Ask the Expert: Multiple Offer Strategies and Changing Agents

A.  My strategy for winning offers has the following pieces, in some form, every time, with every buyer. It is dependent upon a trust-based relationship with the REALTOR® representing you, and getting all of your “ducks in a row” before making an offer.

1. Start with a pre-approval (not pre-qualification) from TWO lenders: the one who you have been using all along, and a second lender. The first pre-approval is obtained prior to beginning the property search, and is used to pinpoint how much you can afford to spend on your purchase. The second lender should be an INSTITUTIONAL LENDER (such as B of A or Wells). Its purpose is to satisfy the seller that you are legitimate in the lender’s eyes, and to show the  seller that you are solid gold. Be sure each pre-approval letter lists your name, the property address, and the purchase dollar amount. Update the information with each offer/ counter offer, as it changes.
2. Check the listing agent if a bank appraisal has been done on the property, and if so, do they know the value.
3. I always prepare a thorough Market Evaluation (CMA) with all of the most recent comparable sales, and help my buyers set a value on the property, both so they will know what they will bid, and so they will have a good sense of what the property will appraise for when they obtain their new loan.
4. BEFORE beginning negotiations, set a maximum that you will pay for the property. Beyond that value, be prepared to walk away, without looking back. Some properties are not meant to be, and a buyer needs to feel in control of the process. There may always be someone willing to pay more, but that should not affect your decision. This is, after all, a business transaction, and it should make good business sense for your family. The moment it doesn’t, WALK AWAY. Another property will come along.
5. Buyers should always write a letter to the home seller. Your real estate agent should always write a separate letter to the listing agent highlighting your purchase offer.
6. Write your cleanest and best offer (or counter offer). Your pre-approval told you how much you can afford. Your CMA told you how much the property is worth in today’s market. You have set the maximum value you are willing to pay. Now select terms that protect you, but are as attractive to a would-be seller as well. You can never compete with an all cash buyer or investor, so realizing that frees you up to write YOUR best offer
7.  Never, ever use round numbers in your price. Everyone else does. It makes your offer more mysterious to the seller when they see an uneven number, and banks assume you have some formula for assessing value. When it comes to counters, you may win by that extra $1682 you tacked on at the end!
8. If someone else gets the property, the hardest part, as I mentioned above, is to walk away without looking back. Know that you did your best. You and your agent made a strategy that was appropriate for you, and someone else got the property. Take comfort in the planning you did, and the knowledge you have about your situation, and know that something else will come along. Count this one as preparation for the next offer, a rehearsal of sorts, that will season you and make you a more savvy purchaser.

Q.  I saw a home with one agent, but he seems to lack the knowledge or experience or interest in getting me the information I need to make a good decision.  I heard I have to keep him as my agent due to “procuring cause”.  How long do I have to wait until I can choose my own agent to represent me?

 A.  I think you are mixing apples and oranges. There are really two questions here: can I select a new agent of my own choosing, and who gets paid for writing the offer (procuring cause).

Procuring Cause is a term used in determining to whom the seller will pay a commission based on the MLS offering to a sub-agent (the person who brings the offer). It has absolutely nothing to do with you, as a buyer, because you are not a party to the MLS offering, nor to the commission.

Commission disputes boil down to what is referred to in the industry as “procuring cause.” The agent who ultimately caused the buyer to purchase the home and earned the commission is generally the procuring cause agent. That procuring cause agent might not be the agent who obtained the offer from the buyer, presented the offer and successfully negotiated the seller’s acceptance of that offer. But it’s often not the agent who simply first showed the home.

The only time you need be concerned with who, or how, an agent is being paid in the transaction, is if you have an exclusive buyer representation agreement, wherein it states that you, not the seller, will be paying the commission.

You have EVERY RIGHT to choose a new agent for yourself, especially if the standard of representation you are receiving is not up to the standards specified in your agency agreement, including, but not limited to, diligence and knowledgeability on the part of your (existing) agent.

When you hire a new agent, make them aware of what has transpired, and be sure they speak with all parties (previous agent and seller’s agent) on your behalf, to notify them of the change in representation. I find it often helps to have my buyers write a brief email or letter stating that they are no longer working with broker A, because he lacks the skill, knowledge, etc. to put the transaction together on your behalf, and that, due to your strong desire to acquire the property, you will be working with broker B, who you believe will work more effectively on your behalf.

This will give the new agent the negotiating strength he/ she needs, and makes it clear that you are quite serious in your endeavors, and not someone flighty whom the seller should worry about, if they get into an escrow with you.

As for how long to wait, as in every real estate transaction, TIME IS OF THE ESSENCE. Don’t wait. The primary goal here is acquiring the property for you. Commission is secondary, because the needs of the buyer and seller outweigh the right to commission.  Let the compensation chips fall where they may. The agents can resolve that, among themselves, down the line.

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