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Thursday, July 28, 2016

Wrestling with Buyers in Key West - Part Deux

Two years ago I wrote a blog post titled "Wrestling with Buyers" where I related some frustrations I have had in selling real estate. I wrote  "I sell houses in Key West. I get most of my buyers and an occasional seller from what I write in this blog. People read what I write and ... probably judge me. Some buyers contact me to look at houses. Some buy houses.  Some do not. Some buyers ... are able to look at several properties and make a decision to buy and then negotiate a deal that is acceptable to them. Others struggle. Sometimes I get drawn into that struggle which can seem like I am wrestling with my buyers." Two years later the struggle continues. My purpose today is to share more examples of wrestling with buyers.

I meet most of my buyers for the first time when I pick them up at their hotel. Our day starts when they enter the car and introduce ourselves to each other. We share some small talk on the way to our first showing. After we have seen two or three houses and their resistance to me as a salesman starts to diminish, they start to ask a lot of questions about issues Key West - how long I have lived here, what do I do when a hurricane comes to Key West, what do I think of Cuba opening up. Then they ask about the cost of owning a place here - how much does insurance cost, what does it cost to renovate a house, are there good contractors here, why is a seller trying to sell his house - all questions that could have a myriad of answers. I'm not so sure that these buyers really care about the answers as much as they may be sizing me up. Or to put it differently, can they trust me.

Many of my buyers come to Key West with notebooks filled with printed copies of MLS listings accompanied by fact sheets they prepared. The reason these people can afford to spend $500,000 or more for a second home is a testament to how successful they have been at life. Super-achievers don't give money away. They are methodical and need to verify the worth of any property. I think that some buyers rely too much on data as a justification not to buy a property because the metrics don't work. Let me share a couple of examples.

TOO SMART FOR THEIR OWN GOOD  Back in 2010 and 2011 I worked with a couple who wanted to purchase a B&B. The gent had an MBA from the Wharton School of Finance. He shared that fact frequently - not so much to remind me how smart he was, but by creating voluminous business plans projecting how the business would fare five to ten years down the line. He used his data to prove that none of the properties was worth the asking price. Over 18 months the couple made offers on several properties, but were not able to purchase any. I looked back at the MLS to compare their offers to actual sales prices. All of the guest houses sold at higher prices than the offers they made expect one. And it did not sell. They refused to negotiate beyond what his analysis "proved" the value to be on each property. They decided to buy a small place in northern Florida where the weather is colder, the prices are lower, and the income is not as great. They settled for less.

A lot of potential buyers do the same thing. And so do a lot of locals who talk to strangers and give them an earful of opinions. I had a lady Realtor from up north who sought the counsel of her hairdresser to tell her what he thought about properties I showed to her. Not making this up, folks. She bought and sold three properties from me, but she listened to him. 

CAN'T KEEP A SECRET  Another buyer who bought a big house from me several years ago recently retired from a really big Wall Street firm. He decided he wanted to move here and live here full time He was from New Jersey and approached every investment with suspicion. We looked at many possible properties and found a few that interested him. Nothing ever worked out. That was until a specific property became available. He made a substantial cash offer on this property. When I learned there were several offers on the table, I told him his offer was too low. I also told him to never talk to anyone in town about his offer. He couldn't help himself. He told me he met a guy in a bar and the two started to discuss real estate. I wasn't there and don't know all that was said except that the guy he was talking to bought the business my guy made the offer on. Men should not cheat on their wives nor their Realtors. They shouldn't, but they do. 

BUDGET SHOPPERS  Some buyers set a budget (price limit) on how much money they are willing to spend. For some reason $500,000 is now the typical budget of most of the people who contact me about buying a home. I realize that you can buy a pretty fine house up north in America for $500,000 or less.  Many say they are willing to so some work so that they can build the house they want. They probably have watched too many shows on HGTV which promote that kind of thinking. These buyers have no idea how difficult it is to build or remodel here. They would save money by spending a little more up front or by looking in other less expensive parts of town or a few miles outside of Key West. 

CASH IS KING  I love it when I am working with a cash buyer because cash can make a sale go much more smoothly. When there are multiple offers on a property, the best offer may not be the highest priced.  A cash offer with few to zero contingencies may be preferred over a higher priced offer subject to mortgage loan approval, inspections, and so forth. Sellers expect buyers to come back after inspection with a list of issues they want fixed or given credit to accept. This often creates dynamic tension between the parties and sometimes between the agents.

NICKELS AND DIMES  A few months ago an agent in my office was a couple of days away from the closing of a pretty expensive home. Then the cash buyer announced he wanted the house delivered completely furnished. This did not go over well with the seller who had things all boxed up and ready to go. Threats to walk away and sue and so forth were made. The seller finally said okay you can have my sofas, chairs, beds, lamps, artwork, dishes, bedding, etc. But it was too late. The deal failed. 
One of my favorite stories involved a couple who owned a storybook house on a quaint Key West lane. The house was tiny but it had the requisite charm, parking, and pool. A completely acceptable cash offer was made with the condition the seller convey one piece of furniture that fit ever-so-perfect in that little house. The seller said no because of one piece of furniture that some aunt gave or whatever. That stopped that deal. It took a year later to find a new buyer who ended up paying $100,000 less.

WHATEVER WILL BE, WILL BE  Some buyers approach a negotiation as if they are Doris Day singing Que Sera, Sera - whatever will be, will be. I think that if you want to buy a property, you should actually try to buy it. Approach a negotiation to win it, not to set up conditions that make success unattainable. Buyers who watch the market have a rational basis to determine the worth of a particular property. If it is over-priced they may not want to even look at it because they know the seller is irrational and they don't want to waste time and money on something they cannot buy. (Buyer are often correct in these situations.)  When a price is reduced, word spreads across the internet and a lot of buyers pop out looking for bargains. I have numerous instances in situations like this when buyers make offers but then refuse to get into a "bidding war," Buyers see the the other potential buyers as bullies. They retreat even before a punch is made. You must engage to win. Retreat is not an option. The worst thing that can happen is that you don't get the property which is exactly the same thing that will happen if you walk away.

1030 Fleming St 2009
1030 Fleming St 2016
1030 Fleming Street was listed as a Bank Owned Property in late 2009 for $600,000. It appeared in my blog. The former owners made a lot of illegal renovations without obtaining building permits and caused substantial structural damage. But it had a killer location and a lot of street appeal. The damage could be fixed. The location was about as good as it gets here. I had a buyer who was a general contractor from a northern state. He measured the house room by room and knew how much he would spend to fix. My guy offered $500,000 cash. Several other offers were made. We were asked to make our best offer. His wife thought this property was too big a risk. They refused to offer anything more. They took the Que Sera, Sera approach. Another buyer got it for $530,000. That buyer hired a good general contractor, fixed the problems, and ended up with a really nice home in a AAA+ location. It is probably worth near $2 million today. You will find it difficult to find a one bedroom condo in Old Town for $530,000 in 2016. My buyer lost this house for $134.71 per month based on a 3.5% 30 year mortgage. That's the cost of a nice dinner in Key West for two people.

RISK AVERSE BUYERS  Risk averse buyers are often very analytical personalities who favor a known return which can be relied upon for years to come versus a potentially greater reward with a potential for loss. Some of these buyers approach buying a home as an investment.  I had one buyer who made offers on several properties over the years. He had a bunch of cash with which to buy the perfect dream home - a place on a good street with a pool and parking. He still has the cash that produces a 5% tax free return each year. The Key West market has grown way beyond his willingness to buy. He gave up his dream so that his heirs can enjoy his cash in their future. 

LOCATION VALUE Sixteen years ago a friend of mine who was a real estate developer from Denver came to Key West looking to find a place to retire. He considered houses in Old Town and Casa Marina areas. I told him not to buy a couple of different locations. He pointedly told me he thought I overstepped my job as a Realtor.  He said buyers can figure out for themselves what works for them. But I saved him from buying a vacant lot which had been on the market for years and that had not sold because of its location. I convinced him to buy an existing property just east of the Casa Marina. He tore down the original house on a beautifully landscaped lot. He built a new house. He ended up getting divorced. He moved away a million dollars richer. Someone else bought the lot he liked. They build a huge spec house there that took a long time to sell. The person that bought put it back on the market soon afterward. It has sat vacant and for sale for years. We all know this house and please don't comment on it. Location does matter. Bad locations matter a lot.

A lot of potential buyers refuse to look at houses located near the Key West cemetery.  Some of the best deals in town are for houses that are in this area. I don't know what they expect to see.
Other buyers refuse to consider houses on certain streets, or to look at homes near a church or school, or to even consider a house in a neighborhood or area such as the Key West Golf Club. Some buyers say they don't play golf implying that playing golf is either a requisite for buying there. Others say the ten minute drive to Old Town is too long - that they would prefer to be located closer to Duval. But most do not have the extra hundreds of thousand dollars to pay for that location.

If you are looking to purchase a place in Key West please call me, Gary Thomas, 305-766-2642 or send me an email at I am a buyers agent and a full time Realtor at Preferred Properties Key West. I have been representing buyers and sellers here since 1996. I have the knowledge and experience to help you find your place in Paradise.

1 comment:

Anonymous said...

I'm glad I'm not the only realtor to struggle with all of this. Cheers from MN.


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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.