive and paranoid, the stress level goes up all around. Everybody becomes defensive, and subsequent negotiations are drawn out and difficult. When everyone is cooperative and looking to be fair and reasonable, the entire contract period can actually be a pleasant experience.

The sellers in this case are good people who want to be fair and want to do the right thing. And they want to work with somebody they trust to be on the same page.

None of this is to say that there’s anything wrong with seller’s working to get the best price they can for their home, or with a buyer trying to get the best deal possible. That’s what we do for our clients. But are better and worse ways to go about doing that. In an impersonal corporate situation, or in a case where one party has proven untrustworthy, perhaps cagey game-playing is the way to go. But when families are buying and selling their homes, it’s not the time to play slippery ace negotiator.

It can backfire. Badly.

The other day, I ran into someone I hadn’t seen in a while. She had just moved back into town, so I asked here where she was living. She looked at me sheepishly and said “I bought a house. I was going to call you but it was new construction and I didn’t think I needed to and the whole experience was awful and I really wish I’d called you first.”

A lot of people think they don’t need a real estate agent when they’re buying a new home from a builder. After all, they don’t need help finding a new house. The builders advertise all over the internet and the newspapers, and they have those nice models with the helpful salespeople who walk buyers through the whole process. What’s left for a real estate agent to do?

Plenty. First of all, those nice helpful sales people work for the builder, not for you. They’re not looking out for your best interest. They’re looking out for the employer’s best interest. If you don’t have representation, then there’s nobody in the transaction looking out for your interests.

Buying new construction from a builder is a lot different than buying an existing home from an individual seller. First of all, when you buy a home from a homeowner who is working with a real estate agent, the contract guiding the transaction must be the official Colorado Contract To Buy and Sell Real Estate. That contract was drafted by the Colorado Real Estate Commission, and is amended every year, to make sure that buyers and sellers are protected.

But not new construction. If you buy a house from a builder, you use the builder’s contract. The contract drafted by the builder’s lawyers, to protect the builder’s interests. Do you think those lawyers sit around trying to think of ways to look out for your best interests as a buyer? Don’t bet on it.

Second, you have those on-site sales people who, if you have no representation, will be instructing you and guiding you through the whole process. They’re often very nice people. I’ve worked with several of them whom I liked very much. But don’t forget who’s signing their paycheck. It’s not their job to see that your interests are protected.

How often, in this market, do you think unrepresented buyers pay too much for new construction? It’s easy for a buyer to assume that a builder knows the market, and that their homes are priced accordingly. But that’s not always the case, especially in a stale market. There are times when new homes are priced too high. When builders first set prices for a new development, there’s a little bit of guesswork involved. They don’t necessarily know that those initial prices will hold. That can be a big bummer for the first people to waltz in during the initial excitement period and pay the asking price. Because if the homes are overpriced, sales will usually peter out fairly quickly, and the builder winds up dropping the price. And that leaves the initial buyers in the position of having paid more for their homes than everyone else who moves in later. Guess what happens when it’s time to sell?

A good real estate agent will tell buyers when a new home is overpriced, and attempt to negotiate a better deal. If the builder isn’t dealing, he or she will advise the buyers to move on.

Sometimes, buyers attempt to purchase new construction without representation because they think they can get a better deal if the builder doesn’t have to pay an agent’s commission. That isn’t going to happen. Builders know that charging less to buyers without representation means charging more for buyers with representation, which amounts to penalizing buyers for having representation. That doesn’t make them look so good. It also hurts their relationships with local real estate professionals, and they really don’t want that. They need buyer’s agents to show their product to their clients. So they won’t stab us in the back by penalizing our buyers.

The cost of paying a buyer’s agent commission is built into the price of a house. The buyer is going to pay it whether or not any commission is paid. If the buyer is unrepresented, that money just goes back into the builder’s pocket.

The thing is, most builders expect Realtors to accompany clients on their first visit to a community in order to allow that agent to represent the clients. So call your Realtor before you start wandering through open houses. (Not working with a Realtor yet? Call me!) Personally, I’m happy to go wandering with my clients, even if they’re not sure they’re serious yet. And keep a stack of your agent’s cards with you. That way if you happen to pass by a model home and justhave to go in, you can hand the card to the onsite person, tell him or her upfront that you’re already working with an agent, and make sure the builder will honor your relationship before you go traipsing through the model.

Pick up the phone before you start looking. Call a Realtor. You’ve got everything to gain and nothing to lose.