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Tuesday, October 13, 2015

Walking Money - The Cost of Walking Away from a Good Deal in Key West

Most of my customers are buyers. I identify with their wants, needs, frustrations, and frugality.  I know what it is like to dream, to plan, to save, and to eventually to buy the special place to call home. Some people have a lot of money and they sometimes treat price negation as a bit sport while others treat it as a genuine business matter that is to be dealt with. They leave the emotion out of the equation and usually get the deal done. They know what they want and they usually get it.

I think a lot of buyers who are pursuing the dream of buying a place in Key West are often vexed by the perceived high or inflated asking prices on houses here. They often get overwhelmed by the process and the seeming intransigence of sellers who won't budge on asking price - or  at lease budge enough. Some buyers draw a line in the sand. They take their stand and avow the seller can take it or leave it.

Unlike those dazzling dandies on BRAVO TV's Million Dollar Listing LA, I don't play games when I negotiate.   How can they trust me when I tell them something if I play word games with them?  They can't and they won't.  So I don't. I am straight with my buyers. I expect the same from them. When a principal tells me something, I conversely believe what he or she tells me. I have an ethical duty to be honest when dealing with my principal. Why should I expect anything less from him or her.

The line in sand becomes problematic when either side uses it as negotiating tool and really doesn't mean it. And the words line in the sand don't even need to be said to have the same affect.  Words do matter. Failure to respond to an offer or to make a counter-offer creates a sense of unease or worse on the part of a buyer who fears the seller really does not want to sell to that buyer. Likewise, when a buyer says "X dollars is my final price, he or she seemingly cuts off the ability to find a compromise. I run into this very often when buyers reach a point beyond which they are unwilling to go.

Sometimes the breaking point is a matter of a few thousand dollars. This becomes the cost of walking away from a potential purchase. Now I know every dollar in a deal matters. But some dollars are more meaningful than others. I can tell you what that cost is. It is predictable. It is the exact dollar amount amortized over thirty years. Let's say the buyer and seller reach the breaking point at $10,000.  Buyer won't spend a nickle more. Seller won't accept a dime less. Agents won't split the cost to save the deal. The deal is lost. The deal is lost over $46.31 per month (calculated at 3.75% amortized over 30 years).  A $25,000 disparity would cost $115.78 using the same amoritization.  The point is the fractional issue is often a matter or pride or ego rather a genuine breaking point. 

I know the price of houses houses goes up across most parts of America, but I doubt that it goes up as much as it does in Key West. We live on a little island out in the middle of the ocean. The island can't get any bigger and we can't expand the number of houses (or condo) beyond the number the State of Florida allows each year. We can't build skyscrapers and thank God we can't. So we are forced to sell the same houses over and over again. The best houses in the best locations sell for more money than inferior locations or inferior properties. And the word inferior does not mean  there is something wrong. It means the location or house is not as good as rather than there is something wrong.

To the buyer who wants to walk away from buying your dream house over $46.31 I would suggest that is about the cost of a pair of LEVI 501 jeans. How appropriate. You can have your walking jeans but not the house of your jeans.


Anonymous said...

When I saw your photo of the jeans I thought you were going to say "when buying a house its time to put your big boy pants on". Your article, and blog are great thank you for taking the time to update it.

Yes, buying a home is emotional but do NOT let that get in the way of making your dream come true walking over a few thousand makes little to no sense in the long run.

Anonymous said...

If agents let a deal walk over that $10,000 then shame on them. Talk about stepping over a dollar to pick up a dime! Now, this wouldn't apply if the seller set some unrealistic price or the buyer won't make a realistic offer. But if both the seller and buyer negotiate back and forth in good faith yet still can't reach common ground then split that $10,000 and get er' done. Why should the buyers and sellers be the only ones paying more or taking less?

Furthermore, most of the time, sellers list at a price suggested by their agent. Prices are getting crazy in Key West mostly due to a few big agent players in town. You know it's true.

For the most part, owners of expensive real estate are rather successful in life. You've said this yourself countless times. They didn't get the money to buy that house on that island in the middle of the ocean because they are flippant with money. So yes, they do care about that $10,000 because it's not about the $10,'s about making every dollar count. Maybe more of these broken deals over a few thousand bucks will make these particular realtors think twice about "buying a listing". As a realtor that actually knows his stuff, that little tactic must drive you to drink or eat your way right out of that new pair of Levi 501's.

I love your blog. I know for a fact that you're product knowledge in regards to the Key West market is far beyond that of most any other agent around. That being said, this comment wasn't meant for you. Delete this if you find the need, but it's simply how I feel.

Keep doing what you do. You're the best read of my day...everyday.

Gary Thomas said...

I don't drink. But in the past few months I have had way too many chocolate eclairs late at night. This is my vice. This is what has comforted me when dealing with the stress of my job. I am not kidding one bit. And it is showing. My 501s don't fit anymore. I have to dig out the big boy pair I saved just in case I went nuts.

I have seen that a large number (as in majority) of people who buy a second home in Key West, tend to sell it within 3 years or so after purchase. Some buy up and go into a large place. Whether the resale occurs in 3 years or 5 years is not the point, the point is $46.31 X 36 months equals $1667.16. Unless a buyer bought a problem property, the chances are with the value of the property escalating in value in tiple digits.



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Gary Thomas in a Nutshell

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Key West, Florida, United States
I first read about Key West in a magazine called "After Dark" sometime in the mid 1970's. But it wasn't until March 1984 that I made my first visit to the island that would become my home. I had two weeks for a vacation and reserved a room at Colours Guesthouse (now Marrero's Guest House) for one week. I thought that if I didn't like Key West, I could always go back to Miami or Ft. Lauderdale for the rest of my trip. But after a couple of days in Key West, that was no longer a consideration. But when I wanted to extend my stay for the extra week I found there was no room at the inn. The guesthouse owner did find me a room at LaTeDa, the infamous guesthouse/restaurant. That's a story I'll write another day. But those two weeks in Key West gave me the realization that I had found Paradise. Key West has been my home since 1993 and my only regret is that it took me so long to get here. I am a full time Realtor at Preferred Properties CRI. Let me help you find your new home or business in Paradise. Living in Paradise is not a slogan, it's a way of life.