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The Buying Game
- To get an edge in a tight market,
buyers must compromise and get creative to land a home of their
own
By LESLEE
KOMAIKO, SPECIAL TO THE TIMES
"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."
*
Leslee Komaiko is a Los Angeles-based freelance writer. |
September 15, 2002 |
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