The Buying Game
“A nightmare” is how Donna Bohana characterizes the Southern California real estate market for buyers.
“Lately everything is going over asking [price],” said the agent from Coldwell Banker, Malibu Colony. Inventory is low. And multiple offers are the rule rather than the exception. For instance, Bohana’s last four deals, all in the San Fernando Valley, were multiple-offer situations.
“There are a lot of disappointed people,” she said.
But there are plenty of happy ones too. After all, in each transaction, someone ends up a homeowner.
In some cases, it’s serendipity. Public relations professional Jennifer Barry was strolling in Venice with her mother late last year when they saw an attractive house under construction on one of the coveted pedestrian-only walk-streets. Barry, who had been casually looking for several months, thought little of it. But her mom decided to talk to the contractor. Turns out he was building it on spec. Friendly negotiations followed and Barry eventually sealed the deal. Usually it’s not this easy, however.
Writer Andreas Samson said he and his schoolteacher wife, Wendy, have a “tale of woe” (which has a happy ending) that began about two years ago. That’s when the two started “looking heavily.” Their goal: “a house that felt like home” on a quiet street for about $200,000.
“For us it was really kind of readjusting what we would consider,” Samson said. “We started looking in Larchmont. Then we were priced out of Larchmont.”
They moved on to Silver Lake. Again, they were priced out.
The same thing happened in Echo Park, then Atwater Village. “It became the Valley by default,” Samson said.
Samson spent a good part of every day poring over the listings on www.real tor.com. Anything new that came up that looked like a possibility, he’d drive out to see that very day.
“It got to the point where a listing would go up in the morning and in the afternoon, we’d pull up and there’d be like two or three cars racing to the curb,” he said. The Samsons put offers on eight different properties. Eight times, they lost out.
Then one day in February, agent Lucy Matsumoto of Prudential California Realty, Beverly Hills, who was referred to them by a friend, showed them a half-dozen homes in Van Nuys. One was a two-bedroom “tucked away in this little working-class neighborhood,” Samson said.
“It was one of the best of the ones we saw. But I wasn’t personally crazy about it. Our agent said, ‘You are going to be priced out of this neighborhood right now and you should buy this house.’ All my alarm bells went off. Was I being conned?”
“We ended up writing an offer,” Samson said. “We were the first people to write an offer and it was accepted. So we got the house and lo and behold, by the time we closed escrow, we could not buy in this neighborhood. It worked out exceptionally well.”
Jeff Smith, chief executive officer of JS2 Communications, bought in April on his fourth try.
Before “the one,” he lost out on two houses and a condominium in a celebrated old building on Rossmore Avenue in Los Angeles.
It helped that Smith saw and bid on the Hollywood Hills property he ended up buying the first day it was available for showing, even before a formal open house. Still, his wasn’t the first offer. There was already one other.
It also helped that Smith knew the market well enough to recognize that the house--in an area where comparable listings were ranging from $400,000 to $2 million--was “really well-priced.”
“You’re always told to buy the least expensive house in the best neighborhood,” Smith said. “And while this wasn’t the least expensive, it was at the comfortably affordable end. That gave me some flexibility on upgrading within my budget.”
“I bid full price because I had already been down that road with the condo,” Smith said of a failed purchase offer on another property he had made for less than asking price. And because he knew the sellers wanted a long escrow and the option to lease back for 45 days, he included those terms in his offer.
“They accepted my offer right away,” Smith said. “And after looking at houses for nine months and really educating myself, I can honestly say I got the best house at the best price in the best area.”
To ensure they would be the successful buyers of a Pasadena bungalow they saw in April, Jim Dunn, a writer, and Lisa Hansen, communications director for Los Angeles City Councilman Jack Weiss, heeded the advice of their agent, Matty Hurtado of Coldwell Banker Old Pasadena.
“One thing she said you can do is make your offer simple,” Dunn said. “So we went in lean and mean.” They offered a bit over the asking price and even assumed all responsibility for termite repairs. They also submitted a letter of introduction with their initial bid that included a list of reasons they liked the house as well as a photo of themselves.
“[The sellers] said, ‘Thank you very much. We’ll take your offer,’ ” Dunn recalled. “There were no counters. The sellers even sent us a little note about how much they thought we would love the house, the great neighbors next door and how they hoped we would raise a family here.”
To give their clients an edge, many agents are taking buyers out on “caravan” to brokers’ open houses, which take place Tuesdays on the Westside and Fridays in the San Fernando and San Gabriel valleys. Often this is the first time a house is shown.
Some agents, however, are holding open houses the Sunday before the broker’s open. Sometimes the hope is that a buyer will walk in, fall in love with the place and write an offer through the listing agent. If the offer is accepted, the agent has just doubled his or her commission.
In situations where it is clear a property is going to generate a lot of interest, Bohana has several suggestions. But first, she asks her clients a critical question: Do you really want this property? If the answer is “yes,” Bohana said, “I give them their options.” These include putting down more than the usual 3% good-faith deposit.
“They’re going to have to come up with 20% in the end [anyway],” Bohana said, to avoid paying private mortgage insurance.
In one recent deal, Bohana’s client wrote a deposit check for $56,000 rather than the expected $17,000. “It showed that this guy’s serious,” she said. Besides, who doesn’t like to see a big check?
“The second thing I do is try to shorten the escrow period,” Bohana said. “Even if the owner wants to move out in 45 days, I’ll have it close in 14 days and the owner can stay there.” That’s 31 fewer days a seller has to worry about a deal falling through.
“I also cut down on the inspection period,” she said. “Instead of 14 days, I do seven.”
Coco Clayman-Cook, an agent with Prudential Beverly Hills, uses many of the same tactics. She also often includes financial statements when she presents an offer on behalf of a client.
“I want to show the seller that they, [the buyers], have the balance of the funds,” she said. “Anything you can do to make the seller confident in you, you’re in better shape.”
“If a person knows they are going to get a loan,” she added, “maybe remove the loan contingency. If it’s you up against four other offers and you don’t have a loan contingency, you’re looking a lot stronger.”
A contingency on the sale of the buyer’s home can also handicap an offer. Consequently, Clayman-Cook advises buyers who have written offer after offer with a home sale contingency to go ahead and put their home on the market. In such a competitive market, she said, “you have to be a little bold.”
One thing’s for certain. “You can’t sleep on it,” Bohana said. “It will be gone. If you think you like it when you walk in, don’t go home; go to your Realtor’s office. Timing is everything right now.”
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Leslee Komaiko is a Los Angeles-based freelance writer.
