The “Positive Thinking” Crowd and how Good People Get Hurt By Bad Advice

So the latest numbers came out today regarding the housing market and anyone who has been around this field long enough should not have been surprised.   Most of us know the tax credit was the only thing propping up sales numbers and values in the face of high unemployment, tightening lending guidelines and the loss in the demand chain by those homeowners experiencing negative equity.

Now for many people this latest "news" will have no impact.  Those who have a fair degree of equity in their home can still sell it if they need to or in the event of a life changing circumstance, though they may not get the return they would have registered a few years ago.  Those who perhaps purchased home in the mid part of the decade may be currently experiencing negative equity, but if they have no reason to move or sell, the impact of the market will be negligible.  I've lived in my home since 1994, across from my parents who have lived in their home since 1966. We have not refinanced.  During those years the market ebbed and flowed in terms of value and unit sales, but for my parents and me, the personal meaning of it was negligible.  But there is a rapidly growing group of people who very sensitive to the current market; those people who may have purchased a home in the last five years or have refinanced during that same period.

During the first part of this year, a number of home owners contacted me relative to listing and selling their property out of necessity.  These were good people who were dealt a bad hand by the economy and could no longer afford their home.  My advice to almost all of them was the same and was based on sane real estate valuation techniques and forecasting the market environment over the next six months.  I explained the importance of pricing their property aggressively along with how it was imperative to get their property placed under agreement before the tax credit expired.  Although each marketing plan would have accomplished the mission of getting their home sold along with the relief of the associated financial burden, they were universally disappointed with my projected sale price.  Although a few listened to my advice anyway and experienced a successful result, many others chose to hire someone else, based on their "positive attitude" as it related to their expectations. 

Since the beginning of August, eight of those who sought my previous advice have contacted me in an effort to now help them.  Unfortunately, time is the enemy in a declining market. Where most of these cases would have experienced a 90% success rate if they adopted my marketing plan in January or February that had now narrowed to 20% at best in most of these cases. (without going the short sale route) 

For me a 20% chance of success is better than nothing and went about the work of crafting  reasonable plans, but as I explained to these potential return clients, there is no margin for error, or time to waste in chances for a successful outcome. 

Only one of those potential clients took my advice and the outlook is good for them, the others went back to "good news boys" and in my opinion, these well meaning people have suffered immeasurably. 

 So for those of you good people who are forced to enter the housing market due to a bad hand dealt by the economy, my advice is to consider this information wisely.  Winners always deal with the truth, regardless of how ugly or unflattering it may be. And especially beware of those who ignore it or dismiss it.

 I will leave you with this short story to illustrate my point.

 You are on an Island and you hear a roaring sound coming from the direction of the shoreline.  You see three people standing there starring at a giant wave rolling toward them.  You yell at them, "There is a tsunami coming, what are we to do!"

 The first person says, "Yep, that's a tsunami, we're all gonna die, get your shovels and start digging your graves."

 The second person says," Heck, what are you talkin about? I don't see any tsunami, it's a beautiful day, let's go fishing."

 The third person starts running while the other two are talking and says, "Yep, It's a Tsunami all right.  One of the biggest and baddest ever.  But I know how to get to the highest part of the island in the shortest amount of time."

 With whom would you cast your lot?