Saga Of The InstantAgentless Buyers

Research!

"Yes, we are twins! Let us tell you a tale about a home buying couple who wanted to relocate to Oahu from the mainland a few years ago. They had a very different style than the one that works in Hawaii, and their story is eternally instructive!"

Answers!

The Buyer. Mr. & Mrs. Lesia lived in Oregon where they both worked for Intel. He and Mrs. Lesia wished to sell their home and move to Hawaii, set up a software business, and raise their 2 small children in a different climate at a less brisk pace. Mr. and Mrs. Lesia had about $38,000 for a 10% down payment and closing costs.

The Seller. Mr. Fishborne lived in a modest windward Oahu 3 bedroom 2 bath single family dwelling. He decided to sell as a For Sale By Owner and retire in California. He felt an agent could not get what he needed, especially if he had to pay broker's fees to his and a buyer's agent. He based his asking price on what he could have obtained a few years ago, and added a small discount in consideration of Oahu's current "buyer's market." He felt heavy advertising and open houses would make up for not being in the MLS, and he put an ad on the Internet. He ignored actual market data and looked for a buyer who would buy on impulse. When contacted, he informed interested parties there would be no agents, and that the savings was reflected in his asking price. Weeks of open houses and ads did not result in any firm offers, although he did get a verbal offer of $250,000 from a couple down the street. The property was known as overpriced by local agents. Mr. Fishborne pondered if he would have to offer the usual seller-paid 3% "courtesy" or cooperating broker fee to a buyer's agent to induce showings.

The Search. In early Spring, Mr. Lesia searched the Internet and

found what seemed to be a perfect house in Hawaii offered by a Mr. Fishborne at a "discounted price of only $320,000. He and his wife had been thinking about taking a buying trip to Hawaii to be ready by Summer. They called the seller, liked what they heard, and he faxed them photographs. They agreed to not have an agent if, upon personal inspection, it was the right house for them. They took a flight to Hawaii that week, saw a few properties at open houses, and contacted Mr. Fishborne. They fell in love with the house and were quick to make the purchase.

The Deal. Mr. Fishborne told the Lesias that a house down the street had just sold for "more" than he was asking, and that his land was larger and his house in better condition. Mr. Fishborne was actually referring to the asking price of that house. He did not know when the house sold or on what terms, or that the house's "sold" price was actually $280,000. Mr. Fishborne wrote up a full price offer for Mr. and Mrs. Lesia to sign, with their condition he would leave the sprinkler system intact and other fixed items intact. As previously stipulated, the buyers agreed there would be no agents since it was the right house for them, plus the seller had turned out to be a nice man. They proceeded with neither representation nor market knowledge. The seller found an escrow company, and the buyers contacted their bank back home. They were to put 10% down (which the seller suggested would be a good earnest money deposit), and deposit $500 now with the lender for a credit report and appraisal. They had good credit and appeared to have sufficient income to make the mortgage payments. Mr. Fishborne told Mr. and Mrs. Lesia they could avoid the cost of a professional home inspection, since he had "maintained the home so well." He did not mention he had tented the house two years ago for termites, but did remember to not include a termite report in the contract. Mr. and Mrs. Lesia were sure they were getting a good deal, but were not aware the home across the street had gone on the market the day before. Mr. Fishborne told them of the "many people interested in buying my home," and it was natural Mr. and Mrs. Lesia did not want the seller to change his mind. They "wrapped it up" quickly on the seller's price and terms. They would close early and Mr. Fishborne would remain rent-free until the summer.

The Result. Mr. and Mrs. Lesia called home to tell their children they would be changing schools. They returned to the mainland to restructure their affairs and plan the summer move. The seller finalized plans to buy a California townhouse, and began restructuring his affairs.

The Closing. There was no closing. The lender required a survey, but it had not been included as part of the contract. Subject to getting a survey, the lender stated it would give a 90% loan on the property based on the appraisal value. The lender did

not exhibit prudence by requiring a termite report. The lender actually got in the way of the normal closing steps, and notified the buyer that closing might be delayed due to its unfamiliarity with housing in Hawaii. Then the Bombshell: Thirty days into the contract, the appraisal came in. At $280,000! The buyers "just" needed to come up with the difference between the amount the lender would loan ($252,000) and the purchase price ($320,000)--a total of $68,000 plus the closing costs. Mr. and Mrs. Lesia went into shock -- it was known from the beginning the Lesias had only $38,000. The seller became angry, and the property fell out of escrow.

The Aftermath. Mr. and Mrs. Lesia lost momentum, had an expensive lesson, and did not relocate to Hawaii that summer. They still live in Oregon, but have vowed to try again, this time with their own agent. The seller, Mr. Fishborne, cancelled his home purchase in California. As a For Sale By Owner, he put the property back on the market at a reduced price of $310,000. After two years, he continues to wait for another written offer.

Analysis. (1) By not having an agent in the Multiple Listing Service, Mr. and Mrs. Lesia knew of only 2% of worthy properties available in their price range. (2) A different neighborhood would have been more suitable for their kids. (3) They were not "represented" by an agent legally required to work in their interest. (4) They were neither pre-qualified nor pre-approved. (5) They did not know the right price to pay. (6) They did not understand local customs of who pays what, or what a typical sale includes. (7) They did not anticipate and plan for problems with the appraisal. (8) They did not anticipate and plan for problems such as saga4.jpg (2287 bytes) possible encroachments, termite damage, etc. (9) They did not make the contract contingent on anything except the loan. (10) They acted on advice of someone not having their best interest in mind. (11) They put the entire down payment in escrow as a deposit instead of a modest sum of earnest money. (12) They made concessions without getting benefits in return. (13) They did not "shop." (14) They acted on impulse. (15) They did not assess alternatives before acting. (16) They did not start with an offer less than asking price. (17) They did not choose a local lender. (18) They put the seller's needs before their own without realizing it. (19) It took them 6 months to get their deposit back. (20) They did not have a home inspection, termite report, and other tests. (21) They were not aware of current real estate activity in the immediate neighborhood.


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