Jim Gatos

Ah, what a day when you look at Craigslist.

In my over 26 year career in real estate, sometimes I get asked about homes that are advertised as "Rent to Own". I usually "cringe"... I don't know how receptively they're looked upon in YOUR market area; in my area I don't think they are a great option.

As a matter of fact, they're most likely just plain awful, Why would someone want to do "rent to own"? What type of buyers and sellers do you attract with "rent to own"?

Desperate, mostly...

Let's talk the truth here. For a seller to open themselves up to all the potential headaches of "rent to own", they probably can't sell their house, but HAVE TO MOVE. They HAVE to move. Either they won't lower the price, can't lower the price, or won't qualify or consider a short sale. So they pick off the "last resort". They venture in the world of "rent to own".,.

For buyers, in THIS market? They'd had to most likely be slightly delusional. Unless they get the property for a steal, and I mean A STEAL, why would they do this? In a declining market, it almost won't happen anyway. It may not appraise for the agreed upon price, unless there is a clause written to address this.

So, before I continue, let me review the "rent to own" scenario, The seller has a home and they advertise it as "rent to own. They usually mean, the buyer is a tenant and is entering the transaction AS A TENANT. THey sign a lease for a year or more, and the landlord MAY agree to put aside a certain percentage of the rent towards the purchase price, usually the downpayment. If the buyer doesn't go through at the end of the lease or at the agreed time, they generally LOSE that money and the seller - owner keeps it as part of the rent. Unless the buyer MUST have that property and doesn't have a deposit for financing, rent to own usually attracts buyers who can't buy... maybe for a long long time. They hope their credit gets better. Maybe yes, maybe no.

What types of sellers go for this? Either the ones that are doing the buyer a favor, like parents, friends, etc... OR... sellers who are so desperate they decide THIS is their ticket. But if it's overpriced to begin with, it may, and I EMPHASIZE "MAY", it may take years for the overpriced figure to catch up with the market. With more and more people doing short sales, some of them ask me, brusied credit and all, "Jim, let's look for rent to own"? And now, the landlords of these homes, found far and few, won't rent to tenants like these, unless THEY are ridiclously overpriced, and will pretty much take any live body the minute they walk in the front door. Problem is, some of these "buyers" got burned before. Even if they don't qualify now they won't go near anything that they consider overpriced.

And the cycle never ends...

What are YOUR thoughts?

About a year ago, I was talking to a fellow agent about how we run our businesses. Probably, that was my first mistake right then and there. (Just Kidding)...

However, I told that agent, no matter what I tell sellers when I look at their property, I could hit them in the head with the "TRUTH Sledgeahammer" all day long, a lot of them STILL opt to list with yet another agent, who agrees to list their home for "a little overpriced" and they wind up for the most part, either NOT selling their home, or accepting an even LOWER price than even I recommended, because after several months have passed, 19 open houses and weeks of NO Calls or activity, the sellers finally reduce the price and/or their agent FINALLY gets through to them, or sometimes FINALLY gets the courage to tell them the truth, at the risk of losing the listing.

Believe me, if the sellers won't bring the price down in this market, you really have nothing to lose, period.

So, against my better judgement, I decided to adopt a slightly "softened" version of my listing acceptance policy, one that I STILL TELL THE TRUTH, of course, but instead of turning down listings, to list them "a little overpriced", if the sellers really insist. And I mean REALLY!

This of course is ridiculous. With Zillow and so much information out there, buyers simply have so much to choose from. They won't waste their time with a seller, or agent, who's playing pricing games. Sellers are in competition for attention. I give sellers the best exposure I can; with an overpriced listing, all that's accomplished is .... NOTHING.

So, why would an agent overprice a listing today?

Two reasons I found.

#1. They are hoping a buyer candidate who doesn't know the price and hasn't studied the market will call, most likely from a sign call, appraisal be damned!

#2. They are hoping the seller will realize the price is too high and get desperate or realistic and reduce the price on their own. Of course they hope NOT to become another "expired" (failed to sell) statistic.

Well, I should've known.

None of my listings "expired".. I canceled them myself after repeated attempts to reduce the price. These sellers just don't want to "get it".. They'll keep "agent hopping" until they either change their mind or lower the price low enough to reality.

One reason I like listing short sales is they are REALISTICALLY priced. I'm NOT insulting the intelligence of today's average buyer.

So with this, I'm returning to my "tough as nails" policy. Maybe I won't get the listing, BUT the feeling you get knowing you stood your ground and acted like a TRUE professional, and turned down a listing that most likely won't sell, well, try it! I betcha you'll feel like a million bucks!

Last week, I had an interesting, but sadly, ALL TOO COMMON occurrence take place.

An agent made an appointment with the local showing service company we use here, MAPASS on one of my listings..

So. a couple of days later, the agent calls me and tells me, almost breathlessly, "I'm gonna get an offer on your listing today!".. You'd think I haven't seen an offer in over a year with the "enthusiasm" she had.

True enough, I get the offer.

Without a preapproval.

Come on, what the heck? Like I'm gonna get my seller and recommend they sign that offer. Yeah. ooookay...

Let me ask, in this day and age, what listing agent wouls recommend an offer to their listing clients from a buyer who doesn't submit a written preapproval from a reliable and "known" lender or mortgage institution?

Better yet, what showing/buyer agent even goes around with buyers like that?

if you are a buyer agent, and you get an offer from an unqualified buyer, and suppose for a moment, you are dealing with "Igor Idiot' real estate LISTING agent, who gets his sellers to sign the offer, you have just done a terrible disservice to the buyer!

So you all go through the motions. The buyers plunk down a couple of hundred dollars on a home inspection on a house they will never buy. They lose money and time, YOU as a buyer agent lose money and time, in short, everyone does..

Some agent YOU are!

Yet, this sort of thing happens ALL the time, believe me. I can't believe I have to even ask for a preapproval when I get some of these offers..

Just unbelievable..

Are the agents nervous about asking for one? Do they figure they can get "practice"? Practice in what? Burning gas? Wasting time? Looking like a "Realtor(R)"?

REALLY unbelievable...

So, the thought occurred to me, should I demand a preapproval letter or, for those "cash" buyers out there, proof of funds, FIRST, BEFORE THE SHOWING?

It may drive down showings. What I'm really worried about is, doing this may "offend" some buyers and their agents into NOT showing my listing.

But then on the other hand, it's okay to show my listing to totally unqualified buyers?

Something has to give, wouldn't you say?

I'm here, and I ain't going no place... What do YOU think?

Sounds like a tongue twister, doesn't it?

The title is one of those expressions I've heard for years that I never got the full impact of the statement until a certain event "slammed" the point right at me.

I "get it" now..

I referred a client I work with over to a mortgage lender that I previously never worked with. Normally I don't do that and there has to be a very good reason for this. I don't like my clients being "guinea pigs" for untested service, but in this case I had NO choice. There was a bank owned property that my client wanted to make an offer on; one of the conditions of making an offer with this REO was that any prospective purchasers HAVE TO be pre approved by the bank that owns the property. After jumping through a few hoops, I found a mortgage officer from this lender and set the thing up.

I should have known from the beginning. I called the mortgage guy up on Thursday mid morning and Saturday afternoon rolls around and still no answer. I tried to find another mortgage officer from the same lender and found someone with an attitude problem (as far as I'm concerned) that she didn't want to waste her time on my client if he ONLY wanted to "use" her for a pre approval and then go somewhere else. "Lady, I can't guarantee I'll get up out of bed tomorrow and you want me to PROMISE my client will use you for the mortgage?" It's not enough for me to provide a lead to someone untested; I now also have to GUARANTEE my leads! Ah, if I could only live THAT "charmed" a life LOL..

Nope, I'll stick with the first guy, the one who doesn't return calls in a timely fashion. Finally I got ahold of him, some bull excuse about his cell phone not working. Get a Blackberry or IPhone, my friend.. LOL.. Anyways, I shrug it off and hope for the best.

From what I understand, my client rightfully starts verbalizing his frustration with this guy; how he never calls back and sometimes has to wait for days, at times OVER 3 days, for a callback. I understand the business and I personally don't make it a habit to call my clients and customers with meaningless wasted breath, but if I am called, I CALL BACK. And I try to call within minutes if possible. The only times I can't call imediately are either if I am at a class where I am NOT ABLE OR ALLOWED to call, or if I am at an appointment. Usually I am able to call back within two hours. Rarely will I let a call go to the next day unless the circumstances demand it. I also use text messaging and/or email, but the point is I DO GET BACK...

For me to deal with someone who doesn't operate like that puts me WAY OUT of my comfort zone. I consciously avoid people like that. I just can't handle it. If I refer someone to a service provider, whether it be a mortgage lender, home inspector, even another agent for a buyer agent, I insist out of them the same level of follow up service I provide myself.

So, getting back to my story, the loans (two properties for this lender) roll along, and I suppose everything's going through, except for the fact the mortgage guy is eternally unreachable by email or phone. I personally am getting frustrated by having to deal with someone who seems to work on their beat, not mine. Meanwhile, my client, rightfully so, is "bitching" at me left and right. He starts asking me for names of other mortgage lenders. I explain that may not be his best option but HE IS MY CLIENT AND I WORK FOR HIS BEST INTERESTS... One thing leads to another, to make a long story shorter, he dumps the first mortgage lender and changes lenders and mortgage officers.

The problem I think service providers have who are extremely competent but lack client service skills is they forget the ole' tagline, "People don't care how much you know until they know how much you care ..."

They forget people are people. Of course they want competent and knowledgeable people BUT if someone is truly THAT good they understand excellent client service is an integral part of the whole picture. "Communication is the universal solvent:, said L. Ron Hubbard. He was right. All someone needs sometimes is just an acknowledgment that they've been heard, that's all. Of course, an extremist that wants a phone call 8 times a day for no reason other than just to get attention also needs help that a real estate agent nor a mortgage lender is able to professionally provide, but aside from the joking around, any REASONABLE inquiry and phone call should NEVER be ignored. That is akin, in my opinion, to being insulted. Ignorance of any nature can be constituted as an insult, That's not the right thing to do.

Years ago, I made it an issue to return calls. None of this lame "I normally return calls at 11 am and 4:17 pm" crap that I sometimes hear. When I get a voice recording like that, I hang up and move on if I can help it. I honestly don't know who came up with that idea and I know it's even being taught by a couple of real estate coaching companies and trainers, but I personally think it's insulting and demeaning. What if MY times are 10:18 am and 3:24 pm? What do we do now? Never communicate?

Please don't get me wrong. I have no problem with emails and text messaging, but I also have a Blackberry so I can get these communication forms when I'm away from my computer. This problem doesn't apply for just mortgage lenders, so I'm not "singling" them out. I can't understand the agent that I call two, three, or more times to make an appointment and they never call back. If I persist and finally succeed, they have that famous excuse; "I never got any of your 68 messages .. I guess something's wrong with my phone"...

Buddy, I'm going to let you in on a secret. You know why a lot of real estate agents lately have suffered in their earnings? It isn't the economy. It's because they never answer their phones! Jeez!

My answer will probably be from now on, "No ... I think something's wrong with YOU.. " You may have "missed the boat"...

Last night, I received a very polite email from a reader in the Western part of the state. I replied back and am reprinted an updated version of my letter here on this blog, The question is a very basic one;

"I am thinking of selling, I want to sell on my own, do you have any advice???"

"Most of the FSBO's (for sale by owners) I see pretty much are in this type of boat."

Most of the FSBO's (for sale by owners) I see pretty much are in this type of boat. It's bad enough the present market conditions make it tough for regular real estate agents to sell their listings; and you want to attempt selling your home in this market environment? The odds are not stacked in your favor.

Most FSBO's I've been tracking (yes, I do track the "fsbos" in my area) all follow a sad and familiar pattern. I want to scream, "Please!!! Please don't do this! So many others have failed before you!!! Perhaps that's what I'm probably doing with this post.

In some cases, the homeowner has consulted with an agent or agents. They decide NOT to list with anyone, 'cause they want some monetary figure that no agent can get them. I mean, let's talk the truth here. The 2 biggest reasons sellers think they should try selling on their own is either because they think they won't be able to pay an agency and/or they think it's easier than it seems. without meaning to potentially insult anyone, I'm sure you've heard the expression concerning defendants in a court house setting that "only a fool represents themselves"... With all due respect I submit to you that the same could be said for a lot of "FSBO's".

Honest and ethical agents tell the truth and do not list "liar" listings, with prices that will never sell. They walk away if they can't get the property properly priced. In this market (any market, really), you may be giving out "signals" to the buying pool that you're NOT really serious about selling when you are asking an unrealistic amount. It's almost like you're saying; "Go away, until I get serious or until you find a more realistic, sensible buy." All you are doing by overpricing your property is helping to justify your competition's market position. The ones that are in the same price range with you offer more bang for the buck; the ones you should be competing with are getting looked at. That's WHY a lot of overpriced homes don't even get showings. You or your agent could advertise that sucker on the Tonight Show with Jay Leno; no one will buy it.

The 4 "P"'s of marketing, for the real estate world...

A proper price is only ONE of the 4 p's of marketing; the others are promotion, product, and place. You can also throw in planning as a 5th p. Let's look at price first. Without a correct price, everything else collapses. It will be impossible to promote a product, (your property), and expect to be taken seriously when the asking price is too high. As for promotion, well, promotion is NOT advertising; it's PART of it...Promotion to me simply means getting the word out. RUN AWAY from an agent that promises you tons of newspaper advertising! Why would I or anyone waste our resources in a dying medium? The serious buyers are all doing internet searches so they won't leave one stone unturned! That means if you're not in the MLSPIN - Realtor.com search engine, you may as well pretty much forget about it. An overpriced listing accomplishes NOTHING. And finally, place. Place is where the potential buyers are going to find your product. Place is the real estate agency the product is being handled by. If your product is not handled correctly, well, that's why you see homes sometimes jumping 2, 3 or even 4 or more comapnies before they finally sell. Sometimes it may have sold for more money if it was handled correctly the first time, like anything else out there.

If you attempt to sell it on your own, buyers may tend to try to deduct from your proceeds the very same commission you are trying to save. You have to ask yourself, "do I want to spend the commission and have a professional do this for me, with potentially much much less liability involved, or do I want to eventually see the buyer save that money, while I wind up doing all the work and walk on potentially dangerous soil? So now you may be thinking; "I'll list it with one of those 'put it in MLS yourself' agencies'.

What sort of a buyer would not want all the services of an agent?

Is it an investor? A "looky loo?" or an unqualified buyer that has been told by 14 mortgage companies and 17 agents that they are NOT qualified to buy a house! They decide to look and ONLY look for fsbos since you don't know their situation and you're probably as desperate as they are; after all, why would you be going fsbo?

Maybe they can even convince you to do a "rent to own" deal, eh?

"Most serious buyers I've worked with DO NOT WANT to see or meet the sellers."

Most serious buyers I've worked with DO NOT WANT to see or meet the sellers. The whole thought of this is nerve jarring to them. They don't care about you; the house is a commodity with a little emotion spread on it. I've actually had buyers instruct me NOT to have the sellers in the house. When the occasional seller "slipped" by, they'd roll their eyes and give me THAT look....

Think that if you're there you can do better than an agent? I once saw a buyer at a home inspection purposely disparage and demean both the house they were thinking of buying AND THE SELLER, probably because the seller was an elderly lady who was "afraid" of leaving her home. On almost every issue the home inspector brought up, the buyers kept turning and asking the elderly lady, in a borderline sarcastic way "You, you're going to fix that for us too, aren't you?" Feeling sorry for my client (and doing my duty as a seller's agent in protecting her best interests), I INSISTED the lady and I leave the inspection and go have ice cream (even though I'm lactose intolerant LOL). Two hours later, the inspection was over, the house was fine, and the buyer conveniently "forgot" all the "issues" they were bringing up to the seller before we left.

If you're a real estate agent, and today there are many homes to pick from, HOW EXCITED WOULD YOU BE if you placed on deposit a home for your buyer client with someone that probably doesn't really know what they're doing? How much higher would you say there is a chance for liability, even with lawyers involved? I think some, or most real estate agents get scared of FSBO's NOT because of the work they have to do but because of the potential nightmare they may be facing. And again, buyers may see you as a "discount"
house and act accordingly.

I can't tell you how many times I've seen the following scenario repeated over and over...

1. FSBO runs ad in paper and possibly something on the internet. Maybe it's a webpage they do themselves.

2. 2- 3 weeks go by and they start doing open houses. The majority of respondents are real estate agents.

3. They start offering the buying side of the commission to buyers agents, not having someone represent their side. (They are their own negotiators)

4. They pay money to "list" their home, complete with a cheap looking sign that looks like a nightmare from Home Shopping Club"..

5. Nothing happens. Then they may just give up and try the same steps again later on or.. if they REALLY DO NEED TO SELL...

6. Urgency sets in. They finally "break" and list with an agent. The sad thing is if they listed earlier, they may have gotten more. How much more? Well, with the declining market spread over the course of a couple of months, I saw a FSBO lose what I think in my opinion was around $20,000 or even more. Yup.. That much.

"If I have any advice, at least I'd say just price it right and don't spend more than $200 in advertising."

If I have any advice, at least I'd say just price it right and don't spend more than $200 in advertising. The commission you pay isn't just for advertising; it's a professional fee for expert services, NEGOTIATION, and advice. Doctors, Attorneys, etc, all collect professional fees. If you can't sell it for a realistic price, don't waste your time. The buyer you seek isn't going to come down from the sky to save you. Even if they did, the banks are sooo conservative today they'd knock the sale out with their appraisal. Yes, you will find real estate agents that will take your property and put it on the market, and pile up on the market time and do mind numbing open house after open house after open house, but that because they are what a friend and client of mine calls "people pleasing" brokers, who have a hard time saying no and try to make you happy; only problem is, their failure is their unintentional deception and your misery. This is where you have to interview agents and pick the best qualified. The best qualified is NOT necessarily the highest bidder for your listing.

If you owe more than you can sell for, and are having problems, I can try to help you with both either with a loan modification or a short sale. You could try to do your own loan modification by checking out hopenow.com. You don't want to waste week after week after week; those folks are flooded with work now. Or you could call me and I could take an application over the phone. I submit it to ShortSalesexpress.com and they will tell you if they can do anything for you in terms of lowering your interest rate, your payments, or even in some cases your loan balance. If you agree and they do this they will charge you. I can tell you it aint cheap but it may be worth it in the long run and it's probably cheaper than refinancing. I am admittedly not a big fan of loan modification because in a lot of cases it merely delays the problem, and doesn't solve the problem. Am I telling you to do this? No, I am telling you you may want to try it yourself with hopenow for free.

With a short sale, the bank agrees to release you from the obligation of the loan while they collect less than the loan amount rather than go through foreclosure. You won't own the house anymore and have to move out, but worst things will happen in a foreclosure. Your credit may not be as adversely affected but this is a case by case assessment. I would say however that anything is better than a foreclosure. You may even be able to turn around after a year or so and buy another house, but again, a credit advisor-mortgage officer would be the one to consult.

Through this blog I hope to provide enough information to help out. If you need to, please do not hesitate to call or email me directly.