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  • Poway, CA 92064
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Negotiating Like a Pawn Star

Pawn Stars

I recently spent a fun-filled weekend in Las Vegas with Daughter #2 (pictured, although she is much "brighter" in person). It was a belated finally-old-enough-to-buy-her-mom-wine-day present and we, of course, had to visit the site of the show "Pawn Stars." So popular has this show become that the actual pawn shop has ropes snaked out front ala Disneyland. The cab driver told us that the wait to get inside can last over an hour on weekends. Since our visit was at 9:00 am on a Saturday (and remembering 9:00 am in Vegas is as bustling as 3:00 am in an assisted living center), we waltzed right in. 

For anyone who is unfamiliar with this epic History Channel show, you are likely from another planet. Like Mars. Or Arizona. Suffice it to say that Pawn Stars is Reality TV at its finest. And by that I mean, it is by all appearances utterly contrived, unless you accept the premise that the first place everyone goes to sell (not pawn) their most valuable collectibles is a dingy pawn shop located ten blocks off the downtown Vegas strip. 

It's entertaining, though. And we can draw some parallels to the negotiating process in a real estate transaction. Here is how a typical episode might go.

Normal Looking Man walks into pawn shop carrying a collectible. Cut away to pre-recorded parking lot interview with Normal Looking Man.

NLM: I came here to the pawn shop today to sell my gently used 1943 WWII Oneida PAL-MOD bayonet. I am hoping to get $4.7 million, and I am going to use the money to send my son to a four-year state college. For one year. Oh, and the least I will take is $200.

Cut away to "real" time. NLM approaches counter where one of the shows stars is eagerly awaiting his arrival.

STAR: What do we have here?

NLM: I have a 1943 WWII Oneida PAL-MOD bayonet left to me by my maternal grandfather, a decorated hero who served under Patton in the Eurpeon Theater and later went on to become one of his closet friends. Here is a picture of my grandfather standing next to General Patton at a barbecue, cutting a flank steak with this very bayonet. 

At this point, the STAR proceeds to give a little history lesson about the item to justify the fact that this show is airing, for some unknown reason, on the History Channel. Plus, buyers are reallly smart. 

STAR: This is a bayonet manufactured in 1943 by a company called Oneida. Bayonets manufactured by Oneida are among the rarest today. Originally, this bayonet blade was 16 inches long. At some point after WWI, the army figured out that a shorter, seven-inch blade was more effective. So the bayonets were modified. In this case, a company called "Pal Blade Company" modified the blade. Oh, and George Patton was a highly decorated General.

(EDITOR'S NOTE: The author knows a little about this particular bayonet (but nothing about General Patton), because she has one in her office desk drawer that she found while cleaning out the garage. Coincidentally, it is for sale, as she has found she has little need for it. Brandishing a bayonet at a listing appointment, it turns out, is not a good business development strategy. Make an offer.)

STAR: So what did you want to do with it?

NLM: I wanted to sell it. (Remember: They always want to sell it rather than pawn it. This is a pawn shop, afterall.)

STAR: What did you want to get for it?

NLM: Well, I have researched it online. I've seen the same bayonets go for between $200 and $300. So, I was thinking… (pregnant pause)… $4.7 million.

(Now, this is part you have been waiting for. In Reality TV negotiations, the buyer immediately commences trash-talking the seller's special item. Kind of like in real estate negotiations.)

STAR: Not gonna happen. You see, I need to make a profit. And your bayonet has been sharpened, and the handle is worn. It's basically a piece of crap — the ugliest, most undesirable bayonet I have ever seen. Plus, they made about 893 million of these. Hell, everyone I know has a 1943 Oneida PAL-MOD bayonet in their office desk drawer! (Pregnant pause) I'll give you $5.25. In CASH. 

NLM: But it has the original scabard! (Note: So does the Author's, which, you might have heard, is for sale.) Will you do $10?

STAR: I can go $6. Take it or leave it.

The segment wraps back in the parking lot, where the Normal Looking Man looks to the camera, not defeated, but all smug-like. "I was hoping for $4.7 million, but I am happy with $6. I understand that he will have to resell it some day, and I think $6 is a fair price."

Phew. Now, let's venture a little segue to real estate negotiations. The negotiations you see in Pawn Stars are bunk. If real people negotiated like this, they would have a pawn shop devoid of any real merchandise save the rows of commemorative T-shirts and Chumlee bobbleheads. Wait – this is exactly what the pawn shop we saw this day looked like. I rest my case.

You see, in real estate, the whole "your house is steaming pile of doggie doo-doo" approach to negotiating is generally a flawed one. Just like most people are emotionally invested in their 1943 WWII Oneida PAL-Mod bayonets with the original scabard (not me; mine's for sale), most people are very emotional about their homes. They take it personally. And the whole idea of the process is to bring the parties together. Sellers want to get the most money they can, but they also want to sell their home, all things being equal, to someone they like. Trust me on this one.

Beating the seller over the head with your own "comps" is just another form of negotiating by insult, but this time you are insulting the seller personally. This is the approach that makes me craziest. Too often I get a call on one of my listings from an agent who is more interested in giving me a clinic on comps and pricing than on actually getting the home under contract. In a Realty TV show, it might work.

Buyer's Agent: Does the seller really expect to get $500,000 for his place? I sent you the comps, and you will see that the same house down the street sold in 1982 for $140,000. And it had a 1943 WWII Oneida PAL-Mod bayonet that conveyed. The buyer won't pay more than $6, but it's all cash.

Me: Thank you! I am a pricing idiot, and I have no idea what I am doing here. My client is just as stupid. We talked it over, and while he really wanted to get $500,000, he now sees that $6 is a fair price. Let's write it up!

But you aren't a Pawn Star, and this isn't Realty TV. Better to go the Sappy Cover Letter approach, even if your client has no intention of paying anything within 20 furlongs of what the seller is asking. I wrote about this last year when tackling the whole multiple-offer situation. From that most excellent post:

The difficulty with multiples is that they tug at the old heartstrings. With a typical one-offer negotiation, the conversation typically goes something like this.

Buyer’s Agent: I am pleased to present this offer on behalf of my clients to purchase your listing. For $5.

Seller’s Agent: But the asking price is $800,000!

Buyer’s Agent: Yes, but we have reviewed recent sales, and this home sucks. The appliances are not Viking, the fixtures do not have the requisite gold plating, and your hair looks like it was styled by angry hedgehogs. We don’t like you. Or your client. Or this home. Accept the offer or we walk.

This confrontational approach is understandable. Despite the low inventory, this market continues to defy the laws of supply and demand. It is still a buyer’s market. Ask Case and Shiller.

But now we are seeing multiple offers, which, by the way, I hate. In multiple offer situations, the interpersonal dynamics change — like magic. The same adversaries who could only speak in complete dollar signs yesterday, the ones who would gladly have thrown the seller and his Schnauzer under a school bus for a $3,000 carpet allowance, suddenly become humanitarians of the highest order. They are deeply caring, compassionate individuals who each have a unique personal story to tell.

Enter the sappy cover letter.

There is nothing wrong with the sappy cover letter; I’ve written hundreds of them. And they all read something like this.

Dear Mr. and Mrs. Seller,

Thank you for allowing my clients to tour your home. We are sorry for the inconvenience, and we will be forever in your debt. We left you a bundt cake on the counter.

Mr. and Mrs. Buyer have been looking for a home just like yours for 39 months, and now they have found it!

My clients are well qualified. Mr. Buyer runs a local non-profit food bank, and Mrs. Buyer has devoted her life’s work to searching for a cure for kidney disease, ever since she donated her own kidney to a young inner-city homeless boy. When she is not causing stem cells to differentiate, she enjoys raising her five young disabled children who spend their summers doing missionary work in orphanages in various third-world countries – like Texas.

My clients have outgrown their current studio apartment. Their lease is month-to-month. Therefore, their timing can be flexible to meet your needs. By the way, they really enjoyed meeting your puppy! Their own Schnauzer was run over by a school bus last month while trying to save a toddler who had wandered into the street, and they look forward to putting your dog run to good use as they foster rescue animals in Scooter’s memory.

Please accept our offer for $5.

The sappy cover letter, by the way, works equally well in the single-offer situation. 

And since I can't quite come up with a "big finish" here, I'll leave you with this. I would like to get $200, but I won't take any less than $50.

photo (1)

The Royal Baby is coming! OMG!

I’m back. And just in case you don’t believe it is really me (or as spellcheck likes to say, “really I”), I will try to throw in a few typos as proof.

Ignore the title of this post. This isn’t really about the royal baby. That was just, as they say in journalism, a “lede” to suck you back into the vortex of my neglected little blog.  If you are one of those wacky royal watchers, however, rest assured you don’t have to go rushing out of here lest you miss the news of the big birth. Kate, being royal and all, was whisked off to the hospital at her first signs of slight discomfort. She could be there for days. On the other hand, when I, a commoner, was in labor, my doctor told me to stay home and practice my breathing for about 22 hours. He didn’t want to hear from me again, he scolded, until the baby crowned.

Since my last two posts – in April and February (insert sad face) – touched on our little local pricing run up and dearth of inventory, I thought it would be fitting to celebrate my coming home party by picking up where we left off.

Back on February 25th, I noted that Scripps Ranch (Zip code 92131) had a dismal active inventory of 33 detached homes and 8 attached homes. Fast-forward to today, and Scripps has 74 detached and 25 attached homes offered for sale. Doing some quick mental math, that’s, like, way more houses for sale. What gives?

Well, summer gives, for sure. But the sudden spike in offerings is arguably more a result of those rising prices. As a case in point, we are seeing an unusually higher percentage of tenant-occupied listings. Sellers who, unable to get what they considered to be a palatable price a year or two ago, made good on their threats to “just rent it.” Suddenly, selling makes a little more sense.

Hat tip to the Movoto Blog for giving me permission to reprint their June year-over-year housing performance statistics for West Coast cities. Note that San Diego had a slight inventory increase of 3.6% but a whopping 20.8% increase in list price per square foot. And since the sale price to list price ratio for San Diego County sales in the past 60 days is 99% (Sandicor MLS), sale prices are following suit.

west-inventory

west-price

Tada! I finished a blog post. That didn’t hurt at all. I might make this a weekly habit.

San Diego home prices are on a little rampage

blister in the sun

From the San Diego U-T yesterday, home prices have hit a five-year high in San Diego. Brokers in the multiple offer trenches are "enjoying" the insanity first-hand. Perhaps better than the article itself, was this reader comment:

Things are getting a bit frothy, but this isn't a bubble yet. There are a few things that I look at when I say that. In the areas where I look, you can buy a house and the mortgage payment is basically the same as rent. Of course there is still a down payment, property taxes and maintenance, but if a mortgage payment and rent are the same, prices are reasonable. Also, it seems that people are actually putting money down and buying within their means. No matter how you do the math, if someone can afford to buy something and chooses to pay that price, then that is the fair price. This is different from the bubble when people couldn't actually afford to buy at the prices they were paying. If (when) mortgage rates rise prices might drop since a house is more about affording the payment than the actual price. However, when that happens we are supposed to be down to 6.5% unemployment so demand should increase. Hopefully prices don't shoot up too quickly, and the Case-Schiller index is a better tool than this one that follows the mean, but for now we are just fine.

Cosign.

photo by: marfis75

Scripps Ranch Listing Inventory (What inventory?)

Or, as we like to say these days, comps-schmomps. That's what happens when demand exceeds supply.

This morning in Scripps Ranch? A whopping 33 detached homes are on the market; if you take away Stonebridge listings, you are left with 20. And if you are looking for an condo, the going gets tougher with a total of 8 active listings. This is good for sellers. For buyers, it's kind of a bummer.

(Source: Clarus Market Metrics, Single Family Detached Homes in 92131 Zip Code through Feb. 1, 2013)

 

 

 

 

Happy New Year (and, by the way, the Senate voted to extend the Mortgage Debt Relief Act)

2013

Happy New Year to our three readers! 

The bad news is that my oldest daughter had to ring in the new year in the Senate Press Gallery awaiting a vote on the fiscal cliff mess. The good news is that H.R. 8, which was passed by the Senate in the wee hours of 2003, includes the following:

Sec.202.Extension of exclusion from gross income of discharge of qualified principal residence indebtedness

If you are in the throes of a short sale on your principal residenence, this comes as welcome news. Now, let's hope the House likes the idea. 

H/T to broker J. Philip Faranda for the link.

Now, go out there and kick some 2013 hiney!

 

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Office Location

  • San Diego Castles Realty
  • 12265 Scripps Poway Parkway, Suite 115
  • Poway, CA 92064
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at) sandiegocastles.com
  • CA BRE# 01853496

Broker Information

  • Kris Berg, Broker
  • CA BRE #01241572