The Los Angeles couple recently made an offer for a townhouse. The townhouse had some good points and some not-so-great-but-livable things.
It was in the neighborhood they wanted, but at 1,500 square feet was a bit smaller than the space they’d hoped to get. It was listed for $300,000, which was about $30,000 more than they wanted to spend, though certainly affordable by a mortgage lender’s standards.
But they’d become tired of shopping around. Homes in Los Angeles, like in most of the country, have been selling in minutes or hours, not days or weeks. They’ve been selling for list or above-list price and typically there are multiple offers.
In fact, things in Los Angeles, Manhattan, and parts of Chicago and San Francisco have become so crazy that real estate agents have begun to lose track of deals, sellers are actually accepting more than one offer, buyers are suing each other to get homes, and are sometimes “flipping” property before they even own it.
And if that weren’t enough, sellers are now refusing to allow basic contingencies, including a contingency for financing, home inspections and even attorney approval of the contract. If a professional home inspector does come through and the home has a serious flaw, buyers have no recourse to back out of the deal.
The Los Angeles buyers have spent the past several weeks shopping like crazy for a home. When they stumbled upon this townhouse, they felt they had finally found something they could live with. The recent insane escalation in prices (some neighborhoods have gone up 45 percent in value in the past year) has made it difficult and frustrating to shop for a home. This couple has already lost several properties because they didn’t bid on the spot or make a high enough offer.
This townhouse seemed perfect. Their agent, sensing yet another set of buyers about to throw in the towel, suggested they use a tried and true method for getting their offer accepted. Make a full price offer without any contingencies, and write a letter telling the sellers how much they want to buy the townhouse, and what good neighbors they’ll be.
The wife, a television writer, wrote a beautiful letter. So beautiful, in fact, that her agent told her “This is so great I’m going to have all my sellers use it.” “No you’re not,” said the wife, insulted that the agent would use this personal a letter for all her home buyers.
The agent put the letter with the full-price, no contingency offer and the promise that the seller could choose the closing date. The buyers waited. And waited. At the end of the day, the sellers countered their offer — $10,000 above list price.
“;I think they went higher because the letter said we were so anxious to buy their property,” said the wife. “I didn’t think it was supposed to go this way.”
To comfort them, their broker said, “Oh well, that’s the real estate market. Now what do you want to do?”
The couple mulled it over and decided to cancel the deal. “It’s just too much money for what it is,” said the wife.
Did the couple get bad advice? Not really. A nice letter of introduction often helps seal the deal. This just happens to be an extremely unusual market. In certain areas, and Los Angeles is one of them, sellers are dictating completely unfair terms. The rise in value is so extreme on a year to year basis, that many experts are concerned the slightest piece of bad news will send the market into a tail spin.
Which could leave homeowners where they were a decade ago, when home prices in California and in the northeast collapsed under their own weight.
Meanwhile, our Los Angeles home buyers have decided to put off home buying for awhile. They’ll continue to rent their $900 month apartment for a few more months and start enjoying their weekends.