You might be wondering why I’m blogging about Johnny Damon and the New York Yankees. Hopefully you’re a sports fan because I can, and will, relate any sports topic to a real estate matter. As a New York Mets fan I couldn’t care less who plays left field for the Yankees, however, as a real estate agent I must draw attention to the parallels of this failed free agency transaction to today’s real estate market. For those of you who aren’t up to speed with Major League Baseball, let me fill you in. Johnny Damon’s four-year contract just came to an end with the Yankees. He was a perfect fit, as he NEEDS to play for the Yankees AND the Yankees NEED Johnny Damon. The Yankees offered Damon a two-year contract at $7 million per year. Damon’s agent (the infamous Scott Boras) refused and the Yankees signed Randy Winn. This was an atrocious job by Scott Boras. On an interview with WFAN radio Damon explained his situation by stating nobody would want to take a 40% pay cut after coming off the year he had. His previous contract was signed in 2006 for $12 million per year. Let me explain how this deal hits to close to home as a real estate agent in today’s market….
1. There are several reasons to hire an agent. Besides the obvious, one of them includes keeping emotions out of the deal. This should be very simple for most agents. However, this is never the case with Boras. Why is that? Ego! If you have an ego it’s extremely difficult to be a good agent in any field of business. When you put the facts aside and are only concerned about who’s right and wrong and who’s going to win or lose… BOTH SIDES LOSE! There have been numerous deals where my clients got so angry they were ready to walk away simply out of spite. That is an unacceptable reason for a deal to fail. It is the agent’s responsibility to keep the clients focused on the big picture knowing that once the deal closes the relationship with the other party concludes. Nothing is worse than working with a party that has an ego.
2. Understanding the market. Johnny Damon’s last contract was 2006, which was during a stronger economic period. Much like sellers that have to realize they aren’t getting what they did four years ago, so does Damon. It’s almost a slap in the face to complain about a pay cut when you’re still earning $7 million. Hey Johnny, how about the millions of people that are currently taking a 100% pay cut! This is very similar to sellers we are faced with today. They are upset with the fact that now they will only make $200,000 profit when they sell their house instead of the $350,000 they thought they should make. It’s easy for me to say but they should thank God that they are making something and not facing foreclosure or in a short sale situation like many other Americans. Not to beat a dead horse but Damon also has to understand that at his age his value is depreciating… not appreciating. This point leads me to my final point….
3. Understanding the situation. The bottom line is this… Damon is only worth $7 million dollars per year. How do we know this? Because it’s the only offer he got! This is the same realization sellers are faced with. Sellers always think they are being low-balled until finally they realize they’re not getting any other offers. Your house is worth what buyers say it’s worth and this has nothing to do with how much of a profit you would like to clear. The solution to any negotiation is very simple, however, if you involve ego or greed it’s virtually impossible. In this case, Damon wants to be a Yankee and at the same time make as much money as possible. It’s blatantly obvious that he cannot play left field in any other ballpark and he fits the Yankees lineup like a glove. Not to mention, he won’t win anywhere else. The Yankees want Damon because he popular with the fans and he’s the best #2 hitter possible for their lineup. Again, he fits their stadium perfectly. If both sides were to put egos and greed aside, they could have easily put a deal together for lets say $8.5 million and would be on their way to back to back World Series’. But no, welcome Randy Winn. For the record Randy Winn is an over the hill, washed up substitute….lol.
I guess the moral of this story is to put all emotion and opinions aside and put a deal together that works for both sides. They key to a successful negotiation is when both sides walk away feeling like they won.
If you read through any of my websites or blogs you probably know that I currently own three multi-family investment properties. Through the years I have racked up many memorable moments to blog about. This post, however, concerns the buyer I’m dealing with. I have two of my houses under contract and with a little luck will be closing in a month or so.
I’m sure you’ve all heard the infamous cliché on assuming, “You should never assume because you’ll just make an @ss of u and me”. This is true for about 99% of the time. The other 1% is when buying a home.
Being a young real estate agent, I’ve been going out of my way to help my buyer purchase my properties. He is in his mid 20’s and these will be his first investment purchases. I was 26 when I bought them and wish I had someone like myself to help me through the process. At the time, I neither had my real estate license nor much experience under my belt. I gave him advice throughout the entire process and was very lenient with credits and wording in the contract. My goal was to sell my houses, not take advantage of a young aspiring investor. We have been in agreement throughout the process except for one issue. My loans are assumable. This is very rare in today’s mortgage industry, except for FHA loans. I advised him to assume my loans. This would save time, bypass the approval process with another lender and save him thousands of dollars. Unfortunately, like many buyers he was stuck on one thing – the interest rate. Focusing only on the interest rate is a mistake made by many buyers in today’s market. Interest rate is a crucial part of the purchasing process, however, it is only one piece of the entire purchasing puzzle. He has decided to get his own mortgage because he will save a couple points on the interest rate, as my rate is slightly higher than today’s going rate. His argument is that he will save money monthly over time and that will equate to a larger sum than the money he would save upfront. My answer… STUPID!!! Ok, that’s not so nice but it really is silly. The cost of assuming my loan according to my lender is $500 per loan for a total of $1,000. The closing costs combined on the other two properties will be at least $8,000. It is ALWAYS better to keep that amount of money in your pocket then try to accumulate it over a long period of time. Not to mention there is a nice positive cash flow, which is covering all expenses anyway. Take a slightly lower positive cash flow and keep $7,000 in my bank account… Sounds like a pretty easy decision to me.
This isn’t real estate but it’s quite a funny story. I’m sure all the men that read this will get a little chuckle while many of the women think, “Oh, brother!” For Christmas I figured I could surprise my better half (Marcie) with dinner for two and two tickets to see a performance of Beauty and The Beast. I made up a nice mock ticket on the computer, put it in a box and wrapped it. As you can imagine, she was excited as Beauty and The Beast is her favorite story. We also saw it on Broadway during its final showing at the Lunt-Fontanne Theatre.
So Marcie gives me a call on Monday evening (Jan. 4) to see what’s up. She was away for a few days in NJ. I was telling her how excited I was over this miracle of the Jets making the playoffs. Yes, I know these last two wins were gifts! I told her they play Saturday so don’t schedule ANYTHING from the late afternoon on. She then asked what time they played. The game starts at 4:30. She informed me that I was in fact not going to watch the game because we have somewhere to be. Well, I almost had a heart attack! I had NO IDEA what she was talking about! When she told me we had reservations for Beauty and The Beast my immediate reaction was, “Oh no, I did it to myself!” That’s what I get for being nice…LOL.
On Tuesday, I told the story to the women in my office. I’ve been working with them for a few years now and refer to them as moms #2,3 and 4. They of course were hysterical because it was of my own doing. After the laughter subsided, one of the women took charge, called the box office and requested they change my tickets to the Friday showing (tonight). They all have sons around my age as well so are accustomed to getting us young stupid men out of trouble.
Now for the question everyone’s waiting for…. What was Marcie’s reaction to the whole situation? Well, she just happened to call after everything went down. She thought the whole thing was hilarious. Marcie knows the wonderful ladies I work with and pictured what must have happened. They all agreed that Marcie must be great to not care that the date was moved.
Yes, she is! Tonight we will get a nice dinner and enjoy a wonderful production of Beauty and The Beast. As for tomorrow, J-E-T-S JETS, JETS, JETS!!!!!!!!!!!
Thanks for visiting my blog. My name is Tom Ricapito and I am a licensed real estate agent in NY. I specialize in the Westchester/Putnam/Dutchess area. I will be talking about everything that has to do with real estate including FAQ’s, hot new listings, foreclosure and anything else you can think of. I would like to keep an active blog as it would benefit both my readers and myself. It may be difficult to come up with a real estate topic everyday so I’m sure I will have various topics of discussion. My goal is to keep it fun and interesting. We also have various promotions to both buyers and sellers! If you have any questions please email, IM or call my cell at 914-804-3048.
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