A few weeks ago, I wrote several posts about an offer that I had made on an REO property. The goal was to give my readers an idea of the back-and-forth we often have with sellers when negotiating purchases and our thinking throughout the process…
The last update I posted was back on August 12, and at the time, the bank rejected our $43K cash offer on the property priced at $55,000. At the time, we actually let the agent know that we’d be willing to go as high as $44K — and give her our side of the commission — if she could push the offer through. We never heard back from her after that, and we suspected that she had given up trying to get our offer accepted.
But, as I suspected might happen, we received a call from the listing agent today letting us know that the bank had just lowered the price to $46,900. She wanted to know if we were still willing to offer $44K? After some consideration, we decided to stick with our last official offer of $43K, and again offered the agent our side of the commission (about $1200). She said she’d take it to the seller…
A few minutes later, the agent called us back and said the seller was countering at $44K. While we were willing to pay that amount, we weren’t willing to pay that amount and also give the agent our commission (at least not without the bank giving us some other concession); so we countered with an offer of $44K, but with the seller paying closing costs (probably around $600-700, so they’d still net at least $43,300). She said she’d take it to the seller…
A few minutes later, the agent called us back and said the seller was willing to pay for the title insurance but that we’d have to pay the rest of the closing fees, and we’d have to use their closing attorney. Well, their closing attorney is one we know well — they charge exorbitant closing fees (about $400 more than our preferred closing attorney), and in reality, it would be cheaper to use our own closing attorney and pay for the title insurance ourselves.
For much of the afternoon, we were at a stalemate. The bank wasn’t willing to budge off $44K and we weren’t willing to budge off $43K plus giving away our commission.
Finally, we called the agent back and told her we were willing to compromise — we offered $43,500, with us paying closing costs and using our closing attorney, but instead of giving her our entire half of the commission, we’d instead just give her $500 of it as a bonus. She wasn’t thrilled about losing the extra commission, but said she’d submit the offer and get back to us…
A few minutes later, the agent called us back and said the seller was willing to accept our offer, but in the process, screwed her over by substantially reducing the amount of commission they were willing to pay her (technically, I imagine she could have refused to accept these new terms, but then she risked not having the sale go through at all). Ultimately, even with what we were offering her as a bonus, she will make less in commission than if we hadn’t offered her a bonus and just agreed to the $44K.
It really pisses me off that the bank chose to screw over the listing agent in retaliation for our hard-nosed negotiation, but unfortunately, there’s not much we can do without risking the relationship the agent has with the seller. I would even have been willing to refuse the deal unless the agent got her promised commission, but I have a feeling that would reflect badly on the agent, and I didn’t want to risk that. In the end, it looks like the deal will get done at $43,500, and we’ll throw in a few hundred dollars extra to the agent as a bonus to make up for what she is losing from the bank.
Hopefully the contract will be finalized by Thursday, and my closing attorney said he should be able to close by the end of next week. Now, I just need a name for this house… 🙂
Haggle House …ha
Tom –
I love it! That may be a winner… 🙂
Great job. I’m surprised that much negotiating happened that quick. That’s a pretty decent listing agent and bank rep.
Bilge –
I was actually pretty surprised as well. Seemed like the agent had no problem getting in touch with the asset manager and he was able to make quick decisions. We went back and forth about 6 times in 2 hours…
Probably helps that this is a small bank (I believe) making the sale…
Wow. That’s some tough negotiating. Too bad the listing agent got the shaft, but in the process she earned your respect (I assume) which would make you more likely to work with her again. What kind of ROI are you looking at in this property?
Alex –
Unfortunately, we’re not even sure we’ll get the property. The bank — who was very available to negotiate all afternoon yesterday — has decided to ignore us all day today. We’re still waiting to get official approval on our offer and get the contracts signed.
It’s probably just a ploy on their part to see if they can elicit a higher offer from us or someone else in the meantime, but if the bank wants to be unethical in this respect, I can’t stop them.
No! These banks are cheeky! And then, they delay closing. Delay closing. Delay closing. Then they want you to close in 12 hours. It’s ridiculous. Totally on their rules.
I recently got my license, but we try to allow the agents to double dip. I think we’ve gotten a few deals because of it. Other agents don’t even seem to crack a smile when you mention that to them. It’s like they hear it all the time. Get excited agents!
J — you guys had good luck with the REO agents?
What ARV are you looking at with this house?
J Scott, did you end up purchasing this property? If so, for how much?
In sept 10′ you mentioned that it might be falling through?!?! Don’t leave your readers in anticipation for a year bro!!! lol just playin, but seriously… what happened?
Hi Jacob –
That ended up being House #18: The Haggle House. Ultimately, it turned out to be a very profitable deal for us…
Nice. You guys seem to be great at negotiating. Do you find that you are generally less aggressive while negotiating with your home buyers or are your tactics primarily the same accross the board?
Hey Jacob,
I tend to prefer to negotiate with nameless, faceless entities, like the banks. I find that I can be a little soft when it comes to dealing with needy homeowners, etc. My wife on the other hand, has no problem negotiating with our buyers and ensuring that we get top dollar for our rehabs. Over the past 28 projects, we’ve averaged selling at 95% of list price, and I don’t think we’ve ever gotten less than 90%. Now, that said, once the property is under contract, we both go out of our way to ensure the buyer is happy with the house and the closing process. So, we’ll normally do *all* repairs that are requested during due diligence (which is generally every little thing the inspector finds) and if the appraisal comes in low, we’ll always happily reduce the purchase price. So, we are tough negotiators up until a contract is signed, and then we get soft… 🙂