Save a Dime, Spend a Dollar – How you may be your worst enemy when selling your Home.
I was having a conversation with buddy of mine the other week, Ryan Sloper, another entrepreneur who owns multiple businesses and also happens to be in real estate. We were sharing stories, talking about implementing new strategies in our businesses, and making a larger impact in our respective communities. He is getting ready to rebrand and reopen his company, move to a new office, and hire someone to run his business. Having my own company with a partner, I was able to share some insight into what he is currently experiencing.
Sloper has a successful real estate business in Northern Virginia, has a subsidiary that rehabs and sells distressed properties, owns a Duck Donuts in Bristow, Virginia, and I believe is a silent partner in a few other companies. So we were discussing the logistics of opening and moving a new office, the new TRID guidelines for borrowers/purchasers, and he was in the final steps of executing another lease to open his second Duck Donuts. To say he is busy is an understatement.
I actually had Sloper on the pilot episode of Frederick Advice Givers to explain what a podcast is all about and to swap stories. Our conversation on the podcast (You can listen at: http://frederick.localadvicegivers.com/001/ or go to iTunes or Stitcher and search for “Frederick Advice Givers”) was pretty similar to the one we were having that day. Just a couple of guys sitting around sharing stories, sharing ideas, and coming up with new strategies to help our clients.
I was telling Sloper about a recent transaction that was very complicated from the beginning. I was sharing with him the intricacies of how we got to settlement on this unique property. We had to overcome appraisal issues, meet with the city planning department and the Fire Marshall, get an architect involved, ask a sprinkler company to help, and even had to get the council of a local attorney to interpret exactly how the property boundaries were described in the deed. We were laughing because all the public thinks we do is put a sign in the yard and put the property on the multiple list and then collect our commission check.
There is so much more that goes on behind the scenes that the public is not even aware of to ensure that everything happens smoothly and our clients’ interests are best protected. I told him the kicker was that on the day before our “feasibility study period” was over, we were meeting with five city officials in their conference room. I’ll spare the minor details, but we left that meeting and were verbally told one thing…then the next day at 2pm (with our deadline just a few hours away), we got an email from an official stating that he reviewed the code again and found that it could actually end up costing my client an additional $42,000. So with the deadline ticking, I immediately went back to the seller’s agent and told him that my buyer had to walk away from the contract unless the sellers could help subsidize this cost.
This led to some intense, last-minute negotiations, but we were ultimately able to come to terms and get to settlement.
I met with and coordinated meetings with literally every possible official. I had to call in favors to get all the answers we needed within our due-diligence period. There were probably a dozen meetings and another 100+ phone calls to make sure my client knew her options and that she was satisfied with the answers at every turn.
To say this was difficult and stressful is an understatement. But that is just what we do for our clients. We don’t just sit back and do nothing—we roll up our sleeves and get dirty to protect the interests of our clients.
Sloper then told me a few of his stories.
He was actually in the middle of a crisis with his lender partner where the government had halted funding on a grant program for down payment assistance. He and the lender had over 30 clients who were in the pipeline to buy a new home and use this grant money to help subsidize the down payment on their purchase.
Imagine you are a buyer and have met with a real estate agent and a lender and you are looking at homes with the anticipation of getting a grant to help pay for some of your closing costs and down payment. Then you are told, “Sorry, the funding for the program stopped.” Think this is stressful?!?!?
Sloper and the lender were trying to get in touch with the appropriate agencies to find out the particulars of the funding of the grant. Was this a temporary halt? Did it affect buyers who already had contracts? Were there alternatives to help these clients?
See, when you are dealing with someone’s most important asset, there are hurdles that the public never even knows you encounter. And you just take care of the issue—or, more likely, find an alternative.
I haven’t heard the outcome of this yet, but hopefully they found another program that will help ease the financial hit that the buyers are going to have to deal with because of the halt of the grant program.
Another story Sloper told me emphasized just how important it is to have a professional representing you…
Sloper was telling me how he was representing buyers and how they wanted to buy an FSBO. (For Sale By Owner) That is all well and good, as the sellers think they can save a little money on commission, but what these sellers didn’t know and what most FSBO sellers don’t understand is that they don’t negotiate for a living. And understanding your rights during these negotiations can either save you or cost you tens of thousands of dollars, depending on your skill level.
See, Sloper and do this for a living and know how to properly negotiate a contract. We know when to push forward, when to pull back, and how there are times to negotiate certain items to be advantageous for your clients. We understand how you might have to give something on the front-end, knowing that you will make it back on the back-end of the negotiations.
He was negotiating the contract with this FSBO. His buyers were selling a house, so they had the contingency in the contract, and his buyers were also going to do a home inspection. He could tell that the house was older and was going to need work, so they would be able to negotiate those items at a later time—after they had a contract on their house and the home inspection was complete.
To make a long story short, Sloper was able to get all of his buyer’s closing costs paid by the seller. (This part of the negotiations was done initially to get the home under contract.) He was able to get this house under contract while his buyers were still trying to sell their home. Then after a month or so, his buyers got a contract on the house they were selling, and it was time for Sloper’s clients to do the home inspection.
Well, just as Sloper predicted, there were major items on the home inspection. Sloper, able to deal directly with the seller and not through a listing agent, was successful in getting the sellers to fix EVERY item on that home inspection list. How? Because Sloper is a skilled negotiator and knew what buttons to push and when to push them. These repairs that the FSBO sellers had to make before settlement were in excess of $30,000. So not only were Sloper’s clients able to secure the house at an excellent price, but they also got the sellers to pay all of their closing costs AND over $30,000 in repairs!
How did Sloper do this?
Well when he first met the sellers during the initial showing, they told Sloper way more than they should have. And being the excellent agent that he is, Sloper kept his mouth quiet and listened, thinking he might use this information at a later time in negotiations. Sloper knew that if he could get them to initially agree to a contract, if issues were to come up three months later during the inspection, the sellers would almost have to do them. If the sellers would have had a savvy agent, they would have asked for inspections be done immediately.
It always amuses me to see what people will do just to save a few dollars on commissions, but then lose BIG time in negotiations. Whatever they saved in commissions ended up costing them three times more in the long run. I don’t know the professions of these sellers, but they obviously weren’t skilled negotiators. This goes back to the old analogy: if you needed a heart transplant, would you operate on yourself? This is the same when selling your home. Why would you advise yourself on the most important investment in your portfolio? This seller, like so many other FSBOs, thought they would save a few thousand in real estate commissions, but by not having a professional on their side, it cost them MULTIPLES of tens of thousands of dollars in the long run.
And don’t get mad at Sloper.
His buyers were smart enough to hire him. He did exactly what he was supposed to do—work for HIS clients. And he did a great job.
This brings me to my larger point…DO what you DO well and know whatcha don’t know. You might be the best dentist in the area, but does that qualify you to make a floral arrangement for your daughter’s wedding? No. So stick with what you do well and hire GOOD professionals for other jobs.