While writing her insider’s tour of the veiled industry in which she has worked for over three decades, Joey identified salient rules of thumb concerning individual residential real estate transactions. She then distilled and refined these into Twelve Laws of Real Estate, where, like so many islands in an archipelago, they form parts of an interconnected chain. Taken together, the Laws provide a handy guide for agents, sellers, and buyers involved in particular transactions because they encapsulate hard-won truths about human behavior at such potentially fraught times.
Law #1: “Selling and buying real property is a very touchy business.”
This law is foundational because it is the dominant motif, a constantly recurring theme, in residential real estate sales. It’s hard to believe until you have experienced one or more imbroglios yourself. However, the fact remains that individual real estate transactions are volatile—that is, susceptible to blowing up with not too much provocation. This is because the business, like the 1970s song “Feelings,” operates more on emotions than on facts.
Trouble may arise owing to an idiosyncratic conviction of a vain seller, an unrealistic expectation of a demanding buyer, or even the aggressiveness of either a listing agent or a selling agent. Regardless of who initiates the trouble, once someone has staked out a position based on feelings rather than facts, wise counsel, or even common sense, it’s always downhill from there. An excerpt from OPEN HOUSE! will illustrate the general problem.
Idiosyncratic Seller Assumption: "A Wealthy Buyer is a Cash Buyer"
One year I had the privilege of handling the sale of a large estate. The listing debuted at an asking price of $3,000,000 and soon received an offer of $2,500,000. My seller was comfortable with the proposed sales price but irate that the buyer’s offer contained a financing contingency.
“Joey,” he vented, “no one at this level of home purchase should be getting a mortgage. I don’t like it and won’t sell unless that odious contingency gets removed.”
It’s hard to argue with a business titan. I had, of course, confirmed with the buyer’s mortgage lender that he had verified our bidder’s financial bona fides. She easily qualified to purchase a property at $2,500,000 and would have no difficulty securing the financing she sought. “There is virtually no risk to you,” I told my client. My client wasn’t listening to me, however. He simply could not warm up to the idea of a potential purchaser of his property getting a mortgage to help her do so. This is an instance of a very quirky idea starting to get in the way of an otherwise straightforward sale of bricks and mortar.
Upon looking into why the buyer wanted financing, I found a compelling storyline involving a bevy of dependent children. My seller did not care about the compelling storyline any more than he had cared about the lender’s confirmation of the buyer’s financial strength. After the buyer, predictably, withdrew her offer, she immediately purchased an even bigger and more expensive estate. It happened to be located directly across the street from our listing (ouch!). That seller had no problem accepting the offer of a well-qualified executive with a financing contingency. As for my team, we eventually found a second buyer, but my client’s wacky thinking cost him a full half-million dollars because the second buyer would only pay $2,000,000 for the property.
This sort of thing happens much more than you might imagine.
Unrealistic Buyer Expectation: “He’ll Throw in a New Water Heater”
In my sales region, Realtors generally follow a basic rule of thumb regarding an appliance or system in a house. If it is nearing the end of its useful life but still functioning properly, a buyer is not entitled to demand a new one from the seller.
Who determines the approximate age and condition of a home’s components? It is the buyer’s general inspector. He puts his findings in an official report, which is customarily used as a basis for any subsequent negotiations between the parties.
Now and again, a buyer will swim against the tide of local real estate practice, usually with poor results. My first-time buyer Sheila was such a one. In the end, her purchase of an attractive little assemblage of bricks and mortar was subverted by the headstrong position she took on a water heater.
The townhome I had secured at a favorable price for Sheila was only ten or twelve years old. If constructed properly, at that tender age it should not yet have developed any big issues, and my buyer’s inspector found none. He did note in his report, though, that while the water heater was working well, it was nearing the end of its useful life and would require replacement in the not-too-distant future.
The fact that this inspection, unlike that performed for virtually every other home buyer on the planet, had turned up not a single problem did not impress Sheila. She was upset by the water heater’s age and wanted to insist the seller install a new one prior to closing. After explaining the rule of thumb we agents use as a guide in negotiations over inspection findings, I expected my client to drop the matter. Instead, she doubled down on her position. Did she understand, I asked, that the seller’s response to a demand for a new water heater would most likely be no? Did she really want to irritate the owner of the house she was endeavoring to buy over a $500 item (water heaters still cost $500 then)? She did! “Joey, I want a new water heater thrown into the deal. You are my Realtor, not the seller’s, so get it for me.”
Well, I tried like mad to get it for Sheila despite the unreasonableness of the request, but the seller’s response was, predictably, no. The water heater worked “just fine,” he said; the buyer’s inspection report said so. Didn’t my client and I know the rules of the real estate game? One of us did.
Sheila was livid upon being informed she could not wrest a new water heater out of the seller. I was unable to calm her down. “It’s only $500,” I soothed, “not too big an expense when the time comes, which could still be a way off.” My buyer’s response was to terminate the Agreement of Sale we had in place and to fire me for good measure.
Aggressive Agent: “The House Has NO Issues!”
My lovely relocating buyers the Andos became interested in a newer construction manor home in a luxury community in the middle of my market area. The property, offered at $1,700,000, had been on the market for several months and faced competition from three other houses for sale within that specific enclave, not to mention competing houses outside of it. After touring the residence with my clients, I phoned the listing agent from the premises to express our general enthusiasm for the property. We did have one misgiving.
From the rear of the home’s impressive center hall, French doors opened out onto a magnificent flagstone terrace. When we walked out onto it, though, the terrace proved not to be sitting on the ground! Because of the backyard’s sloping terrain, it was sitting on a one-story-high addition to the house. The arrangement struck me as odd, so my buyers and I went down the exterior staircase on the side of the terrace to investigate the structure underneath.
“Bill,” I said to my colleague over my iPhone, “that room underneath the terrace has a door that is unlocked, and we went in.”
“There was water dripping from the ceiling and down every wall in what is apparently an unfinished, clammy storage space. Also, we noticed a potential structural issue near the top of the external staircase—there were multiple cracks in the stucco. My clients wanted me to ask whether you think the sellers would work with us to figure out what’s going on there in the event that we proceed to submit an offer. They love the property.”
“You are not a home inspector, Joey, so don’t go there.”
“For your information, the property has been pre-inspected, and the report states that the house has NO issues! That’s just an outdoor storage space with a terrace on the top.”
I pointed out to Bill that there was evidence of flooding in that storage area, which perhaps explained why nothing was stored in it. “We simply want to understand how bad the ongoing deterioration of the moist utility space is and figure out why the stucco underneath all that heavy flagstone lying on top of its roof is cracking.”
I’d never known Bill to be anything but collegial. However, he now bellowed into my iPhone loud enough for my buyers to hear his response. “My sellers will not deal with this stuff, Joey, get it? You are totally off-base!”
“Let’s not pursue this home anymore,” Gabriella whispered, shaking her head. “It sounds like the owners would not be interested in working with us in a measured, cooperative way.”
It is highly questionable whether, in his capacity as their listing agent, Bill should have intemperately spoken for his sellers without consulting them first to get their opinion on the matter at hand. They were the principals. After enduring several months of fruitlessly seeking a buyer and being faced with competing listings both inside and outside of their very upscale community, these homeowners probably would have welcomed the news that a highly qualified relocating couple was extremely interested in their home. Perhaps they would have responded reasonably to my clients’ provisional concerns about the outdoor storage room’s integrity by assuring them that they’d be open to discussing the findings of whatever professional home inspector the pair engaged to critique it. Because of Bill’s emotional outburst, we’ll never know.
“Feelings, nothing more than feelings… ”
LAW #1: “Selling and buying real property is a very touchy business.”