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Looking for a bargain-priced home? If you don’t Flinch!, the seller will

This is my column this week from the Arizona Republic (permanent link):

 
Looking for a bargain-priced home? If you don’t Flinch!, the seller will

Let’s talk a little bit about buying strategies. Last week’s rate adjustments by the Federal Reserve Bank may have scared up a few buyers. I’m taking a lot of calls from Canada, and investors seem to be trying to time the bottom of the market.

Here’s a simple idea: If you were to buy a newer three bedroom, two bath stucco-and-tile suburban tract home for $160,000, putting 20% down, it would be cash-flow positive at $850 a month rent. That includes everything, mortgage, HOA, taxes, maintenance, vacancy — everything. The positive cash-flow would net out to about $5 a month after taxes, but the point is that the Phoenix real estate market is back to the point where a rental home is self-amortizing. If home values go up in the future, so much the better, but the home will pay for itself either way.

Here’s a better idea, one that has been making me crazy for more than a year. The name of this game is Flinch!

Normally, when buyers are looking for a home, they’re looking for that one unrepeatable masterpiece, the only home they could even consider buying.

What if, instead of looking for one ideal home, they resolved to look for three — or five — that might fill the bill? Now they’ve got bargaining power.

The game works like this: Make multiple low-ball offers on all the houses that might work for you, with all of those offers being subject to your final approval. Make it plain to all of your sellers that the first one to salute goes under contract, and the others go home empty handed.

This is exactly what sellers were doing to buyers two years ago, with multiple counter offers. By now there are at least eleven homes for sale for every qualified buyer. It’s time buyers exercised their incredible negotiating power.

What happens if it doesn’t work? Try again in a different neighborhood. Or try same neighborhood six weeks from now. Here’s the trick to winning at Flinch!: If you don’t Flinch!, sooner or later someone else will.

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  • 12 comments

    12 Comments so far

    1. [...] The Game of Flinch – I Like It. [...]

    2. Chris September 28th, 2007 11:20 am

      Thats what I am going to start doing. My good friend is looking for a deal on a multi family. I found three that he likes. All three have been on the market for 6 months. So we are going to figure out at what price he breaks even, offer that and see what they do. I will let them know we are offering on three properties and whoever comes down to a reasonable price first wins. One’s $70k over priced, one is only $10k, and another is about $25k.

    3. Greg Swann September 28th, 2007 11:38 am

      Here is a fuller discussion of the strategy, along with some prototype contract language. Good luck! Let us know how it turns out,

    4. Brian Brady September 28th, 2007 1:47 pm

      …and sellers shouldn’t bitch about it. They played the same game 3 years ago.

      Great idea.

    5. Chad Huck September 28th, 2007 7:37 pm

      This seems to be a great idea, but what about the whole “It’s a contract if the seller signs the offer”? Now when one offer is accepted, and the others havent responded yet, then thats fine, but if two offers get accepted at the same time, what would you do?

    6. Greg Swann September 28th, 2007 8:44 pm

      > if two offers get accepted at the same time, what would you do?

      From the post above: “Make multiple low-ball offers on all the houses that might work for you, with all of those offers being subject to your final approval.”

      Here’s a way of doing that:

      This offer is tendered as part of a Multiple Purchase Offer. The buyers named above are making simultaneous offers on one or more additional properties. This offer and all of the other offers tendered are conditioned upon and subject to the final approval of the buyers, which will be delivered in writing within three days of sellers’ acceptance of this Purchase Offer, unless deadlines are extended by written agreement of the affected parties. Immediately upon transmittal of the buyers’ final approval of one of the sellers’ acceptance of the offer tendered to those sellers, all other offers in this Multiple Purchase Offer will be unilaterally withdrawn by the buyers.

      When any seller accepts an offer, they are accepting it subject to the buyer’s final acceptance, just like a multiple counter offer.

    7. Charleston Real Estate Blog September 29th, 2007 6:20 am

      Don’t flinch, a buyer strategy for today’s real estate market…

      Greg Swann at the BloodhoundBlog introduces flinch, a new buyer strategy (game) that takes the strategy…

    8. Chad Huck September 29th, 2007 6:57 am

      Thanks for the reply Greg. It makes sense now. I will pass this along to the agents at my company.

    9. Elizabeth Weintraub September 29th, 2007 9:42 am

      This is an excellent idea, Greg, but it would go over in my office like a lead balloon. That’s because our legal team would get their fingers into it and take ten months to draft suitable and approved language for the contracts, and by that time, the buyer’s market could be history.

      Now, if NAR came out with an approved form, we’d be in business!

    10. Eddie D September 29th, 2007 11:43 am

      Or wait until 3 of the 5 go into foreclosure and purchase for even less directly from the lender.

    11. [...] It’s a buyer’s market in much of the country and today, home buyers have something they haven’t had in years, namely; negotiating leverage. According to Greg Swann of Bloodhound Realty (in Phoenix), savvy buyers should “make multiple low-ball offers on all the houses that might work for you, with all of those offers being subject to your final approval.” Some sellers won’t appreciate that that advice is being dispensed, but others will welcome your offer and as Greg says; “If you don’t flinch, the seller will.” [...]

    12. [...] Getting back to the fundamentals of eating right and exercising brought me back to the land of the fit.  Starting by eliminating the delicious foods of Taco Bell, McDonalds, and other fast food crutches, I was able to initially lose weight quickly.  Next, I wanted to arm myself with more information about what I was eating.  Healthy items like granola and nuts pack quite a calorie punch, so sadly they had to go too.  Even salads can be deceptive (especially when you add bacon bits, cheese, and creamy ranch dressing).  By adding fun outside activities with my wife Natalie and Angel (our five pound Yorkshire Terrier), I was able to get down to the mid 230’s.Similarly, buyers and sellers must now get back to the fundamentals of real estate.  Lenders need to get back to serious underwriting by looking at customers ability to pay based on their cash income and not their property’s appreciation.  Buyers need to understand that real estate is a long term investment, as such the simple buy low sell high approach works well.  Current homeowners need to treat their home like an investment.  When considering taking money out of their home, buyers should be looking to either put that money into a better investment vehicle (rental property, stocks, bonds, etc.) or using that money to better themselves and their family (education, job training, etc.).  Focus on putting money into assets that appreciate, again, a very simple concept that many homeowners got away from.   [...]