"How to Play the Real Estate Game" (Westside Today Apr. 2005)

Murray Weisberg is an old friend to Westside Today. He used to write a highly popular real estate column for this publication, and has also taught the real estate biz at the college level. These days he's an associate manager at Sotheby's International Realty in Brentwood and president of the Beverly Hills/Greater Los Angeles Association of Realtors.

It's hard to find someone as plugged into the market as Murray is, so if you're a buyer or a seller on the Westside, now's the time to perk up your ears and start taking notes.

Waive the Contingencies

Even if you have big bucks, Murray says you're likely to face intense competition on the Westside as a buyer, because multiple offers (several buyers) often fuel a bidding war.

Murray suggests, “If you're in a multiple offer, you will find that the only way to get a property is to waive (remove) one or more contingencies (conditions). In the past, buyers had more room to negotiate, but now two or more buyers are competing to get one property.”

“Because rates have remained low, the market has been strong. Right now, you can buy with a 5, 5.25, and 6 percent interest rate. We're going to continue to appreciate; in two years, a million dollars will buy a starter home on the Westside.”

He says that to compete as a buyer in this hot market you may have to waive two major contingencies: a loan contingency and an appraisal contingency.

The Loan Contingency

A loan contingency is when your purchase of someone's property is based upon the condition (contingency) that you'll be approved by a lender for a loan. This is a condition you may have to give up.

“You have to be pre-approved by a lender,” says Murray. “In a multiple-offer situation, the first contingency (the seller) is going to eliminate is your loan contingency. When you're asked to waive the contingency; you have to be reasonably certain that you'll get your loan. Once (the contingency) is removed, by the time escrow is ready to close, you must come up with the funds with or without a loan.”

The Appraisal Contingency

This is when your purchase of a home is based upon the condition that your lender will appraise it at the agreed-upon purchase price.

Murray explains: “If you want to buy a million dollar house, and you're getting an 80 percent loan, that's $800,000. If (the lender) tells you, ‘Yes you're approved for an 80 percent loan, but we only appraise this house for $900,000, so we'll only be giving you $720,000.' Then you're 80 thousand short.”

“Without an appraisal contingency, the buyer would be obligated to put up the difference in cash or (if they qualify) possibly get a 90 percent loan, which would probably be at a higher rate.”

Don't price the property TOO high. Let the buyers BID UP the price

If you're selling a home, a big mistake can be listening to your friends when pricing it for the market. These well-meaning armchair quarterbacks may push you into setting an unrealistically high price, but Murray says it's best not to. “Keep in mind that your friends are not the ones who will be writing the check for the property.”

“In most cases, the properties that are priced slightly below the top of the market will sell for more and sell faster than the ones that come on the market at or over the top of the range.”

The logic behind setting it a little low is that the buyers will bid up the purchase price. There have been many instances in which the final selling price ended up far above the asking price. This is the result of multiple offers.

Murray recalls a condo in Santa Monica that received multiple offers and skyrocketed. “It was in the back of the building with no direct view of the surf and looked into the alley from the living room. It was a 500-plus-square-foot condo that came out for 399K. Twenty-eight offers later, it closed for 522K.”

Never rely solely on relatives or friends

Back on the buying end, Murray has some tips that can save buyers a lot of frustration if they are financing. “The borrower should be looking for the best package (rate and terms) that works for them. Sometimes even the best-intentioned relatives/friends in the business may not have the best package at their disposal. Do some comparison shopping. Ask questions; then make your decision.”

“Bankers will not like my tips,” Murray laughs, “Check with a mortgage broker. Every bank, no matter how good or how wonderful they are, can only offer what they have. A good mortgage broker will know what everybody has to offer.”