23 Mar Ep. 37 A Frustratingly Hot Market

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In this episode, self proclaimed real estate nerds, Realtor Adam Kruse and Realtor Shannon St. Pierre, give a market update. Find out why St. Louis is currently a frustratingly hot market and what agents can do to make their offer stand out.

Email questions to PODCAST@HermannLondon.com

 

 

 

 

 

 

 

 

 

WHAT’S INSIDE

0:51 Self proclaimed real estate nerds, Adam Kruse and Shannon St. Pierre, give a market update
1:45 Agent Anne Valenza won the Hermann London marketing contest and won $1,000
2:53 Hermann London just got a billboard at Kingshighway and 44
4:16 The Association of Realtors trivia night
4:39 Cooking dinner for The Ronald McDonald House
5:02 There are a lot of people getting their real estate licenses because the market is so hot
5:32 Adam likes his agents to take a personality assessment to help them figure out the best way to market themselves
7:41 Shannon’s husband is using his DiSC personality assessment to update his LinkedIn account
8:19 Adam recommends Tony Robbins’ DiSC assessment
9:22 Is it a frustratingly hot market? It is a seller’s market but is terrible for buyers
10:25 Is it crazy to buy investment properties right now?
10:45 It’s not a crazy deal if the numbers work
11:15 If the numbers don’t work, make an offer that does make the numbers work
11:30 Even if the offer seems lowball, it works 1 out of 15 times for Adam
12:15 Investors should not be afraid to make offers on more than one property
14:00 Shannon gives market statistics. Sales are up 5% but listings are down 11% from January last year.
16:51 The average days on market is 36 days
18:00 Adam remembers years ago that the average days on market was 90 days
18:45 Months of inventory is at 2.9 but what exactly is months of inventory
19:00 Months of inventory is found by taking the total number of active listings on the market and dividing it buy the total number of sales in that same time period
23:00 Buying a house at the end of a lease can be very frustrating. Contact your Realtor 6 months out
25:25 Median home sales are up 4% from the previous year
26:00 Shannon shares her experience with losing out on a listing with multiple offers. There were 17
28:00 What can buyers do to make their offer win? Adam does not recommend removing the inspection contingency
29:00 What does it mean to remove your inspection contingency
31:00 Adam was nervous about potential buyers that were very nit-picky during the open house
31:56 Some buyers are not adding the appraisal rider to the contract. What is the appraisal rider
35:06 Some buyers will remove the financing contingency
37:00 Getting a loan denial letter is now harder than it used to be
40:50 What are escalation clauses
41:50 How can an agent be good at putting the pressure on to get an accepted offer
42:50 There is no reason not to do a backup offer even if the buyer accepted someone else’s offer already
44:33 What is an example of an escalation clause
45:30 How do you know that the listing agent actually had a higher offer and didn’t write a fake offer
49:54 How can the buyer’s agent do a good job presenting the offer and influence the deal
52:00 Buyers and sellers don’t know the reputation of the agents. Does the reputation of the agent matter
54:21 Emal Shannon at Shannon@LivingTowerGrove.com

TRANSCRIPTION

Adam: live from the rooftop of the Hermann London real estate group in beautiful downtown Maplewood it’s the st. Louis realtor podcast with your host Adam Kruse live from the rooftop of the Hermann London real estate group it’s the st. Louis realtor podcasts welcome (2) everybody hello this is podcast number 37 I’m here with my co-host Shannon st. Pierre

Shannon: hello

Adam: and my name is Adam Kruse I’m the broker owner the Hermann London group and we are here this time to give you a market update Shannon I love to talk we’re real estate nerds I’m a self-proclaimed real estate nerd do you call yourself a real estate nerd

Shannon: no but I guess that’s a good way of saying it because I do dive into the details

Adam: the details

Shannon: yeah dive to the numbers

Adam: okay good

Shannon: [???] claim but yes

Adam: good okay so today we have we’re kind of kind of just general I’ll give a real estate market update and we’re gonna nerd out on a few topics I know we’re going to talk about the crazy hot market we’re gonna talk about multiple offers and all the different ins and outs that come with the situations buyers are facing today we want to talk about some simple things that sellers can do to wow buyers and find themselves in a situation where they’re getting multiple offers right versus sitting on the market and first if you don’t mind I’d like to give a couple Herman London updates

Shannon: by all means

Adam: by all means okay so awesome I want to give a congrats and a shout out to our agent and Valenza we occasionally do different marketing contests or different types of contests at the Herman London group and this latest one we have this huge list of different things that Realtors could be doing to market themselves and for each different thing that they did they got an entry into our marketing contest and then we just draw a random name and that random winner gets $1,000 right so the more things you do the more chances you have to win and this contest was the contest winner was and Valenza and it’s great cuz she you know she works really hard and so I’m glad to have her win but the truth is Shannon everyone is a winner

Shannon: yes you said that

Adam: right I know everyone’s like I feel more of a winner with that thousand dollars in my hand but the idea is that anyone who participated in the contest by doing different marketing things as winner because they’re going to end up getting more business and everyone’s gonna be more successful because of that so thank you for agreeing with me on that one reluctantly all right so we also are excited because we have a billboard finally and I’ve kind of always wanted a billboard you know it’s one of those what’s what do they call that it’s like a van anything where I don’t know that it actually does a whole lot of good but you just kind of want one you know

Shannon: yeah it’s one of those unimportant goals in life

Adam: yeah sure I would call it that it’s like any well there’s certain things that I think companies do especially like small companies like ours that the business owners do too to boost their own ego and it’s not actually necessarily good for business or doesn’t necessarily help the business you know and so I don’t think that someone’s going to be driving by a billboard and see it go gosh-darn I need to call them although I think if you do it right I think billboards do work so there you go see so we did we did a simple one that just has our brand on it there’s not even any calls to action on it but I’m hoping that if you’re listening and you see our billboard it’s right by Kings Highway and 44 you can see it from highway 44 try to take a picture of it safely of course and put it on social media and tag us on it or just tag me Adam Cruz on it and I’d really appreciate it because I haven’t even seen it yet so I’m looking forward to seeing it a couple other things sometimes I feel like we’re a real estate company second and a just a real good time social group first you know because like tonight we have the association of realtors trivia night and we’re gonna go we got a table there should be a good time I think that money goes to good cause also in the next Friday you know we’re going to the Ronald McDonald House we go there every year and we’re cooking dinner at the Ronald McDonald House it’s always a nice time to get together and I think that’s for a really good cause

Shannon: yes

Adam: so I like to get always

Shannon: It is always fun time

Adam: it is always a fun time and we try to make really complicated dishes so that we don’t just get in and you know make spaghetti and get out so that we’re kind of bonding and it’s a good team building event and all that kind of stuff too I’ve been surprised we’ve had a not surprised I guess excited we’ve had a ton of enquiries lately from people who just got their real estate license so we’re gonna talk a lot today about the market and how hot it is and all that kind of stuff but I guess people are figuring that out because there’s a lot of people getting into the real estate market and they’re getting their license and all that kind of stuff and I think you’re gonna meet one of the potential new realtors on Sunday too so that’s cool and let’s see I’ve been enjoying getting together with our Realtors and you know what I really like doing is having people take this disc assessment and it’s like a personality assessment we’ve talked about it many times before and then making a custom marketing plan with them and (2) customizing our training with them to based on what their different personality is and it’s and it’s so interesting I was meeting with somebody yesterday and I’m like all right so you’re gonna go you’re gonna have a goal you know each week your goal is to reach out to 10 people and just check in with them see how they’re doing whatever and he was like so like kind of clammed up and like I do that you know and his personality is one that he just he just doesn’t want to do that he doesn’t want to he’s not kind of like he doesn’t sort of like to put himself out there socially I guess you know whereas to someone like me or probably you to that would be the easiest thing on the list you know it’s like hey just talk to some people we’re like awesome love it talk to you actually I’m gonna go to shop and save right now and talk to five different people while I’m there you know it’s so it’s interesting the different personalities I think is all good [???]

Shannon: But I like that assessment so I made my husband take it as well and I will say that the information that comes from is i opening sometimes and when he asked specifically about it he then he’s like do you think this is true and I was like yes it’s true and he’s like well what do you mean and then I gave him some examples about how he handles certain situations and yet other things that came up on it he actually has used it to kind of update his resume on LinkedIn and use some of the words that they give you so I actually think that it’s a really powerful tool for everybody to at least do and I think I think it was dead-on great and the (2) words and the language that they use can really help you describe how you work

Adam: absolutely oh yeah big time big time is I mean not just in real estate but in life and like you said your husband likes to use it and I wonder if do you want to give any sort of examples

Shannon: I can’t remember he did so he’s tried to update LinkedIn because he makes more connections that way I think just because of where the industry he’s in but he has taken words directly from the disc assessment and used them on LinkedIn

Adam: because they tell you like descriptive words about yourself

Shannon: very descriptive but dead-on and correct and it’s words that you wouldn’t have necessarily thought of are use in your everyday language

Adam: so if you’re wondering what this crazy stuff is that we’re talking about you can take an assessment for free my boy Tony Robbins on his website has a disc assessment we’re not supposed to call it a test right so it’s a assessment there’s no right or wrong answers but if you google Tony Robbins disc you’ll get to a page where you can take this assessment and you’ll get the results and it’s just really neat I think it gives you like a 30 page report that you can read through and

Shannon: it’s a super long report but just be super honest with the questions because he when I redid it a couple months ago I was brutally honest like as if anyone else were ever watching me there’s no way I would have chosen the answers that I would have because I’m like wow I think I’m a bad person Mike and I don’t really care about that as much as I thought maybe I maybe I should and but then what it spits out is dead on

Adam: there’s I like to say there’s no right or wrong answers right so it’s not like oh this is a better personality than the other one there’s just there’s just different ones and we need all the different types right so mm-hmm anyway we could talk about that all night but that’s not what we’re here for I love talking about the disc though what we want to talk about tonight is the market update and how and in general what we’re seeing is that it’s a sort of would you call it a frustratingly hot market

Shannon: I guess I’ve been very frustrated I’ve come to you more than where I’ve posted on the forum how that I’m frustrated

Adam: yeah

Shannon: I’d say feel very challenged right now

Adam: it’s everyone calls oh my gosh it’s a great real estate market and I think I think that people call it a really good real estate market when it’s what we would call a seller’s market where if you list your house your house is gonna sell fairly easily for a really reasonable price but what everyone forgets is that’s terrible for buyers

Shannon: right so I wouldn’t say the buyers would call this a really good market

Adam: no they would not I mean I don’t think buyers would people in general like the news would call it a good market

Shannon: yes

Adam: but anyone who’s trying to buy a house right now is hating it and I think most likely and I’m you know I like to buy a lot of investment properties and someone said to me today they’re like are someone just I forget how she set up but I was like are people just crazy if they buy investment properties right now and I’m like I hope not I closed on one this morning but I think you have to be

Shannon: why would why would they be crazy

Adam: well she’s been finding in potential investment properties sending them to their clients and her clients are like the numbers are really bad on this

Shannon: right and we and we are gonna do another podcast on this because you and I have talked in depth about some numbers this week and you were like why this deal and my answer to you was because the numbers actually work

Adam: yeah the numbers actually work and so you know that what I said back to our agent is I’m like

Shannon: well that’s rare I haven’t been finding that

Adam: it is it is kind of tough to find them if if you don’t like the numbers of a deal my whole thing is make an offer on the property at a price that would make the numbers work you know

Shannon: right

Adam: some people don’t like to make offers if they’re low or quote-unquote lowball offers but you know I’ve talked before my thing is like if we go out and look at five properties that meet my general criteria I’m probably going to make an offer on all five of them

Shannon: yes

Adam: and agent and the seller might not like my offer but in general for me you know maybe 1 out of 10 or 1 out of 15 of those properties I’ll get in accept a contract

Shannon: right

Adam: oh my gosh I got an accepted offer on this but that’s how I’m buying properties now

Shannon: and I think we need to talk about that again (2) on the we talked about a little bit more investment property because I think beginning investors I even have them getting really frustrated right now and I’m and I have said so what we just keep writing offers we’ve only written a couple off like we just keep writing offers don’t worry

Adam: well at least

Shannon: I think to them they’re used to just writing an offer for a house and I’m like yes but that’s the house you want to live in that’s much different

Adam: right

Shannon: than just writing offers

Adam: at least they’re getting it I guess because we do have some agents I’m kind of seeing two things right at our meeting the other day people are like oh my gosh multiple offers is so frustrating we offered you know ten thousand dollars over list price and we still didn’t get it which is a frustrating place to be from the agent and the buyer’s perspective but then we have some agents who are working with buyers who are I guess new to the market or maybe first-time buyers

Shannon: yes

Adam: and they’re going to our property that everyone knows you know we know is gonna be really popular it’s gonna have multiple offers it’s gonna sell for over asking you know there’s 30 people at the open house or whatever and then our agents buyer is going I want to submit what we would call a lowball offer on it and we’re you know okay we support doing what you want to do we like to give our buyer the information but then they get to make the ultimate decision but they’re just losing out I mean just crazy losing out on properties which would you rather lose out on a property by making a lowball offer on it or would you rather lose out on our property by offering $10,000 over what they’re asking and still lose out on it

Shannon: I think it’s all the same because of the I think that I think I’d rather take lose out on the lowball offer only because even with the buyer they kind of understand like I probably won’t get it but I always like for fun sure I really care it doesn’t take much to write an offer necessarily but I think it’s much harder when you really dive into the numbers and get them to commit to something well over the asking and we’re not even close

Adam: you don’t even get it yeah so okay so you’re gonna give us a few market statistics right

Shannon: yes

Adam: go let’s go through them

Shannon: so right now this is definitely a seller’s market and so if you’re thinking of selling your house you could probably do it within a matter of hours and not days

Adam: right

Shannon: I’m getting sowed see a single-family homes sold is up 5% over January of 2017 so all these numbers are over January 2017 one year ago so we’re kind of waiting for February’s numbers to be finalized technically and then we’re waiting and so they’re always really behind but

Adam: all right let me let me ask you a question because you said like this is a great time to sell in your house might sell in ours or whatever

Shannon: right

Adam: and I I guess I want to point out real quick that you still need a realtor right because

Shannon: oh the reason of sell because of a realtor

Adam: because of the exposure that the realtor is giving because of some of the type of advice we’re gonna give tonight about how to present the property

Shannon: right

Adam: but then I think that you need a Realtor to (2) help you know how to handle when you do get multiple offers and we’re going to talk about handling multiple offers and kind of some of the intricacies in that and our podcast here today but I I guess what we’ve seen is differences of tens of thousands of dollars on some of these on some of these offers between one and the next one and even what you’re listening forward what you end up getting and this the real fine details about the offer and what little pieces are in it stuff like that so alright go on

Shannon: so the single family homes are way up 5% active listings are down 11%

Adam: okay so there’s okay so huh what does that mean

Shannon: so if you think about it sales are up but listings are down

Adam: okay so the number of listings are down

Shannon: yeah it’s even tighter markets so sales are up 5% yet there’s 11% less active listings which means that

Adam: which month there was a year ago

Shannon: yes

Adam: wow okay so that’s even tighter about what we’re saying about it’s a seller’s market and there’s way less houses for sale than there are buyers available are then there are buyers looking to buy a house

Shannon: yes and in the last couple weeks we’ve seen that I feel like drastically so yeah there’s not a lot of active listings and there’s a lot of buyers in the market

Adam: okay what’s your next one

Shannon: so then the average days on market is 36 days

Adam: that’s crappy is

Shannon: yeah so it’s 36 days versus 35 days this at this time last year so I find that pretty crazy but I’m thinking the averages is obviously it’s gonna have to work out the averages because you do see homes sitting on the market for a really long time

Adam: yeah right now you’re either on the market for like 5 days

Shannon: sure it sale foreclosure all coming the place some of those will be sitting on the market for a really long time but if it’s a I would say a market ready move-in ready kind of for the most part home it’s not sitting on the market

Adam: well okay so that’s an interesting thing that you’re saying because we keep talking about the seller’s market you’re gonna get all these crazy offers right but you that doesn’t mean that you can go and take a house that’s worth 150 that maybe with multiple offers would get 160 and you can just list it for 250

Shannon: No not even close and still have to the work you can’t just throw a sign in your yard either hire a realtor throw sign in the area

Adam: so they have to do the work so you’re saying the median day is up to 36 versus last year it was 35 weird and crazy to me because I can remember when it was 90 you know like years ago it was 90 days was the average days on market

Shannon: well I think even a couple even a couple years so even so not last year so maybe 2015 maybe like and it will you have to remember the six into the account the whole region so that will vary the days on market depending on the (2) area down to even neighborhoods but I want to say that I will look at certain areas and its well as even last year was maybe around 80 days for certain areas

Adam: okay

Shannon: so that just I think varies drastically depending on

Adam: what’s your next sophistic

Shannon: so months of inventory is we’re at 2.9 and at this time us last year we are 3.4

Adam: ok well that to me is the only one of those statistics that you’re talking about now that I don’t think the average person knows what it means and so before I kind of talk about what I think months of inventory numbers mean can you kind of describe to us or do you want me to describe I guess what the what months of inventory is and how they calculate that

Shannon: yeah because it is a specific calculation where we determine seller’s market versus buyers market versus normal

Adam: right

Shannon: what they called normal market so 1 to 4 is a seller’s market 5 to 6 is a normal market 7 plus months of inventory is a

Adam: buyers

Shannon: buyers market

Adam: ok so months of inventory here’s how we do it right we take the total number of active listings currently on the market in whatever market we want so we could figure this out for Kirkwood or all of st. Louis County or the entire world right but for (2) our purposes the statistics you’re giving are for st. Louis City and st. Louis County but so we take the total number of active listings on the market and then in this case we’re talking about for January of 2018 we divide that number by the total number of sales that happened in that same time period right so if there’s three thousand well right now there’s thirty two hundred and eleven active listings on the market and so don’t make me try to do quick math but so if there was four hundred sales in that same period they would take thirty two hundred and eleven divided by four hundred and that’s where they’d come up with months of inventory

Shannon: yeah so the example would be five hundred active listings in February one hundred and twenty five sales and pending sales so months of inventories five hundred divided by 145 that’s you get four

Adam: so in theory if there was no more homes that came on the market at all there would be enough homes that would enough inventory of homes that would last for another right now it’s two point nine months

Shannon: yes and in that example it was the five hundred divided by 120 five is four so four months of inventory which is a very low number we’re at two point nine

Adam: so it’s not like the perfect statistics because it would ever never work that way that a no homes come on the market and be everyone’s just like gobbling up the exact remaining amount of homes there’s probably always be that one weird house that would just sit there forever right but it’s an interesting number so like you said now that you have perspective on what that means one two four months is sellers market which is what we’re in five to six months we’re considering to be a neutral market and seven plus months we’re considering to be a buyers market okay so if you’re in right now if you’re in a seller’s market it’s a good time to sell not as awesome of a time to buy so if you’re buying and holding properties or if you have properties that you’re holding this is a good time to sell them

Shannon: well except for I I would say that for buyers this is still a really good time to sell I mean to buy just because interest rates are doing nothing but going up they predict that the interest rates were going to be raised four times this year they’ve already raised them twice it’s still really great time for a buyer to go ahead and get out into the market and at least try

Adam: yeah I guess I guess when we say it’s a bad time to buy I think what we mean is it’s like sort of like a hard time to find a house to buy I guess right it’s like a stressful time to buy maybe right I mean

Shannon: right but I think that that’s where the agent kind of comes in and manages the expectations and helps them understand the markets and what could possibly happen

Adam: so if you are wanting to buy a house now you should probably start earlier than later

Shannon: right yes so I think where this really comes into play is for buyers who are waiting to get closer to their leases ending that’s where I see the trouble existing is because they think three months might be enough time to buy a house get it closed on it by the end of a lease

Adam: and then they’re stressing

Shannon: and then it’s a very stressful situation

Adam: so what we would encourage people to do is if they have say six months left on their lease then they should reach out to us and have a meeting start learning about real estate probably even go look at a few properties in different areas and get a feeling of what you want so that you can keep an eye on the market start talking to your lender see if there’s anything you need to fix and then have a goal probably of buy three months then your be when there’s three months left and you’re actually really ready to write offers right

Shannon: yes so if you have six months left on the lease I’m starting to stress at six months

Adam: but you can’t I mean they’re gonna write an offer yet when you have six months

Shannon: necessarily but it’s right now it’s taking buyers a really long time to find out to find a house

Adam: to find the house and so I guess it all depends on your financial situation and your lease situation and all that kind of stuff but our point is start early

Shannon: yeah I think my question is always to them is if they go month-to-month if the only and Lord will allow them to go month-to-month and for the majority I would say 98% have said yes it’s an option it’s not one we would like to do because it will raise the rent

Adam: yeah

Shannon: but it’s cheaper than paying for a mortgage Annelise

Adam: and the deal is when you buy how your first monthly payment is not until the month after so if you buy a house in January your first monthly payment is not until March so it helps them if they still have to pay a monthly rent payment right because then they’re not paying a rent payment and a mortgage payment on the same month necessarily

Shannon: right

Adam: okay

Shannon: for they can moving into their home

Adam: yeah if I was I was in a lease I would really like to have my lease for probably two or three weeks at least while you know I guess after the closing of my home so that I can have a little bit less stressful time of moving [???]

Shannon:  people [???] would love to do ideally before they move in

Adam: okay so is that your last attest

Shannon: yes I think so

Adam: what about this one here [???]

Shannon: medium home sales the medium sales are up four percent so right now there are a hundred and fifty six nine hundred it’s almost one hundred and fifty seven thousand dollars

Adam: Is our is our median we’re calling it media not average that’s our median sales price in Saint Louis City and County right now is 156

Shannon: 156

Adam: up four percent from the previous year up a lot from when I remember when it was like 137 so I mean it’s going up alright I’m ready to start selling off some of my properties all right that’s our that’s our market statistics update right

Shannon: yes

Adam: so you want to dive into this whole topic about multiple offers and you did a deal the other day where you made an offer on a property and agent said thank you so much for being one of 17 people who made an offer on my listing

Shannon: yes so I’ve had in the last two weeks where it was a this it was a cute little house and here this one just is always gonna blow my mind I still can’t wrap my mind around this I’ve lost out how many houses I’ve been through multiple multiples to you know offer situations I’ve lost off lost out on this one I I’m still having a harder time with and it’s a don’t get me superhero house two beds two baths in a good area great area but when I did the comps yeah you know she always say specific numbers

Adam: yeah I think you talk numbers

Shannon: so it was on the market for 189 it got 17 offers and we were at and I when I did the comps I couldn’t really find anything over to even when I saw this house on the MLS and they said I really were gonna see this house when I flip through it I was like oh my gosh this is totally the house for them so I kind of ran some comps there was nothing around over too so we went in at 2 or 3

Adam: Wow

Shannon: and we weren’t even close

Adam: did she give you any indication of what it’s sold for

Shannon: no I just because they can’t they can’t so no and but it so my next question was when will you be closing

Adam: [???]

Shannon: yes so I can look and so they’re closing and the second weekend of April so I put it on my calendar to check that listing check back

Adam: so there’s some things that we see like if we’re a seller we have a different perspective than when we’re representing a buyer obviously but some things that we see buyers doing now in this competitive market to get their offer accepted that I don’t necessarily encourage a buyer to do but you do see buyers doing this is removing their inspection contingency which is crazy don’t do it right I mean people I guess people are losing their minds like I want this house there’s 17 offers what can I do to make my offer win

Shannon: so they’re removing the inspection contingency

Adam: I mean yeah I’ve yeah people are doing that

Shannon: okay so let’s so what that means is that they’re waiving their right to negotiate

Adam: their

Shannon: or to be able to walk away after inspection

Adam: people are doing differently

Shannon: they’re waiting you’re right to do your inspections

Adam: people are doing different things some people will entirely remove the inspection contingency paragraph which is removing your right to even do inspections some people will add language into special agreements that says this property is as is which is basically removing your right well it’s not really removing your right to ask the seller to fix anything but you’re kind of like promising the seller that you won’t ask them to fix anything so hey I still want to get it inspected I can still back out if I find something crazy but you know I’m not gonna I’m not gonna ask you to fix a couple little things here and there

Shannon: okay so far they’ve removed the contingency altogether meaning there they’re removing the right to even do inspections to the next step that you’ve seen is from down from that is writing as is meaning you still want to do your due diligence but you’re kind of saying I just want to know make sure there’s nothing no major defects and I just kind of want to know what’s going on with the house but I’m pretty much I’m not gonna ask you to fix anything I just want to do my dude Jill

Adam: and I think that one has a little bit of merit where there’s definitely examples of times where that you know saying okay I’ll buy it as is Kin (2) sort of work right you still get to inspect it and you still get to have professionals come over and give you their opinions and that type of thing I can sort of work I can see people doing now and I’m not like as afraid of that one quick quick offshoot sort of comment like in the what burger place is that with the great commercials with the two guys in the car you know we’re talking about I can’t think of it Sonic anyway quick offsuit comment about that I had a listing and I was working the open house and it was definitely going to be a multiple offer situation and this one like buyer was over there and his parents were over there and they were asking me the most detailed questions about everything about the house that I could tell that they were going to be tough kind of to work with and we did we didn’t end up getting the house because the other offers were actually better offers but I was a little bit nervous if we would have accepted their offer because I knew they were just gonna nitpick us and so it’s even like what impression do you make when you go to the open house you know and we can talk more about that – about how the agent that your agent the buyer’s agent has to present themselves to the other agent and you know seem easy to work with and all that kind of stuff but so back to inspections so you can remove your right to inspections altogether you can remove your right to do a lot of negotiating after inspections I think that you know those I guess have their own merits sort of the other thing people are doing is not adding this document called the appraisal writer and so they’re getting a loan they’re gonna buy this house they’re gonna get a loan and they’re not adding the appraisal writer and what that you know I thought of a weird way to say this the other day but when you buy a house it’s not really used you’re not generally really using your money right you’re using the bank’s money and so by removing the appraisal writer you’re kind of saying like hey I want to buy this house but I I’m not gonna not contingent upon the bank telling me if they’ll give me the money or not I’m saying that weird weirdly but

Shannon: okay so [???]

Adam: well so basically if on this house to you we’re just talking about if you know you thought it was worth no more than two hundred somebody probably ended up offering two twenty on it right

Shannon: my first thing instinct I said to them I bet it goes for 215

Adam: okay so let’s say somebody is paying 215 for it if they have the appraisal writer which we encourage our buyers to use and the appraiser comes out and he appraises it and says it’s worth 210 right then the buyer can go back to the seller and say hey seller this property only appraised for 210 so either sell it to me for 210 or I’m out of here and if the seller says I’m not gonna sell it to you for 210 get out of here I’m gonna find somebody else then the buyer can either say okay I’m gone or they can say well fine I will come up with that extra $5,000 so my lender will give me a loan based upon a sales price of 210 so my down payment percentage will be based on 210 so I’ll have to bring my down payment plus the difference which in this case would be $5,000 so by removing your appraisal writer you’re kind of putting yourself out there on the limb to pay whatever that difference might be and in some of these cases like the one you just said you think hey man this thing is only worth 200 max so that buyer if they remove their appraisal writer might end up having to come up with whatever percentage they’re putting down on 200 plus the $15,000 difference right and so if the seller gets two offers and one of them is 215 with an appraisal writer I’m sorry with no appraisal writer 215 with no appraisal contingency and the other one is 220 but with an appraisal writer the seller might consider going with the slightly lower offer with no appraisal writer because the buyer will not be able to back out based on the price of the property

Shannon: okay so I’ve had in the scenario where it got a competitive situation area where I’ve got I’ve had I was on the side of the seller I’ve gotten an offer and they removed the because the other thing you can do is remove the financing contingency

Adam: right

Shannon: so there’s also in the paragraph if you’re not approved for the loan and then then you get out of the offer you back out of the offer which you would probably have to much

Adam: right

Shannon: and you get your earnest money back so that’s the important thing to carry about that so I thought was interesting about this is you have seen where they’ve dropped the appraisal writer where this one specific offer and I haven’t signal to him I’ve really seen is where they didn’t it the offers not based on the financing contingency but they had the appraisal writer

Adam: yeah I mean

Shannon: so I mean I think that that’s a good way to go yes they came in at a really high over list price they’re very confident in their financing ability but the house still has to appraise for what I’m buying it out is what they’re saying

Adam: yeah so I mean let’s I don’t know I guess that’s a nice that’s a nice offer too but it still has to appraise

Shannon: yeah so but it but it’s not gonna fall through because they can’t get financing which I feel like I see that a lot happening a little bit is offers are falling through because they get they can’t get the financing or they figure out they can’t get the financing so I guess my question to you is on the flip side so both have happened where you would you don’t do it on the financing contingency but you still attached to the appraisal writer and then on the flip side you don’t attach the appraisal writer but you still take the financing contingency isn’t it all kind of one of the same anyway

Adam: well it’s not

Shannon: it’s obviously like how do you get the financing if the bank says I’m not gonna give you a loan for this because it’s not appraising and [???]

Adam: [???] well the deal is things have changed right so a). it used to be really easy to get a loan denial letter do you call your lender go hey I need a loan denial letter he goes sweet here it is no problem you know why don’t you keep a copy in case you need one in the future right so you can’t do that anymore now getting a loan denial letter is a harder because they have to kind of like get it approved through underwriting or whatever they actually have to deny the loan and b). the loan denial letters now have a reason on it they have to have a reason why the loan was denied okay and so there’s new also new wording in the sales contract and paragraph for the financing contingency that basically says hey you this contract is contingent on my buyer being able to get a loan or me as the buyer being able to get a loan but it’s if I wanted this to be specifically contingent on the property or appraising then I should add the appraisal writer right and so when we’re talking earlier and we’re saying oh if the property doesn’t appraise then you have to pay the difference and you’re sitting here listening to our podcast going heck no I’ll just back out because of financing well you technically shouldn’t or can’t or however you want to call that because I’m not here to give legal advice right but my interpretation is that you shouldn’t be able to back out based on the appraisal writer a loan denial based on the appraisal writer because I’m sorry based on appraisal if you did not have the appraisal writer you follow sort of jumping around here

Shannon: now you say because you’ve separated them out but doesn’t that say in the contract

Adam: the contract says if you basically if you want this thing to be contingent on it appraising you need to add the appraisal writer which we do and we’re suggesting that people do but it’s to me that’s saying if you don’t add the appraisal writer then don’t be trying to back out because this property didn’t appraise and so if somebody sends you a loan denial letter and goes hey here’s a mutual release we’re getting out of here here’s our loan denial letter and it says loan denied because of appraisal it’s like oh hold on a second there you did not add the appraisal writer you know fine you got a loan denial here’s the mutual release you can get out of this thing but I’m at least gonna keep your earnest money because you’re backing out for kind of a crap reason

Shannon: yeah for one you waived

Adam: you waived [???]

Shannon: because of the comparative situation [???]

Adam: I’m not an attorney sort of a gray area but I don’t think that it’s I don’t think that people should be able to get out for a reason that they just said they wouldn’t be able to get out for but we also can’t then somehow force them to get a loan and closed on the property so you’re better off probably just letting them out but trying to keep their earnest money

Shannon: and I think that in that scenario they the seller should keep

Adam: absolutely

Shannon: earnest money because yeah and they’re trying to play like be competitive and push out all these other legit offers that may have had that in there but now you’ve just

Adam: and that’s why I mentioned earlier I think you need a realtor to help you with all this kind of stuff because there’s so many little deep fine details and timelines right are really important where if it doesn’t appraise oh well it didn’t appraise well I’ll just back out because of inspections right okay well we’re probably passed inspection period if the general buyers age encouraging the lender to wait to do the appraisal until the inspection contingencies been passed and all this kind of stuff so you really need someone who has a really good understanding of the deal timeline and when they look in and offer when I look at an offer and I redo it I can picture this whole deal timeline in my head and I can explain how it’s gonna work and just see all the different little intricacies of what could happen based on different (2) things you know so I think it’s important that you have someone that can really like evaluate that

Shannon: yeah (2) it’s the sellers agent to be able to look at all that and say what is probably gonna be legit and what’s just gonna end up causing us trouble

Adam: yeah so let’s talk a little bit about these escalation clauses

Shannon: yes

Adam: which are you the one that hates the escalation clauses

Shannon: no I love (2) escalation clauses

Adam: you love escalation clauses

Shannon: I do…but it doesn’t it’s as though it’s it hasn’t come into play because agents are just saying no we want best and final

Adam: right

Shannon: and (2) then so last weekend again I mean before I could even get home to write the offer they already accepted another offer I’m like

Adam: well let’s talk about

Shannon: like in that case they just they just accepted one they didn’t even take into consideration all the offers that might come in (2) that first weekend in the market

Adam: yeah I mean that’s (2) just kind of craziness right

Shannon: and then they wouldn’t even allow showings on Saturdays so I’m just

Adam: well so you’re jumping you’re jumping ahead to my next topic which was going to be pressure

Shannon: well yeah so

Adam: I think that there’s some agents who are really good at putting the pressure some buyers agents that are really good at putting the pressure on the listing agent and then therefore the seller to accept their offer and it like Expedia expeditious manner

Shannon: so short time are you saying in a short time

Adam: yeah (2) and so not waiting they don’t want them to wait and see how many other offers that come in or what they all their terms are they don’t want to get into this like multiple offers some your highest and best thing they’re (2) good at kind of putting the pressure on to get them to accept it fast and there must have been some sense of that happening if you went to an open house you literally drive home to write the offer and they already accepted one there’s no reason why he should have done that

Shannon: well and the agent said that she said I can’t I’ve tried to talk my micellar into just waiting let all the offers come in and just she’s like but pretty much everyone the saw it was writing an offer and she was just she just wanted to choose one so she could move on with her day

Adam: what weird thing

Shannon: it’s completely odd completely

Adam: move on I want to move on with my day and I don’t want to take the extra call it three hours to maybe get thousands of dollars more

Shannon: thousands

Adam: thousands

Shannon: yes

Adam: so there yeah that’s just interesting that people you know whatever she had to do that day was very (2) important in a cost her probably thousands of dollars

Shannon: they cost two thousand now she’s just like I think wanted to get on with her day and so she wanted to accept one and just kind of so she just didn’t want to have to be near computer phone or whatever she was doing like you’re right so whatever it was (2) worth thousands of dollars but these in that case they have anything like that in my life but the offer or the agent said but will step back up offers and so far no one wants to do a backup offer and I’m like I like backup offers

Adam: so you did it back up offer

Shannon: yes there’s no reason not to do a backup offer I feel like it’s laziness on the agent part

Adam: like what the backup offer form says and what outs and stuff that gives you there really is no reason to do it backup offer our region not to do it back

Shannon: yeah so I mean again it’s paperwork but I don’t think it matters I think actually we would get the house for less than what we would have offered if our backup offer actually comes into play

Adam: so okay quickly I want to talk about these escalation clauses I’m gonna (2) say again I’m not an attorney if you know if you have questions whatever consult your attorney everyone situations are different I feel like I have to say these types of things I don’t want people to just use the example [???]

Shannon: [???]  

Adam: yeah or just like you know I don’t know your specific situation so maybe this is not appropriate for you but so a very simple example escalation Clause is you here’s our offer it’s exactly listing price or whatever number it is and we’re willing to give $1000 above the highest offer up to X right so we’ll give you a hundred fifty thousand or we’ll give you a thousand dollars above the highest to offer up to 160 thousand now you know when I write escalation clauses I write them that simple and to me the most important thing I can do is explain to my buyer exactly what’s going on here and the best way I’ve been able to think of how to say that is we’re giving the seller and the agent technically a chance to be honest right so to me without the escalation clause our only other option was to offer the top number they would give which is in this example was 160 thousand right and so if they only got another offer at 155 we’re gonna end up paying 156 right and then they the buyer naturally would say how do we know that they really had an offer at 155 and so to answer that question what a lot of agents do is they start adding extra wording into their escalation Clause like you know listing agent to provide a copy of bona fide offer or whatever and then I think that we’ve seen one company that has an entire page long of wording for their escalation clause

Shannon: really do you have a copy of that

Adam: I do have a copy of that and I think you have a copy of like some really long paragraph that you really like

Shannon: I do I use a whole paragraph

Adam: okay

Shannon: I’m guilty that’s

Adam: that’s fine but my point is is that if these people are liars right if they’re gonna go you know what I’m gonna I’m a liar and I want that 160 even though my highest other offer is only 155 then I personally believe there’s nothing keeping them from just writing a fake offer right and so when I when I’ve had when I’ve represented a buyer and the sellers asking us for a copy I’m sorry when I’ve represented the seller and the buyers that ends up getting it has asked us for a copy of the other offer I’ve always been honest because I think that’s what do you call it reputation and morals and all that kind of stuff

Shannon: everything after call

Adam: if they this I meant so if they make me send them a copy of the other offer to me to be ethical to the agent who made that offer to the buyer they made that offer I cross out the name of the agent the name of the buyer anything that would be identifying and so I’m sending to the winning buyers agent of this document with all this black line stuff so how do they know I’m being honest

Shannon: so I guess I think I’ve asked you this before baby but is it really truly unethical or do we get in trouble as realtor’s if we said without the redaction now can you show me the other offer and not redact maybe even maybe just the other potential buyer but not necessarily the (2) the other agents

Adam: I don’t I don’t truly know the answer to that

Shannon: yeah and I think that we’ve talked about that because when I’ve been in multiple or an escalation clause and I’ve won it I think it’s happened a couple times where they just send over the contract

Adam: and that’s not necessarily meaning it’s right you know they could be uninformed or they could be whatever and it doesn’t [???]

Shannon: and I say in that paragraph with personal information

Adam: removed so to me what a seller should do in that case and we’re getting off topic sort of about the escalation clause but if a seller gets a you know one offer that’s 155 and 1 that says up to 160 you know a thousand above the offer highest offer up to 160 if that seller really wants 160 they can counteroffer that buyer and say give me 160 right and then that buyer’s agents gonna go hold on what’s what why didn’t tell you why are we getting a counteroffer does that mean they have another offer at this price so what does that mean it means they want 160 whether they have another offer or not right and so I think that that’s fair to do because the buyer said hey I’ll pay 160 so why not just counter and say yeah fine give us 160 but so what you’re saying Shannon is that when you representing a buyer the listing agent calls you back and says we have ten other offers or 17 in that case and probably at least half of them probably have escalation clauses because over the last few years those have gained popularity other people are figuring out what they are and then that agent the listing agent isn’t quite sure how to like evaluate what the different escalation clauses mean and what the actual highest number is and so they’re just saying don’t get you get your escalation clauses out of here then give us just an actual number

Shannon: yeah highest best that’s it

Adam: I can see why they do that I can also probably argue that that’s not necessary because I think they’re I think I mean depends on how they all were their escalation clauses and stuff I think that they’re if you look through them there you could choose like okay this is the highest one probably but I want to talk a little bit about how the agent who’s representing the buyer can do a good job on presenting the offer and kind of communicating with the other agent and how that sort of relationship that may exist or not exist already can be formed and can sort of influence the deal right so if one agent already has a bad reputation or they’ve had a bad deal together or they’re just known to be aggressive or something like that and they’re one tough to deal with there and they’re one of the offers the listing agent can influence the seller and say now this offers okay but this guy is really not someone you want to deal with right

Shannon: absolutely

Adam: and I’ve been in situations where there’s multiple offers and the agent I’m representing the buyer or one of the buyers I guess and the listing agent has called me and said we’re gonna go with your offer because I want to work with you which I’m like that’s cool but that’s interesting right that (4) agent has such an influence over that and I can’t imagine that our offer was you know five thousand dollars less than the next offer it must have been fairly close but that that sort of agent relationship thing is important and if you don’t know that listing agent then you can you can I guess present your offer and way that you’re gonna let them know like full and complete offer right here’s our earnest money here’s our pre-approval I’ve already contacted our inspector you know I and kind of let them know in different ways you’re gonna be easy to work with am I making any sense here

Shannon: yes I think by presenting I think yeah one of our other agents kind of talks about this where an agent called her up and she was a listing agent and just chatted her up a little bit and I think that that’s a really good idea i I think the best idea is to always be very professional and when working within this industry so the hard thing for buyers and sellers is they don’t know the reputation of agents necessarily inside this industry but there are some really big name agents that I can say their name in any room and everyone goes…like…i did deal with them and it was terrible and awful…so there’s no real way for a buyer or seller to really know that information but I do think that there’s a way I think it’s just I think that if you’re as a the buyer who representing the buyer if you can get a hold of the (2) sellers agent and that’s been the other issue I don’t I can’t really get agents to pick up the phone lately in these situations to just chat them up and say what is important I know price is important what else is important to your client so when I’m in this situation in that 17 offer situation I tried calling the agent I tried texting the agent and I asked him I said I get price is probably very important what else would be important to them so as a closing day is it you know are you worried about financing do you want I can have you my lender call you today what do you need and nothing I can’t get and I’ve had that more than a couple times where I can’t get a response because I would I can get my buyers probably do anything besides completely overpay

Adam: yeah closing day and stuff like that they control to be flexible on everybody

Shannon: and I can get my lender to call it their lender to call you today

Adam: we got the money

Shannon: they told ya they’re well-qualified

Adam: all right so

Shannon: that’s the other thing like as a buyer and working having your agent do those things can really help to

Adam: okay so in typical st. Louis realtor podcast fashion we’ve gone over time you know we had more stuff that we wanted to talk about but we’ll keep that for next time right we got our new podcasting equipment here so we’re trying it out I’ve got the headphones on you’ll see it on our picture that we’ll take and we’re gonna try to do more of these podcasts please submit your questions to podcast at HermanLondon.com submit them through Facebook reach out Shannon would you give your information in case someone wants to call you buying or selling

Shannon: right so my cell phone 314.583.0070 or you can email me Shannon@LivingTowerGrove.com or look me up on online at Facebook is /livingtowergrove website: stlouiscityrealtor.com

Adam: stlouiscityrealtor.com okay so thank you everybody for listening and we look forward to talking to you next time take care

Shannon: bye bye