Buyer! Know who You’re Hiring!
I was recently reviewing multiple offers for a listing. I research the buyer, their agent,
their lender and loan before presenting an offer to my sellers. I come prepared to give
a well-rounded picture of the strength and potential liabilities of each scenario. In a
multiple offer situation offering price does not exclusively win the day. Secondary
considerations come into play. The goal in selling a home is not opening an escrow
but in closing one.
What other factors come into play when considering an offer and comparing it to others?
There is the low hanging fruit: offering price, length of escrow, requests for the seller to
pay closing costs, down payment and type of loan. What if all those things are more or
less equal? Or what if the seller can counter multiple offers so they become equal?
Secondary contract terms can tell a lot about the strength of the offer. For example:
how much earnest money is the buyer bringing in? That indicates how much skin
the buyer is willing to have in the game or how much money they have in their bank
account depending on how you look at it. Is their pre-approval letter with a loan broker
or a direct lender that you can verify is actually closing loans? Then there is the basic
question of “is the contract filled out correctly?” Why does this matter? Because it
tells you a lot about the agent who wrote it. The buyer’s agent is their advisor. They
recommend lenders to pre-approve with, how much to offer, how to interpret the seller’s
disclosures, who to hire to complete inspections: how to negotiate every last item
throughout the marriage of the transaction. If this agent is steering the buyer ship how do
we decide if they are a credible captain?
The buyers may not have interviewed multiple agents before settling on one…so my
sellers and I need to look into the matter ourselves. The no-brainer: is their real estate
license valid and current? This basic question is one of the reasons the agent’s DRE
license number is required on all contracts and marketing materials. Second, does this
agent have any restrictions on their license (read: hand slaps) or any pending complaints
or judgments? Who is their broker? What is that broker’s reputation? Agents can look
up another agent’s production to see what homes they have sold, where, with whom and
for how much.
Back to my recent experience in “spying” for my sellers. The offers were different but
the seller would counter them so they’d end up the same. She needed to take in the whole
picture to decide who had the best potential to actually close the sale. This is when I
summarized what I learned about the buyer’s agents. One agent was a “part time realtor”
by his own definition…he said he “does real estate on weekends and summer breaks”
because he is a teacher. He explained this to me when I asked (in a very polite manner)
why he hadn’t closed any sales in the 4 years he had been licensed. One agent was his
own broker and also happened to be doing the buyer’s loan too. He wouldn’t allow his
buyer to pre-approve with another lender. I guess his double-dipping paycheck was too
important to risk that. Don’t even get me started on the quality of work done by someone
straddling two very complex roles of both loan and real estate broker. One realtor was
brand new and had completed just one sale. But in researching her I discovered that
her more seasoned team agent had worked with a realtor I know well so I called for a
reference. What she told me confirmed my initial impression of the newer agent…high
quality, smart and committed to going the extra mile. Everyone has a first and a second
transaction. You need to start somewhere. The fourth buyer’s agent was a broker who
had been licensed for many years but had not closed any sales since July 2008. With all
the changes in the market since then, could they anticipate speed bumps on behalf of their
buyer to avoid the deal falling apart? One in five escrows currently falls through so that’s
a valid question. Lost market time can cost my seller money.
We discussed the offers, the buyers, their loans, their agents and my seller’s priorities. In
guiding my seller through the totality of the strength of each offer, what I learned about
those buyer’s agents became relevant. The depth and experience (and yes, sometimes
agenda) of the buyer’s agent often explains why the buyer’s offer is what it is. The
buyer’s agent may not be the reason a seller should accept or decline a particular offer,
but it’s important to know who you will be working with. It’s not a popularity contest, it’s
a business transaction. It’s best to see the spike strips before they hit your tires. As Edna
Mode from The Incredibles says “Luck favors the prepared”.
Sellers shop for realtors. Buyers shop for houses. Buyer beware! Not all agents are
created equal. Your agent may be compensated by the seller but hire them like you are
paying them out of your kid’s college account. Because that’s what it can cost you. You
can pay too much for your house or miss opportunities to get the most for yourself out
of the sale – like closing costs paid for, cheaper affiliated services or better loan terms to
name a few. And in some cases you can miss the boat altogether.