Let's do a little negotiating

I've been trying to get to this post all week, and then I took a look at today's Pearls Before Swine strip, and it just seemed all too appropriate. I love Pearls - cynical & twisted humor like that is right up my alley. Anyway...

We live in a unique culture in the world in a lot of ways, and one of the ways that we are unique is that we really don't negotiate all that much, at least where it concerns buying things. We negotiate on houses and cars, and most of the rest of the time we just pay list. In most other cultures, they negotiate nearly everything. It's just ingrained. I'm not sure how we came to be so different. It probably has something to do with living in the Land of Plenty - but if our economy doesn't recover soon maybe that aspect of our culture will change.

The thing about negotiation is that it's much more art than science. There really isn't any one-size-fits-all approach to it. No two scenarios are exactly alike, and a big part of being successful in a negotiation is having a good grasp on the entire scenario. Here are some of the things that I've learned either from experience or from listening to experts that might come in handy with your next negotiation.

It's a zero sum game.

At least where the money is concerned, every thing that you win, your negotiating counterpart loses. And it goes the other way as well. Understand this going in. When you are talking strictly in money terms, there is no such thing as win-win. If you give a dollar, they win a dollar. It's very simple math. However...

It's not always about the money.

One of the mistakes that a lot of people make in a negotiation is to overlook that there are two components to a purchase negotiation - price and terms. I once had a trainer demonstrate this by saying that we could decide which we wanted - price or terms. We'd pick one, he'd pick the other, and he'd come out on top. So one of the students was going to sell him something - I forget what it was, and he said "OK, name whatever price you want". She offered up a million dollars. He said "OK. A dollar a year for a million years and I take delivery today." That's obviously an extreme, but you get the point. It's important to understand that sometimes it's possible to come out better at a lower (or higher) price if the other terms are right.

Know if you are competing.

If you're buying a house and there are other offers on it, you probably don't want to stake out a negotiating position on it. But if it's something that's been around for a while and there aren't any offers, you might take a shot. But one thing to keep in mind - a good listing agent will know who else has been showing the house. And when an offer looks imminent or has come in, we'll usually make a few phone calls to see if we can shake out a competing offer or two. I've seen this movie a few times, and I can tell you that it's not all that unusual for a house to sit on the market for 4-5 months without an offer, only to get three in the space of a week. On the flip side - if you are selling, it behooves you to know what other houses are on the market that could be competition for a buyer. If you have a lot of similar houses competing for buyers, you might want to take a little less of a hard core stance. But if there really isn't much else like your house out there or if you're in a thin inventory market, you might see if you can squeeze the buyer a bit in a negotiation.

Shut up and listen.

This is probably the best simple piece of all-purpose advice that you can get or give on almost any topic. It's much easier to hear what the other side is saying if you aren't in broadcast mode all the time, and you might pick up some valuable information from them that you can use to your advantage. On the other hand, if you insist on running your mouth, you might very well give away something that could compromise your position. A corollary to this rule is...

Never tell anybody your bottom line.

If you're buying or selling a house especially, don't tell anybody how high or low you are willing to go to get the deal done. Nobody. Not your agent, not your co-workers, don't even tell your mother. People can sometimes let something slip inadvertently, and word can get around in a hurry, especially in a small town like this. And if you're on Facebook or Twitter, don't even think about posting anything about your transaction there. I'll tell you this without apology - if I'm on the other side of a deal from you and I learn information that will help my client get a little bit better deal, I'm going to use it with extreme prejudice. Anything you say can and will be held against you in a negotiation.

Know what you want.

This sounds easier than it really is. Sometimes you have to stop and think for a minute - "What is it that I really want or need to accomplish here?". You can't map out a strategy if you don't have a goal in mind.

Walking away is always an option - but you better be sure.

Look, if it's not right, it's not right. Sometimes saying no is the best option that you have. But before you do - make good and sure that "No" is the right answer. Sometimes you can walk away from a deal and it'll all come back together and you'll get a better deal for it. But I've also had buyers walk away from a deal hoping that they can revive it a week or two later after they've let the seller sweat a little, only to see another buyer jump in and get the house that they really wanted. And I wish I had a nickle for every time I saw a seller bounce an offer that would have netted them much more than they wound up getting later.

I hope that you find a few of these tips useful. Botching a negotiation can be very painful and expensive, but doing it well can be extremely rewarding.

Monday Morning Numbers 4/25/11

Good morning again, hope you had a good Easter weekend. We also had the Spring Arts Festival over across the street from us this weekend, and I can't help but wonder if doing that on Easter weekend was good or bad for the turnout. I didn't make the connection that they coincided this year until late last week, and then I was a little surprised that they didn't adjust the festival schedule. Go figure. Let's take a look at this week's numbers:

Active Listings: 150

Contingent Listings: 30

Pending Listings: 52 (22.4% of the inventory)

New listings: 10

Months of inventory: 6.8
Click here for the updated price per square foot chart.

Another week with very similar looking numbers. Nothing new to see here, move along...

Later this week I'll be back with a few tips on negotiation.

Focus on North Vandenberg Village

In case you never noticed - and I'd be shocked if you did - I have a sequence that I use for the areas that I cover in this blog. And way back in the beginning when I started writing this blog, the very first area post was North Vandenberg Village. So we're starting the cycle over again. As I tell you every time I do one of these, if you'd like to go back and get some background on the area, go back and take a look at the first post I did on it back in 2009.

I was just looking at this area for a buyer client recently, and the first thing that popped off the screen at me was the inventory level. We have 16 active listings up there this morning. That's a pretty big number for that neighborhood. The good news is that it's not dominated by distressed sales. None of them are REO listings, and 5 of them are short sales leaving us with 11 traditional sellers. We only have two contingent sales at the moment, both short sales.

Sales activity is relatively low considering the inventory. We only have 3 pending sales in the area right now (1 each REO/SS/Trad). Over the past 3 months we've seen 7 sales, which have been a little heavier in distressed properties (3 REO/1 SS/3 Trad). The 3 REO's that sold were all considerably lower than price than the other sales - and from what I saw of them they were pretty beat up.

The small number of sales here makes it a little more difficult to nail down price trends, but from what I can see, it looks like these non-distressed sales are pretty close in value to what we had been seeing in the previous three months, but the increase in bank owned sales in the area were a drag on prices. It's very similar to what I reported last week about the first quarter of this year - price trends appear to be down at the moment driven by an increase in the percentage of REO sales. If there's encouraging news for North Village, it's that the current inventory isn't heavy in REO's, so when some of those wind up selling down the line, it should help shore things up.

I'm sure that I'll come up with something to write about next week. I'm just not sure yet what that is.

Monday Morning Numbers 4/18/11

Good morning again. It's time again for a look at our Lompoc market stats:

Active Listings: 153

Contingent Listings: 30

Pending Listings: 51 (21.8% of the inventory)

New listings: 10

Months of inventory: 6.6
Click here for the updated price per square foot chart.

In case you missed the first quarter update I did on Saturday, I should warn you - that chart is a little scary this quarter. This week's numbers look an awful lot like last weeks numbers, although the number of new listings is down just a bit. Half of those new listings were REO's this week, and only one new short sale.

Later this week I'll have an update on activity in North Vandenberg Village.

2011 First Quarter Update

Warning: Reading the following post may be detrimental to your health. Especially if you derive any portion of your income from the sale of real estate in the Lompoc Valley.

OK, now that we have that out of the way, let's take a look at the train wreck that was the first quarter of 2011 in the Lompoc Real Estate Market. Seriously, this was not a good quarter for real estate sales by just about any measure that I can pull out of my statistical bag of tricks. So let's not even bother to try to put lipstick on this pig, and call it what it was.

As I've done for the past several quarters, I break out some of these stats out into numbers that are combined from the Lompoc and Central Coast Regional MLS systems, and then later I'll get into some stats that are Lompoc only. Here are some combined stats:

We had a total of 95 sold units in the first quarter of the year. That is down 7.8% from the sales activity of the same quarter in 2010. Distressed sales made a comeback after a few quarters of more traditional sales, with REO's accounting for 49.5% of sales, and short sales up to 23.2% I've been waiting for that short sale percentage to increase, and it looks like it's starting to move that way.

As you might expect, when we have an increase in REO's as a percentage, our prices suffered. Our price per square foot dropped 9.9% from the previous quarter, down to a new low in this cycle of $128. If you really feel brave, you can take a look at this updated chart. Our median price for detached units took even a larger beating, a 19.5% drop to $184,900. Yikes.

I've said this here many times, but I kind of think that it needs saying again: We are working with a very small sample size here, even when looking at an entire quarter. Things can get skewed a lot by what kind of properties sell, and when half of them are REO properties you can get some pretty funky results. And I looked through the list of properties that sold, and I can tell you that there are a lot of pretty rough houses in that mix. So take these number as data points, but not necessarily as the final authority in how things are going. For instance, it would be hard to convince me that any individual house lost almost 10% of its value last quarter (let alone 19.5%).

Now let's move on to the numbers that are only from the Lompoc MLS:

Looking at the way buyers were financing sales during the first quarter, we see that 17.9% were sold with conventional financing, 34.1% were sold with FHA financing, 23.5% were VA loans, and 22.4% were bought with cash. Cash had dropped off a bit last quarter, but given the type of houses that sold and the price levels, it's not surprising to see that number move back up.

If you've been checking on this blog on Mondays to track our market, you'll know that our inventory has been edging up. One thing that goes hand in hand with that is increased market times. We're up to a median of 50 days on market for our sold units last quarter. We're still at 49 days for a median escrow period, the same as last quarter.

So what does all this mean? Are we in a double dip market decline? I really don't know. I do see a few things that give me a little hope that our second quarter will be better. For instance, of the 95 sales that we saw, 41 of them came in March. Our pending sales have been increasing in recent weeks as well, and the median list price for the pending single family house sales is in the 220K range. So maybe last quarter was just a blip. Maybe it was a harbinger of another ride down the slope of declining sales and values. We'll have to wait to see. I'm getting out of the prognostication business. I don't have a freakin' clue what's going to happen anymore.

Monday Morning Numbers 4/11/11

Good morning once again, and thanks for checking in. Here we go with another round of weekly market stats to go with your morning coffee:

Active Listings: 152

Contingent Listings: 31

Pending Listings: 50 (21.5% of the inventory)

New listings: 16

Months of inventory: 6.7
Click here for the updated price per square foot chart.

Most of these numbers look pretty close to last week's set, but we continue to see an edge up in our pending sales. That's a good sign. We might be seeing some return to a more traditional seasonal cycle in our sales. We'll see - the past few years have been out of whack with the REO market driving things.

Later this week I'll have a first quarter wrap-up for you. You might want to check it out in the evening with a stiff drink. Maybe I'll write it in the evening with a stiff drink... It wasn't a pretty quarter for our market.

Inside the Life of a REALTOR® - Sales

Remember a few years ago when they had that special on some channel with a magician who was going to reveal the secrets of the profession? I guess they made some big show of hiding his identity to make sure that his colleagues didn't hunt him down and, oh I don't know, saw him in half or something. I didn't watch it, but I remember a little bit of talk about it.

I'm pretty sure that I'm not going to get sawed in half over this post, so I'm not going to put on the hood of secrecy or whatever it was they did for that guy. But I'm going to tell you a couple of things about the "dark arts" of my profession that maybe you didn't know before. Or maybe you did...

First of all, I'm in sales. Duh - big shocker there, right? But something I bet you didn't know - you probably are too. Even if "sales" isn't part of your written job description, you're probably in sales more than you know. Because when you strip it down to its essence, sales is getting people to do something. In the traditional sense of the word, we use it to mean getting somebody to buy something. But I've come to observe over a period of time that sales encompasses a lot more than that. Teachers, cops, doctors, you name the job - there's probably some level of convincing people to act in a certain way. Parents? Check. Attorneys? Oh, hell yes. Politicians? Please...

Sales in my profession might be a little different than you think. For instance, what do figure that I sell? Houses? Think again. I had a mentor a handful of years ago who observed that in all of her years in real estate, she probably never sold a single house. Never mind the fact that she'd probably worked on tons of transactions. The truth of the matter is, houses sell themselves. I can get clients matched up with houses pretty well, but at the end of the day I can't convince someone to buy a house that they don't want. What I'm really selling a client is me. I sell them my time, my energy, and my expertise. I'm selling them on the notion that they should want to have me working on their behalf in the middle of a real estate transaction.

That sales skill set - selling yourself - is a difficult skill to master. There are many in our profession that do it a lot better than I ever will. The people who do this the best are the ones who get the lion's share of the business. What you, the consumer, need to understand about this is that the skill set of being able to sell yourself is entirely separate from the skill set that is required to watch out for the best interests of a client through a real estate negotiation and transaction. Those aren't mutually exclusive skills, and I know several of my colleagues who do very well with both aspects. But sadly, I also know several who have one but lack the other.

Real estate agents who are good at looking out for their clients but lack the skills required to sell themselves don't last long. They lose business to their competitors that do a better job of convincing the client to work with them. This business is brutal - absolutely merciless - to people who lack the ability to sell themselves.

On the other hand, agents who are good at selling themselves can thrive even if they lack the skills or inclination to look out for the best interests of their clients. They know all the right things to say to get their clients to act, whether or not it's a good move for them. (I could write a whole article on sales scripts, and maybe I will someday.) It's an unfortunate reality, and some of those agents are very successful and have been for years.

So what do you do? Well, my advice is that when you are looking for the services of a real estate agent, talk to people you trust to get a referral to someone that they would use. The best agents - the ones you want to use - will be the ones who get rave reviews from their past clients. If you ask a friend or family member who they used for their transaction last year and the answer is "Oh, it was some guy over at XYZ Realty - dang, what was his name again?" - keep looking. If you get a response something like "Oh, that was a horrible experience! Never again!" get that name too. Chances are really good that they'll remember. The agent you want to use will be somebody who has stayed in contact with their clients after the transaction was over. The other ones - the ones who just railroad clients through a deal regardless of anything else are too busy to stay in contact. They've moved on to the next thing.

Next week I'll wrap up the first quarter activity in our market. I haven't pulled all of the numbers yet, but it may not be pretty...

Hey, this isn't www.lompocliving.com!

Well, it is for now. We're in a transitional phase with our website, so for the time being we've forwarded our website address here. You were just going there for the blog anyway, right?

Monday Morning Numbers 4/4/11

Geez Louise, it's April already. Yikes. Let's take a look at this week's market stats:

Active Listings: 147

Contingent Listings: 35

Pending Listings: 43 (19.1% of the inventory)

New listings: 12

Months of inventory: 6.6
Click here for the updated price per square foot chart.

The only significant change that we saw this week was in months of inventory, which dropped sharply from last week. Our raw inventory number only dropped off a little bit, but we had a big week for sold units at the end of the month, which affects that rate number. We'll see if that stays close to where it is or if it climbs back up again in the next few weeks. We also saw a slight bump in our pending sales.

Later this week I'm going to have another look inside the life of a real estate agent. I haven't done one of those in a while. I can't wait to see what I have to say...