question about bidding process

How the seller and seller's agent address the question of commission is really none of your business or appropriate for you to weigh in on. If you will not be represented by a buyer's agent, and the negotiations are at a final point where you are only separated by the equivalent of 1-3% of what would be the commission, then the seller's agent could decide to kick in something to get the deal done. But that is not your concern.

FWIW "low ball" is not necessarily the best way to characterize an approach, either. Making an offer that reflects your view of the value--taking into account current and what you think to be imminent market conditions--is how I'd position the offer.

I think you'll do well to work on the finesse of language and approach if your aim is to win over a seller/agent to your position--or nearer to your position. Remember everything done--words, writings, expressions, timing--in a negotiation must be done in a way calculated to persuade or it is pointless at best, self-defeating at worst.

How much the agent gets is completely out of your control and, quite frankly, none of your buiness. THe only one who sets the agent's commisison is the agent and the seller. As a buyer, this is out of your arena.

if you want to take this approach, I would engage an experienced real estate attorney to act on your behalf on an hourly rate. He/she can make the actual offer and in so doing immediately demonstrate that you are serious and not a "tire kicker."

Although the two prior posters are of course technically correct, in this market everything is negotiable and this would of course include the broker's fees and to the extent that you do not have a broker, someone in the deal will save that money. Downside for you, is that using an attorney means that you will have be pay dollars for offers that may well not be consumated but if you are serious about buying in the $1 million + price range, that won't represent a significant cost.

I would agree with poster #1 that your language and approach will not work -- even the hint of "paying off" the selling broker will make most if not all people run for the hills.

Most of your lowballs are going to be rejected so using an attorney is going to be very expensive.

alpine292:
"Most of your lowballs are going to be rejected so using an attorney is going to be very expensive."

I don't believe there is much evidence to support this. Most broker commentary in the media is suggesting that "some" lowballs are being rejected. The issue is really just not enough of bids of any kind. The overarching issue confronting this market, at least according to statistical data, is that "highball asks" are being overwhelmingly rejected. When the obituary is finally written on this period of the RE cycle. Most case studies will be centered on "why did the industry and its leadership insist on their brokers sticking so long to the failed strategy of highball asks"

i understand your point but think there is another over riding factor at work: uncertainty. both for buyers and sellers. if we have lost any sense of relative values (and I think this is true) the cure is not lower prices. the cure is to find new benchmarks that everyone -- both buyer and seller -- can believe in.

lower prices work for smaller ticket items, i.e. going out for dinner, new cloths. they are not working for cars -- unless 45% sales declines count as working! and if lower prices don't work for cars--how can we reasonably expect lower prices to be the answer for six and seven figure multi year real estate committments.

Dont hire an attorney, and dont be put off by what some of the others have said. While they are correct that the selling brokers fee is not your concern, you should ABSOLUTELY submit a low ball bid. While many sellers are still pretending to realize the value of their property is dropping lower each day its not sold, some DO have the foresight to see it. If the property you are seeing has been on the market for a while, you certainly can offer at least 20% less than what they are asking. That is fairly typical in this market, and if the seller is in a financial bind (and needs to offload the unit) they might agree to negotiate with you. If the broker gives you a hard time about your offer, simply point out they are legally required to roll your offer up to the owner. If you feel they havent done so (and the owner currently lives in the apartment), you should consider sending a notarized letter to them with your offer clearly stated. You should also mention the specific date you made the offer to their broker, this way if the broker isnt actually presenting offers they will get fired. Its a win/win for you, and it might entice the owner to giving you the price you want.

To clarify I mean send a notarized letter to the owner, NOT the broker.

"Most case studies will be centered on "why did the industry and its leadership insist on their brokers sticking so long to the failed strategy of highball asks"

As I recently pointed out in a Real Deal article I posted here, some agents ask high prices so that they have more room to negotiate with a lowball buyer. We discussed this strategy extensively in the thread I started a while back.

ahhh, here is my favorite realtor quote of all time:

"We've got to price things a little bit higher, because people are going to be looking for a 15 to 20 percent discount off the bat," he said."

http://www.urbandigs.com/2009/01/trd_lowball_turns_predatory.html

no one in their right mind should base an offer on the asking price in this market. whether full asking (nuts) or a specific percentage off of it. that's the problem I;m trying to highlight --- comps are useless, either out of date (which in this climate could mean 2 months ago!) or the one in a hundred where the seller had to dump.

that's the problem--even 50% off asking may be way too much -- there's no way to know at this point in time.

I think thats exactly the point. Dont look at your offer as a "low ball" per se, offer what you think is fair. If that is 20% less than asking, so be it. If you are prepared to pay (and most importantly have the ABILITY to do so) then offer 50% off. Keep in mind that unless you have a cash offer it can be very hard to get a $1m+ mortgage these days.

azil: There's a lot of good general advice above, and I especially urge you to heed Kylewest's guidance.

I think the most successful approach will be tailored to the situation - yours, but especially the seller's, to the extent you can determine it. If you would like to chat offline about tactics that might work for specific listings, e-mail me at west81st@gmail.com.

I'm considering one of these 'low-ball' offers on a Coop that needs a mondo renovation. After doing my home work on the costs and time associated with with the project appears less like a good deal. I still like the apt and building but, the price needs to be reduced at least 30% for it to work out with the reno. Thats a huge gap. I e-mailed the seller's agent and informed her of my interest in the building and the apartment. I explained my situation and informed the agent that should there be a significant price reconsideration to contact me. I also explained that I thought that a multitude of factors made a recipe for an excellent deal...the only ingredient missing is time. I wished her luck and asked to be in the loop. I think a crazy low bid would make the broker(who probably priced the apt.) look bad and result in a lost situation. This way they know I'm interested and when they punk out...I could be the man!
Any comments on my novice plan?

Couple of comments on posts:
(1) I have no idea what significance is ascribed to "notarizing" a letter. A notary seal does nothing more than ostensibly insure the signature is authentic. In this context, it makes no legal sense.
(2) falcogold1 is onto something in how to structure a bid. I believe being transparent in your thinking is a benefit when done effectively and most people miss this. Example: I found a stunning apt. just off lower Fifth Ave a year ago. Asking was $1.25. Place was an absolute disaster though. Floors had to be completely replaced--there was no saving them. Kitchen was falling apart. Bathroom was grotesque taste-specific blue and green affair. Closets were inadequate and had to be reconfigured. High-end reno would cost $250,000 I estimated (I'm pretty good at this--didn't make up the number). I made an offer of $1MM and explained my thinking and noted that this was more than fair for the then existing market especially in view of fact I'd have to pay to live somewhere else for 8 months give or take after closing. Buyer groaned and belly-ached and came down to $1.2MM. I explained this was essentially not responsive to the logic of my offer. The views were protected by landmark designations all around and layout was awesome in top-drawer building. My time horizon was long (15+ years) so I made a final offer of $1,050,000. In the end, I convinced the seller she'd never get anywhere near her asking price, but she didn't budge. Instead she decided to rent the place for 1-2 years as she relocated. Well, pretty bad decision it turns out on her part, huh? Because the coop's permission to rent will expire right in time for her to be stuck with the place in the middle of a recession/depression and my offer of $1,050,000 will seem like a dream price that she'll never see again for many years. Granted I didn't get the place (I'm actually quite glad now since it was a bit of a stretch), but the point was even though I came in 1/4 million lower than her asking price (20% off), I got her to talk and consider and negotiate. I was so convincing, she just stopped trying to sell because she "had to sell" for a certain price--typical stupid reasoning that'll screw her now. But had I just presented her with the offer and no reasoning or explanation, I don't think there would have even been a dialogue.

Point: If you are coming in low, offer your logic and thumbnail sketch of your excellent financials (one-page summary). It may at least get the seller to pause and not knee-jerk say no.

Kyle,

As for the notary, you are correct it has no legal bearing but thats not the point. The point is that if the OP thinks the broker isnt rolling up his offer, he wants to do something about it. Especially if he is going to low ball, the notarized letter says to the owner "I am not just some random jerk, as I took the time and effort to get this letter notarized". It does nothing more than show he is genuinely interested, AND it could also allow the seller to see his broker isnt doing their job.

"If you are coming in low, offer your logic and thumbnail sketch of your excellent financials (one-page summary). It may at least get the seller to pause and not knee-jerk say no."

I totally agree with that. I am suggesting he put all that info onto a notarized letter and mail it directly to the owner. The owner can then decide how to handle the broker, and (as you point out) might be willing to consider the offer.

UESBandit: "As for the notary, you are correct it has no legal bearing but thats not the point. The point is that if the OP thinks the broker isnt rolling up his offer, he wants to do something about it. Especially if he is going to low ball, the notarized letter says to the owner "I am not just some random jerk, as I took the time and effort to get this letter notarized". It does nothing more than show he is genuinely interested, AND it could also allow the seller to see his broker isnt doing their job."

Hahaha...tell me this is a joke. Please. You'd have to have an IQ of 17 to be impressed because the signature on a document is notarized.

Nobody said you are supposed to be "impressed". As I said before, it shows the owner that you actually put some effort into presenting your offer and that you are more serious then someone else with a low ball offer.

so..let's see. you ( or I) are sitting with our single largest asset, our apartment, wondering what to do...perhaps we have lost our job, or are for sure in fear of that happening and....voila...the letter arrives with the notarized signature! wow! Don't know about you, but I am frankly blown away. I am thrilled. I am calling friends and relatives.

Thank goodness..the notarized letter has arrived. We are saved from certain ruin!

This is a sure sign of ????? Heh?

Want to make an impression. Send money.

Let's not get too distracted with the notary thing. Let's accept there is a divergence of opinion here. I diverge strongly on the side of absurdity, FWIW. You want to mail a registered letter so you know it was delivered, fine. But contacted a seller directly is a little odd, too, if a broker is involved. Personally, I would not have liked it one bit when I was selling. I trusted my agent, hired her to act on my behalf, and had zero desire to interact personally in either direction with prospective buyers.

precisely...

just as we are all hiding behind screen names here, the last thing anyone in manhattan wants is a stranger trying to reach around their broker on a multi million dollar transaction.

i would agree that a little common sense is called for

Travelled across the river, heard Levon's band; next The Beacon in March. Larry Campbell was Greek-like with the blues....which sent my thoughts to this board.

Now, I'm home reading about the very question I wanted to ask-weird.

Situation: Co-op neighbor must sell asap, due to cancer; he needs the money for next stage/nursing home.
A friend wants to help out and buy, but fearful he may not have enough to meet the price.
Buyer was going to get a buyers-agent, but listening to Larry play the magic....I wondered:

Could the buyer ask the selling agent to give 3% commission back to ill owner...rather than give it to the buyer's agent? Is it legal?

This would give the seller more money to help with the nursing home costs; the thrilled buyer would then need the kindness of strangers-not having an agent-walk him through the closing process; and the seller's agent would have a quick sale. Otherwise, maybe no sale at all in this market...with a heartbreaking end.

Clarification:
Naturally, the buyer never spoke to/contracted with any agent.

Tusconnight: your proposal isn't altogether clear to me. Am I correct that you are saying the buyer hasn't enough money to make a high enough offer? If so, making a lower offer and the broker taking 3% is exactly the same as making a higher offer and two brokers splitting 6%. If the buyer pays the higher price and the seller's agent takes 3%, then THAT would give the seller more money.

Now, quite aside from this 3% and what difference this relatively small amount will make to everyone, if the buyer is so concerned about what is a very small amount of money in terms of the entire sale and could not afford the place for a few percentage points more, then I question if the buyer is even qualified to buy and would be approvd by the coop. If the margin makes such a difference, that suggests to me the buyer may well not be qualified. Not wanting to pay more than $x-3%x for a unit is one thing--not being ABLE to pay $x for the unit is quite another.

Last thing you want to happen to the seller is to go into contract, take the place off the market, and 4-6 weeks later have the board turn down the prospective buyer setting the whole process back to the beginning!

Buyer said he could do it, but is nervous about future and wants x amount of cash available. So, there is a certain "budget."
I think he was thinking...
Do without his broker and give the 3% (let's say) back to his sick friend instead.
He has an altruistic nature.

Does that make sense?

Is it legal?

What you are really saying then is you'll be whatever the agreed upon price is and you want the selling broker to take only 3% and not 6% commission even though you have no agent to co-broker the deal.

If the seller's agent agrees to cut his/her commission by half and take only 3% from the sale price, then it is fine I imagine. Don't see why negotiating terms of a sale would be illegal...did you have some specific concern in mind when you said that? Whatever the arrangement the broker has with her/his agency is for them to deal with. Just be completely above-board in the process. Not sure what the question is here.

Kylewest: Now, I understand...grateful. Your rep preceded your willingness to stay with me on this question. I just didn't know all the ethical issues surrounding the commission and seller/buyer agents. I'm wiser and and will always be "above-board."

"What you are really saying then is that whatever the agreed upon price is, you want the selling broker to take only 3% and not 6% commission despite fact that you have no agent to co-broker the deal."

Sorry for botching the first sentence in my last post. That said, I'm not sure what my "rep" is, but glad if I could help.

so..what happened to azil?

kylewest: I read somewhere on these threads that you, West81st, and HR seem to be the "grown ups." Then, after reading...and reading...and reading, it strikes me like you three are more like the "guys" in the locker room who are not running around snapping towels. Secure, dry wit, straight (referring to talk) and paternal-like in desire to lead the tribe.

Tuscon, that's funny. Made me laugh.

UESBandit says: "As for the notary, you are correct it has no legal bearing but thats not the point. The point is that if the OP thinks the broker isnt rolling up his offer, he wants to do something about it. Especially if he is going to low ball, the notarized letter says to the owner "I am not just some random jerk, as I took the time and effort to get this letter notarized". It does nothing more than show he is genuinely interested, AND it could also allow the seller to see his broker isnt doing their job."

Suggestions before going this pretty serious path of a notary:
1 - Have your mother send a notice of your interest
2 - Have you mother-in-law send a notice. That's pretty serious. (sorry gay people, except in certain states).
3 - Use bonded paper with a watermark and buy a commemorative stamp from the post office for the mailing
4 - Send a candygram with the letter

The last and final thing before going the notary route is to try to get Ed McMahon as a paid endorser to deliver your offer on a really big piece of paper. Ed is a lot cheaper for these things than in the past, but his impact is no less - just see the Cash 4 Gold commercial from last Sunday.

I would go with MC Hammer personally, unless of course you can get a two for one deal.

(Just trying to be a good sport!)

Yes, good sport. Just first admit that your suggestion was very stupid. Then we'll know we are ok between the two of us, and then you can make the joke.

I still stand by my statement as a way to differentiate him from someone else making a low ball offer. As I said its not meant to have legal ramifications, its simply a courtesy gesture to the apartment owner.

wow kylewest "How the seller and seller's agent address the question of commission is really none of your business or appropriate for you to weigh in on" i really appreciated that output