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How to Low-BallFair and Square

Buying a property well below comparable prices is possible for buyers with patience and fortitude

July 28, 1996|ELLEN JAMES MARTIN | SPECIAL TO THE TIMES; Ellen James Martin is a syndicated real estate columnist

Molly and Daniel Blair can hardly believe their good fortune.

First they discovered the Yorba Linda house of their dreams--a half-acre Garden of Eden on a private road, complete with a small orchard of fruit trees and a pool. Then they bought the place at $75,000 off market value.

The couple--he's a Hughes Aircraft systems engineer and she's a homemaker--proved the principle that it's sometimes possible to win at "low-balling," the realty industry's term for trying to buy a property well below comparable prices for like homes.

Does a successful low-ball deal mean breaking rules of fairness and ethics? Does it mean taking improper advantage of an innocent seller? Not in many instances, real estate experts insist.

In fact, the owner of the Blairs' home was a veteran real estate agent. The couple credits their good deal to their agent, John Rygiol, who owns an independent brokerage based in Seal Beach. The couple--both in their mid 30s--found Rygiol's name on the World Wide Web.

The Blairs made it clear that $250,000 was their limit. But the couple's initial search for homes priced between $225,000 and $275,000 proved discouraging. They had visited at least 35 properties--and driven by another 65--when Rygiol decided to try a different tactic.

He sent out 50 faxes to realty firms in the Yorba Linda area, announcing that the Blairs had been pre-approved to finance a home and that they could close escrow within a matter of days. He also defined what they wanted and made their $250,000 price limit clear.

The message reached a retiring realty agent who had recently cut the list price of his home from $375,000 to $325,000. He immediately phoned Rygiol to say he would entertain the Blairs' bid. That same evening--after the Blairs toured his five-bedroom house--the salesman agreed to the Blairs' $250,000 offer.

"We got a super, super deal," Molly Blair said.

Unlike some opportunistic buyers and their agents--who search out the names of desperate homeowners, calling on bankruptcy attorneys, divorce lawyers or even funeral parlors--the Blair deal was an agreement between two consenting parties.

"It's wrong to kick people when they're down. But a deal is fair and square if it involves a seller who is willing and aware," said Douglas Bregman, a real estate lawyer and co-author of the book "The Common-Sense Guide to Successful Real Estate Negotiations" published by HarperCollins.

Ultimately, the "right price" is what's settled upon between buyer and seller. In some instances, you can pay less than market value for a property and still do the sellers a favor--especially if they're facing an immediate out-of-town move or a financial crisis, said Marty Rodriguez, one of the nation's top-selling agents, who recently opened a Century 21 office bearing her name in Glendora.

Do you have the patience and fortitude to seek out a below-market property? Then these pointers could help:

* Act quickly and aggressively when a potential bargain appears.

A boxing trainer working with Rodriguez got a terrific deal on a 1,500-square-foot house in West Covina, partly because he put in his bid the very day he spotted the property. The three-bedroom stucco home, with a two-car garage, was listed for $170,000 and was well worth the price, Rodriguez said.

But after discovering that the tenants living in the property had made it tough for the agent to show the home--and that they were on the verge of vacating--Rodriguez sensed that the home's investor-owner would be willing to bargain.

When the deal was done, the trainer got the property for $154,000--a cool $16,000 discount off the list price.

Many prospective low-ballers fail to persevere when their first bid is rejected, Rodriguez said. "You've got to beat the dead horse--give that deal CPR, she stressed.

* Offer a "cash contract" as a low-balling strategy.

One reason the owner of the West Covina home accepted the boxing trainer's low-ball offer was because he offered a "cash contract."

The term is actually a misnomer because it doesn't mean you must have the cash in hand to buy the house. But it does obligate the buyer to go through with the purchase even if the financing plans fall through--which makes it very appealing to a seller.

Actually, as Rodriguez noted, the boxing trainer knew he would be financing the home through a private mortgage lender. But he was so confident he would get the mortgage that he was willing to offer a "cash contract."

* Seek mortgage pre-approval to make yourself a more attractive buyer.

Smart low-ball buyers can make themselves more appealing to a seller by gaining full pre-approval for a mortgage from a reputable lender. Pre-approval means the buyer has the credit rating and income to close quickly, said Frank Dakides, an agent for the Coldwell Banker Real Estate office in Coto de Caza.

"The faster the escrow, the more confident the seller feels about the buyer," he said.

* Try to overlook a home's cosmetic problems.

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