Real Estate Blog - Have Buyers Been Playing Fair?

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Have Buyers Been Playing Fair?

For months we had a less than stellar market in Central Florida. Slowly but surely, the market has shown some improvement. However, the quality of the offers has been like playing with monopoly money. We track home sales, percent of asking price vs sale price. In 2005 the sale price was on average 97% of the asking price. It was a sellers market. Now a little over a year later, it seems the rash of incoming offers is in the 82%-89% range of asking price. That is after price reductions. This translates to about a $50,000 difference in the asking price to the offered price. Do not pass "Go" and collect $200 dollars. People any offer is an offer. In a market with an eleven month inventory of homes if you are able to snag a buyer who is willing to make an offer...Is any offer a good offer? No, not really. Naturally it will depend upon your seller's situation. Most of mine are not desperate. The ones who are, carry high mortgages and cannot accept low ball offers or they will end up short at the closing table.

Pricing the property correctly the first time is important. To get to the closing table it needs to appraise properly, as well as meet other criteria for lending. If the price is low enough, it will attract buyers. The buyers once attracted by the price some how think coming in far below is still a good plan.

A Lake view property is listed at $279K. Seller gets an offer of $260K. Seller rejected the offer. We will take $270K for the purpose of discussion. The next buyer comes in and is told the offer needs to be better than $260K to compete, he offers $230K and cannot figure out why it was rejected immediately. His defense... "It is a Buyers Market!"

Many are coming to realize they do not have the control they thought they had. The media for months empowered the buyers and many may have misunderstood what the term " a buyers market" really means. To some, it may mean they have the control to price the price the property at whatever they feel like. "Is he desperate?" Not really. To sellers we explain it is an inventory term.

The new media campaign the N.A.R. is running, is helping buyers to understand that inventory is slowly decreasing and building costs are not. They are driving the public perspective towards "buy now before they are all gone."

So if you land on any of the properties on the board with a buyer, if it has a house on it already...it WILL cost more to occupy that square! And as in the game...he with the most money (best offer) will win. Are we having fun yet?

Also read: Offers are like Sticking your Tongue to a Frozen Pole

St. Cloud Florida Real Estate Broker/Associate,

St. Cloud Florida Homes For Sale, Buying HOMES In St. Cloud Florida, Real Estate Agent specializing in Osceola County Homes ,Townhomes, vacation properties, land, & Investment Properties-Allison Knows Osceola County, Fl.

Posted by Allison Stewart BROKER/ASSOC/REALTOR ®St. Cloud Florida on 02/20/2007 12:16 PM

Comments (92)

buyers market, sellers market, monopoly, realtors, florida

Originally posted at: Allison Stewart Realtor Insights: Have Buyers Been Playing Fair?

This post has been included in Florida Information Osceola County, FL Information

92 Comments on Have Buyers Been Playing Fair?

FEB

2007

Hi Allison,

This is a well-written article. I think the analogy you used is a good one and really enhances your point. Thanks for getting the word out as to what "buyers' market" means.

Thanks Lanette- I appreciate you taking the time and effort to respond. I am so glad you enjoyed the post!

in our depressed market we are having the same problem, made worse by the media.

I'm constantly explaining the difference between "buyers market" and "fire sale"

Terry Lynch

Even in a buyer's market the sellers don't give away the farm. The media certainly doesn't help the problem. I agree with that. When a home is on the market for a fair price and that is my client's price range I try to encourage my buyers to stay focused on the end they are looking for, getting a good, fair price on the best home out there for them. Not taking someone to the cleaners. I want the best price for my client but I do like offers I can defend.

We see the same thing here, although I would say that many of the low ball offers come because the buyers agents tell the buyer that the house has been on the market for sooooo long, and that we shoudl try to come in as low as possible.

From a seller perspective, this is nto a good thing... but for the buyers, it is...

If the buyer really wants the house, and can afford it, they will come around.

According to the Market Pulse Statistics, Homes are selling. They just seem to be a small percentage because of the massive inventory. If is overpriced, is not going to sell- Bottom Line. The homes that are not selling are the ones that are overpriced!! Brokers are wasting time with listings that are not selling, only to become expired, then another realtor prices it right -then sells.

In this Buyers Market, you need 3 things from your seller, or I suggest you walk(unless you like to work for free!

1. They need to listen to you on price.(You're the expert, not them- That's why they hire you)

If you overprice, you wasting both yours and their time!

2. They need to prepare home for sale. (IN this market, it better look good, if they want top price)

3. They need to provide access to show. (We can't sell, if we can't show!)

Remember, NO LISTING, IS BETTER THAN A LISTING YOU CAN'T SELL!

The first thing I actually ask my sellers is, Do you really need to sell? Because, this is the worst time to do it. After you ask that, they will come up with every reason and motivation in the world on why they need to sell, plus it softens them up on the listing price. Because i hit them with the reality! My two cents...

how about a listing that demands Realtor catered lunches because their friend said thats what their agent did? You bring them three full price offers in one week and they say no, not until you have the catered Realtor Open House. If they werent moving up to the 650's we'd think different.

I LOVE SOME OF MY CLIENTS....Just Some

great post. I actively list foreclosed and regular properties for sale. I am used to getting a $20k offer on a foreclosure but the offers on all my listings are rediculous. My past two closing were for over list and I just got a full price offer on a property that has been listed for three days but these have been the exception. Every buyer I have spoken to believes they can make any offer and the seller should be grateful. It is our job to educate the consumers however I know that their uncle who bought a home in 1912 will be the person they listen too.

I have been in the business for 13 years. I tell buyers that I represent that ask "what percentage of the asking price should I offer?" that it always depends on the individual home's situation. I tell them that they should be more concerned with the actual value of the property. I tell them that this is done by looking at the comps. If the home is priced well compared to the comps there is no reason for them to make a low offer. There is no reason why they shouldn't pay full price (even if it is a buyer's market) if the home is priced right and it is what they want. If the home is overpriced based on the comps then there is no reason not to make the low offer. However, I make sure that they understand that if the offer is too low they might offend the sellers. I tell them that this could hurt their chances of getting the home, if they can't find anything better, and they decide to go higher later. I hope this helps.

I think the problem is the overuse of terms like "buyers market" and "sellers market". It's always a buyer's and seller's market. When I hear a Realtor say either, I just want to reach over and choke him or her.

Great post and I love the comments people made. "Realtor-catered" lunches? Are you kidding me? That's just hilarious...in a sad way.

I had a loan officer about to give a presentation to a group of Realtors. He lined it up with the broker and he was so excited to speak to 20 Realtors- all those potential clients...

They told him that he needed to "bring P.F. Changs" (an upscale Chinese restaurant) for "all 20 Realtors, plus the manager and two bookkeepers."

I cancelled his appointment.

No question that the Maryland and Northern Virginia area is a "BUYERS MARKET". Homes on the market for months and no one looking?? That is the story around here. More properties on the market than folks looking??? THAT IS A BUYERS MARKET.

Prices increased 100% in 4 years. So, folks stopped buying. Now sellers have reduced prices 1-5% and they expect buyers to buy??? Nope. They just look at what their money will buy and renew their lease.

IMO, prices are going to have to come down a good 20% before the market will improve in this area. Even then, it's not going to be much for a while. Appraisals will start bringing the prices down soon.

Well Karen, I know exactly how you feel! But when they say is a buyer's market,

it simply means Buyers have the cards in their hands, which is actually the case now.

Why? Because the have a huge inventory to pick from! They can and will take their

precious time, when it comes to making a decision. They want to feel like they got a deal!!

Look at it this way- If you go to a Chevy dealer, and you tell the saleman that you're

looking to buy a red corvette. He tells you he only has one in the back, which came from a deal

that didn't come thru. He informs you that you should consider it, because it should be gone

pretty soon. Must likely you will feel somewhat pressured to buy ASAP if you really want it or desire it.

Now same deal, but salesman happily tells you that they have 40 just like the one

you're looking for in stock. Most likely, you'll know that there is no way in this world

that he will sell all those 40 vettes in a short time. So now, you have plenty of time to make a decision,

because you have choices! You will take your time, and you ain't going to let nobody rush you, Right? You'll probably even get a little picky while you at it! Most likely, you'll tell him that you 're going to think about it, and get back to him.

Well Real Estate, is pretty much the same.

When we're experiencing a Seller's Market, the opposite occurs.

Sellers dont offer any incentives. Offers are higher than listing price.

That's why all this builders are bending backwards for our business in

buyer's market. They need to offer something because they lack something else!

It's like when a man asks a women to dinner on first date, or showers them with gifts! Men do that, because they feel like they need to throw in a little incentive, because they think the girl will never like them for who they are, so they need that extra bonus to compensate something they're lacking!!

In business, this is called Buyer's Market(Too much SUPPLY, not enough DEMAND)

In this market, is usually easy to find what you want.

Seller's Market (Too much DEMAND, Not enough SUPPLY)

In this type of market, is very hard to find what you're looking for.(ex. Like finding the right guy)

Another good example: When it comes to relationships in 2007, Women claim that is a Seller's Market. Because a good man is hard to come by. Am I making sense here. Now from the Men point of view, is a buyer's market, because the're supposed to be like 7 woman for every man. Now that's a nice inventory!

Terry I agree, what happened here (in FLorida late last year) has seeped west and north. Affecting the market Nationally. However, we see serious signs of recovery beginning here now slowly. Low offers usually come from those who were shut out of the rush to buy in 2005. They have less to offer, but feel it is worth a try anyway. Some are just down right try8ng to steal property if they can get it. The media campaign promoting buy Now has begun to show an increase in activity and as of late we have some competing offers which is wonderful!

Virginia

Good for you! Keeping the buyer focused on a realistic offer will in the end lead to a deal you can close. Thanks for commenting and adding something of value to the discussion.

Paul- I agree the question of how long has itbeen onthemarket is one we are hearing a lot too. However, my response has been that themarketis changing and sales are brisker than they have been since 2006. Which usually changes their tone.

Miquel- VERY VERY GOOD! I agree completely. If it is not realistic...PASS don;t waste the time, money to advertise or effort to show it if it not going to appraise.

Catered lunch huh..to impress the noisy neighbors no doubt. What an imaginative way of spending your money they have in mind for you! Three full price offers should be proof in itself you are doing a better job of marketing than their neighbors Realtor did. I would ask...which would you rather have a gimmick or a contract?

Oh Allison P. Very, very funny! Their uncle who bought in 1912! Hysterical. Thanks for the great comment! I had an older person tell me that too. Paid 40K fully furnished...."when?" I asked he said 1990!. Wow a lot has changed in 17 years...and what was the cost of a gallon of gas way back then?

Hi Lou

You are right they donot want to offend the sellers. I had topresent a low offer 2 weeks ago and the seller was actually yelling at me! Iwaited it out, and then very quietly suggested we simply reject it. The buyers by the way are back at our price!

Karen- GOOD FOR YOU! I sat through many of those paid luncheons...and the poor mortgage guy after picking up the tab for 20Realtors + secretaries + office manager et als... was finally told WE HAVE NO CUSTOMERS. I usually just ordered coffee.

Allison, Very well said... This article puts the situation in proper perspective for both buyers and sellers. Some of the recent media publicity has been very misleading as to what is truly going on. It continues to amaze me that America, the wealthiest nation in the entire world is the ONLY place where we are talking about real estate price reductions...

Oh Lenn

I feel your pain! We suffered terribly here last year...but good news is on the horizon-even though our home values have also doubled and in some cases tripled, the buyers are finally surfacing with internet sheets in hand. So they have been lurking in Cyberspace. They are realizing we have bottomed out in theprice reduction market, and homes are starting to sell once again...thank goodness. Apprasials have adjusted like-wise.

Very good Miquel- I use car comparisons ALL the time. You can't have a Lexus for the price of a Kia.

It is true what you said that it really depends on the sellers situation. I showed two houses next door to one another. We offered on choice #1, and didn't get it, and were told our offer was basically ridiculous. On the house next door, we offered the same price, and got a counter to within 10K of our offer, and my buyers saw what a great deal it was and took it. Both offers were at 89% of list price after reductions. Two totally different sellers and situations, but it further supports what you are talking about here.

Well I want to cringe everytime I hear the news media announce it's "buyers market" when I'm working with mostly sellers. Some buyers offer such riduculous low-offers on beautiful homes or they just keep searching, like they are waiting till tomorrow because they know that something better is going to pop-up! I like your post, well thought out.

It take awhile for a market to become more balanced. Sellers sometimes don't get it for a long time. I saw a lot of inventory that was overpriced and so there really wasn't a reduction in price. I always run comps, meet with the top appraisers and counsel buyers not to make low ball offers. A low ball offer usually just makes the seller angry. If items come up after the inspection, the seller is less likely to work with the buyer to address those issues. Also, I let listing agents know what my buyer is looking for -- sometimes it's not the price alone --- but concessions -- or paying down a point -- try to find out what really is the most important thing for the buyer! Perhaps we can all me a bit more creative - it's not always about the price!

For sellers most need what they need to pay off their debts. So for them the price affects the net after commission, doc stamps, mortgage, title and closing costs

Thanks Cynthia...nice to see you today!

Joan -- sorry forgot to sign in.

Your right Lola-thanks for the great comment!

Sean- Absolutely! I had to do the same with a condo I recently sold. The sellers needed to make a concession to sell or it would have been their neighbor living happily ever after! But the offer was at least at appraisal which I could feel good about having them accept. thanks for jumping in here with your comment.

Welcome Joan- wondered who penned such an eloquent response!

This is a great post! If these buyers that are playing "Monopoly" aren't careful, they may end up playing "Sorry" while the other buyers are playing "Candy Land." Too far with the analogies? ;)

Thanks for your post, Allison. Great description. It is a complex issue and one not easily understood. Once a market is labeled as a buyers market it seems to have a pretty dramatic impact on behavior. The media implies that because the market has shifted so dramatically that buyers have all the control and can get great deals. That is true to some extent, but it does vary from community to community. It does not mean sellers will let a house go at 80% of the asking price, even after price reductions (unless they are into a short sale, and even then the bank is looking for close to market value). Buyers are still looking for rock bottom prices, and some are putting in multiple offers to see what sticks.

However, we are seeing more buyer activity, and more homes are selling now. Our inventory is less than it was in November and close to that of December too. Prices seem to be holding steady and in a few communities are even creeping up a little, at least compared to a year ago. I am finding that buyers still assume things that have been on the market will remain there, and that is just not the case. It also seems that sellers are willing to be reasonable, and most things are now n the 95% of asking price. I think we will learn more over the next few months of our spring market.

Jeff

Which would leave us playing...."Careers"! Good one loved it!

I 100% agree with you, it has truly turned into a buyers market in most of california also. i like the monopoly analogy, i wish the public would stop watching the news and read the facts on what is really going on !!

Jeff you are sooooo right! Thank you for the wonderful response. We mustbe doing something right as many of my houses are getting offers. I have even had competing offers which has helped to get them to where they should be for my seller. The market is improving and beginning to shift back...finally.

Chris we are always astonished at the prices being achieved in California Real Estate-it was only a matter of time until it went from coast to coast. We have been flat here for most of 2006. Happily we are seeing some give in what was a flat market. Prices coming down enough to interest buyers. Thanks for jumping in here. Your comments are appreciated and welcomed.

thanks for pointing out that "Buyer's Market" is an inventory term, not necessarily an attitude. I need to revise this month's marketing letter.

We are a silly breed us humans, bidding up and down emotionally what should really be seen as an investment...as with all open markets, supply and demand reign...if you have a year to sell hold out...otherwise cut your "losses" and make up for it as a buyer on your new home.

ex. You list your home for 299,000 b/c the neighbors got 300K two summers ago

So you concede 25K and feel like you "lost" 25K when really the 25K you sacrificed will make more sense to you once your buyers face is put on...go get a 40K concession on the 500K property you are moving up to and effectively net 15K through the give and take!!!

Thats how I like to explain to stubborn sellers...until next time.

ex. You list your home for 299,000 b/c the neighbors got 300K two summers ago

Thats how I like to explain to stubborn sellers...until next time.

02/20/2007

by Andy Hubba

Very nice post Allison. I think the term "buyers market" is being misunderstood by those led by the media and their internet "knowledge." They seem to think that automatically equates to desperation on the sellers' part. There may be a small increase in the percentage of sellers who are desperate, but it in no way means that all or most sellers can be manipulated. They need to be shown that "Buyers market" simply means there is an abundance of inventory, which is causing market prices to stabilize or, in some cases, drop.

Right on Allison! Buyers market does not equal a fire sale...Great post!

Good stuff Allison, I too have been getting some very low offers. Fortunately my sellers have been educated on this and are expecting them. We counter every offer if it is not acceptable. NEVER out right reject an offer. You just never know where negotiations may end up.

Doesn't seem fair that sellers seem to be told "the Sky is the limit" with mulitple offers, but when the shoe is on the other foot the pendulum swing is not equally as accepted by the real estate professionals. Why does an agent who doesn't have a problem with telling the buyer they have to pay full price or higher in a seller's market, not celebrate when the reverse is true and a buyer may finally be able to get a bargain?

Great article Allison. I get really upset when a realtor tells me "it's a buyers market" - we think it's only worth xxxxxx now. And I furious when an agent asks me how I determined a price for one of my listings. I received an 80% offer on one of my listings this week, countered back full price and told the seller, "when they get serious, we'll start negotiating. The buyers got serious today and we sold the home!!! Yeah!!!

Great post Allison. You, as well as many responders, make a great point about the press. They make comments (like "buyer's market")without explanation and end up confusing people. Those folks then become angry because their "offers" are rejected. They don't get it because it's "a buyer's market," and realtors, lenders, and sellers are held to blame. All becuase some media voice decided to share his or her, or their, collective misunderstanding. They do it to Realtors, to mortgage brokers, to appraisers, to just about anyone. But since they're on TV or in some magazine or newspaper they are awarded a cloak of expertise. Our job is made harder because being less public and with no pulpit we are obviously less knowledgable.

I agree with you. Just because their are a lot of homes on the market doesn't mean people are giving them away. They'll be in the seller's situation someday.

FEB

2007

I might have considered countering the $260,000 offer. I agree there are more and more bad buyers out there. Their agents are many times fanning the fire.

I don't agree with Lenn about a lot of things, but I have to say she has the buyers psyche down. There just is no value in the high cost areas. You might find relative value, but you won't find absolute value in places like Los Angeles.

Well Said Terry! Thank you adding to the discussion

Well Hello Broker Bryant..Glad to hear from you! There is an interesting pyscology at play here. The rejection paid off in a HUGE way. Not only did the buyer come back he upped his own offer 10K to satisfy the seller, got a loan approval and was ready to win. The second low offer was a trigger point. Now I will tell all NEWBIES...this strategy WILL NOT work Everytime...but if you are confident in the buyers ability sometimes being told "it was not good enough" can pay off in a big way. It is a risk however. Take each offer on it OWN MERIT and ALWAYS ALWAYS Put your seller first and foremost in the negotiation process.

Thanks for your comment Andy-it is an interesting way of presenting the math and it seems to work for you which is great!

Hi Ardell

Thanks for chiming in. Agreed all buyers like to feel that have gotten a bargain. But their needs to be a bottom line as far as the sellers go in order to cover related sale expenses. It must achieve a win/win for BOTH sides. Fair enough?

Thanks Ryan your input was a nice contribution to this discussion.

Congratulations KAY! A reminder of why we do what we do and the sweet reward for a job well done!

I don't necessarily disagree with any of you. I'm of mind that a win/win situation is best for all. The buyer has the right to obtain a home at a fair price. On the other hand the Seller has the right to make a profit. Both are justified. However in a market that has been appreciating in leaps and bounds 30-50% year in and year out for several years. The seller needs to realize if he was not able to capitalize on that moment before the market adjusted. He will still make a profit even if he has to sell below what the trend was previously. I think a lot of times greed becomes a factor on both sides of the deal.

Well Hi Monika

Thans for checking in...it is always nice to hear from you. The market is getting better. One sale at a time

Mikey

Very very well said! Thank you for adding that to our discussion. Excellent point.

Danny

I agree with you- if I were to offer to sell you a stock that would appreciate 20% in a year-you would leap at the opportunity to have a return at that rate-conversely, if I were to tell your home was worth 20% over the cost you paid it would be possible that you would be less than happy about that return. For many, many years the average rate of appreciation on a Real Estate Investment was 61/2% annually over the life of the term of ownership. Suddenly, inventory plumbeted and prices went insane. It is unrealistic to think 100-300% could last. It impacted lending, property taxes, and created artifical inflation. Which is an area such as ours the average income cannot support. So the adjustment is a healthy indicator, that prices have stabilized and been adjusted more proportionately to ones ability to buy what inventory is offered.

Terry your point is well taken. Use the stock analogy when explaining to sellers and they seem to be able to understand why pricing is so important. Thatis if they are serious about selling their property. The media did damage the market...but it is not irrepairable.

I feel bad for the realtors in FLA. I was watching something on CBS on the extremely dry market there.

It's a buyers market here also (NYC) I feel like a Taxi sometimes.

"I agree there are more and more bad buyers out there."

REALLY? What exactly defines a "bad buyer"? Do you have a test you administer before allow a buyer to view your listings? Then, if found worthy, they get a gold star to identify themselves. Arrogance may have worked well in the past, but let's see how well it plays moving forward.

On another note......

Why should it concern me what a seller "has to have"? Let's say they HELOC'ed to 100% a couple of years ago and the market has dropped 5%. If the market dictates a short sale, too bad for the seller. Should I have to pay for their new car or their vacation? If they have to take it in the shorts with a short sale......tough. LOL

Hi Stan

I would think a "bad buyer" is one with a poor credit rating, little hopes of being approved who throws an offer out there with every contingency under the sun, in hopes a desperate owner will take his house off the market on a definite "maybe" only to discover that day of closing their upteenth loan denial has come in... but that is just a guess. LOL Arrogance? No, I would not call it that.. I would call it more conservatively..."Caution"

As for the "short sale" scenario if the lender will not agree you have no sale. If they are in the foreclosure process no one wins really. Losing a home has to be an awful experience.

As for the new car or vacation... I guess they can spend the appreciated value of a good investment any way they like.

Thanks for the opposing point of view it is always nice to get all sides represented for the purpose of discussion!

My pet peeve with realtors is when they advise you not to lowball because "you might insult the seller." WTF? It's an arms-length business transaction -- both parties are (or should be) negotiating as hard as they can. If someone advised me that they were actually insulted by my offer, I would laugh and lower it another 10%. Accept or counteroffer for God's sake. I actually think this is simply realtors trying to get buyers to pay more so the commission is higher -- not conflict there, no sirree.

The seller does not have "a right to make a profit." In fact, many who bought too late in the boom will be losing money when they go to sell.

You can gripe about the term "Buyer's Market" all you want, but the reality is that prices have risen far above sustainable levels, and now that the madness of "flippers" and no-down mortgages is ending, prices will have to retreat to levels where regular people with regular loans can afford to buy them. This will be more than a 5% or 10% discount.

Oh wait, I know - how about if realtors offer to reduce their commissions, to "grease the wheels." ? Better yet, how about flat fees for service? That would save both the sellers and the buyers a lot of money - a "win-win."

Not a realtor, so don't know if this will go through. But I think you guys need to read my post

Just a suggestion for you guys: why do you care if the sales price is high or low? why not work on behalf of the seller AND a buyer to come to an agreement? This way you have more transactions. more transactions=more commissions=more income for you!

We buyers can look around, we do have eyes! We see "for sale" signs up everywhere. we see "new construction" up everywhere. In most major cities you can't move more than a few blocks without hitting a new condo, and can't go more than 10 houses without seeing a house for sale! it's OBVIOUS that the hysterical market of 2002-2006 is over to everybody.

why on Earth should we pay full price, if we can get a discount next door or next street over! many major markets have 40,000-75,000 houses for sale (on MLS or FSBO or new development). Just like buying toilet paper. I buy it at costco because it's cheaper than Target.

I think you've become too reliant on coddling the sellers. (I realize you have fiduciary responsibility to them)

3 facts. 1) buyers are tapped out. it's not our defiance that's keeping us from buying, it's our incomes!!!! 2) despite the minimal decrease in inventory, inventory is still higher than this time last year. the decrease in inventory is probably moreso sellers taking their homes off the market until after the SuperBowl or until early spring. when the inventory explodes again, you'll see I'm right. 3) a bad buyer isn't one who lowballs. A bad buyer is one who ISN'T QUALIFIED to buy a home.

You do YOURSELVES a disservice. Your propoganda machine tells sellers that there's no down market. so they price their homes high. At the same time Buyers can't afford the seller's wishing price. thus stalemate.

We as buyers can't tell who has a wishing price they need to pay off their mortgage balance + HELOC + retirment fund, versus those who have to sell and can afford to sell. thus, we have to lowball everybody, and we have 10's of THOUSANDS of people to lowball! this wouldn't be an issue if you would bring us some SERIOUS sellers.

If you don't believe what I say above is true, then you can be MY realtor. I have a beautiful house that I bought for $300,000, that sold for $127,000 in 1997. At the peak of our market, it was likely worth about $380,000. I now want to sell it for $950,000,000. Please find me a buyer, and please, not one that lowballs. That's insulting.

Allison,

I didn't think there were any more "credit challeged" buyers out there.......anyone who could fog a mirror was given credit. The topic is "unrealistic expectations"; not credit worthiness. Sorry, but I can't read it any other way. If he misspoke, OK; I've done it from time to time.

Short Sales......of course the lender has to agree, but the pressure is on the seller and the lender. We all know what it costs the lender to complete the foreclosure procedure so it's a matter of lose XX or lose YY; either way, they lose.....and it's not my problem.

I never implied a seller should not be able to spend their equity any way they wish.....I simply won't pay more than market to underwrite their decision....would you?......would they if roles were reversed?

It is comical how agents talk about sellers responding angrily to an offer. I'll share one of mine, if I may. I submitted an offer on a builder's new construction last year.

Long story short:

Made offer 5% below asking and same as lowest comp cost/sq ft

Offer angrily rejected by builder and his agent said they already had a better offer and wanted to line up mine as a backup. I told them mine was my last, best offer and was cash w/2wk close. Fast forward a couple of weeks and I get a call from my buyer's agent who said the deal fell apart and the builder's agent asked if I would resubmit mine ASAP. After falling out of my chair laughing, I told her to tell the builder it's like the Indiana Jones movie line (choosing the Holy Grail)......"He chose poorly". I'll let him stew for a few months and if it's still on the market, I'll consider submitting an offer 5% below my last offer. THAT will probably send his BP up a few points and he'll have another decision to make. Let's see if he "chooses wisely".

So what if the deal falls apart, it's like you said, there's LOTS more to choose from!

" Now a little over a year later, it seems the rash of incoming offers is in the 82%-89% range of asking price. That is after price reductions. This translates to about a $50,000 difference in the asking price to the offered price"

Allison,

This is just the beginning my dear. I will watch what you have to say mid summer/fall when the 82% - 89% (after price reductions) will seem like small losses.

Remember Allison, we the buyers are in the drivers seat now and will only pay what we think the house is worth. You can compare this to monopoly if you wish but in the end my REAL money saved in my bank account will kick everyone out of the game.

Oh boo hoo. I have over 100% of the median house price sitting in cash. Am I planning on overpaying so that your cartel can get their volume numbers up and I can take a loss? No. Sorry. We buyers will watch sellers wither on the vine.

Ardell,

If you happen to pick this up, a friend of mine on a RE message board is looking at Seattle and wonders who to talk to........

I don't know you personally, but read what you say and you seem to be a "straight shooter" so I passed along your AR link.

There are excellent values out there indeed. Good luck to you and when the right property comes along I am sure you will do very well.

Agreed- A property is worth what someone is willing to pay. Every buyer is entitled to the make the best deal possible no one is arguing that. Builders attempting to liquidate inventories have reduced prices to achieve close out sales. That is a great situation for a buyer.

We appreciate buyers input, it adds a wonderful perspective to any discussion. It is not one side against the other. It is a meeting of the minds that we always hope to achieve. You input is valuable. Thank you buyers for adding such great comments to this discussion!

Jim

You are absolutely right! I have addressed the topic in other blogs I have written calling for more affordable housing. Now called work force housing. I agree wholeheartedly that average wage earners have a really tough nut to crack, and for the most part I am able to put myself in the shoes of the buyer rather easily. For that reason I have turned down MANY overpriced sellers listings, whose expectations are unrealistic. I am looking forward to the adjustment, so that more working people can afford to buy a home.

BUYERS: You may also want to read:When To Bail Out

FEB

2007

Allison,

I clicked the link but it's a "member's only" thingy.....we poor consumers are part of the elite! :)

I love all you guys chiming in here. Stan, Brad, Jim, Jason, TheTide is Turning and Gotcha. I totally agree with everything you all said. It's so refreshing to get a dose of reality in here.

Why does an offer have to be fair? Why do I care if the seller is going to like me? Why get so personal with low offers? If you don't like it, just say no. Don't make the buyer sound like some evil low life. It's finally an opportunity for many buyers who missed the boat to get a second chance at home ownership.

Allison, while I disagree with almost everything in your original blog post, I will give you credit where it's due and praise you for welcoming other viewpoints and allowing intelligent debate from some other posters (vs. simply deleting them)

This last 10 year run-up in housing values (i.e. bubble) is simply unprecedented in scale. What most people have to understand is that housing is just one piece of the global economic pie. Americans don't really produce anything anymore and over the past few years have pushed economic growth simply by buying and selling houses to each other with easy credit made readily available by the influx of foreign money by countries who want us to continue purchasing their consumer goods. There is a reason why "bad buyers" have been able to get $600K loans with undocumented incomes, or people on fixed incomes buy 10 houses and are now bankrupt, etc. etc. This easy money has in turn made housing unaffordable for the vast majority of the country. As others have posted already, this simply cannot go on since income, wage growth, and new jobs have not been able to keep up with prices by a long shot. The result? Watch out below for housing prices! When 98% of the population can no longer afford the median price for a house (LA, NY, SF, etc.) this stalemate has to give, and with all the looming foreclosures, it will most likely not be buyers.

Don't believe me? How many of the realtors on this board have been working as realtors for more than 10 years? I'd be willing to bet that the vast majority on this board (and elsewhere) have never experienced a down market. My advice is to coach your sellers and make sure they don't follow the market down, and for goodness sakes, stop blaming the bubble on the media, take a step back and just stop to THINK about my post and others'. As others have posted, it is in everyone's best interest that housing prices go back to normal and houses go back to just being places to live vs. the next big investment to get rich quick.

FEB

2007

Tim- I totally agree with you and have written other posts along those lines of thought. The median price in Florida is currently $234,000. Like you, I welcome the downward adjustment in housing prices, for the very reasons you cited. Back in 1980 the market, (in the Northeast) showed a similar pattern, the primary difference back then was interest rates (16% on 30 year mortgages) By 1988, the interest rates had dropped significantly,and most people had refinanced, however, the cost of the housing had increased. BUT, it was possible for an average wage earner (40K a year back then) to obtain a mortgage and purchase a home.

No one will dispute (including most Realtors) that the escalation of prices, and decrease of affordable housing has hurt almost everyone. I completely agree that as you so eloquently said:

"it is in everyone's best interest that housing prices go back to normal and houses go back to just being places to live vs. the next big investment to get rich quick." < Very well said!

Tim

"Don't make the buyer sound like some evil low life. It's finally an opportunity for many buyers who missed the boat to get a second chance at home ownership. "

The ultimate goal is exactly your point-an opportunity for many buyers who missed the boat to get a second chance. Absolutely.

Buyers are NOT evil. Realtors have been diligently working to reduce inflated prices and unrealistic expectations of some sellers. I have written other posts which address this issue. The adjustment of housing cost is INDEED a very good thing. Thank you for sharing and voicing your opinion.

If inventories are high and Bad (?) Buyers will not pay list price - then we simply have not reached equilibrium. BUYERS will decide the demand side prices in the overall scheme. "Everything is in fact a BUYERS market" (I may put some exceptions to necessary health care venues).

A 'low ball' is only a low ball to the seller. To the buyer it's an offer of money for value.

Rob- Supply side economics equates to Supply and Demand. You're right. The demand is for workforce housing...of which the market has had little to offer. As the market resistance is increased, the supply of housing at or below median value will increase. What happened in 2005 was created in a buyers frenzy born of low inventory of available housing. Since then, new construction (at record levels) has flooded the market. Builders are now offering fantastic incentives along with price reductions to liquidate excess inventory. Many Realtors, are counseling sellers of pre-owned homes to reduce prices in order to remain competitive in the market. This in combination has resulted in the deceleration of prices and an increase in achievable sales. An Achievable sale is one which makes it to the closing table pending lender, appraisal and inspection caveat approvals.

As a consumer, I agree that housing costs need to come down.

FEB

2007

Stan,

Send them the link for www.RainCityGuide.com or www.searchingseattle.com for more Seattle specific stuff. Are they from Montana?

FEB

2007

Allison,

This is an excellent article. I do have one thing to say. Well maybe two. :) We all say that we have to educate the seller, but I think we also have to educate the buyer. I just had a couple that are moving from about 6 hours away call me and wanted to come down to my town and look at buying a home. The lady told me her husband is being transfered and they need to get into a house in a hurry. Of course they need horse property as they will be moving her 3 horses also.

I asked her if they were pre-approved for a loan and then explained why that would be a benefit to them and would aid me in knowing what price of home s to be showing them. She said "no they hadn't been pre-approved." That she knew they could afford around $500,000. I showed them what we had in that price range with the land they needed and out of the 8 homes I showed them there was one that was slightly over $500,000. Of course that was the one they liked. They left town on Sunday with the promise I would look at the MLS again on Monday for any new listings and call them. She told me she would return the following weekend with her mother.

With the phone call on Monday, she informed me that she and her husband had decided that they thought it would be best if they leased for a while before buying. But she did want to look at the four new listings I had found on Monday.

Will I show her more homes this week end? Of course I will. Do I think they will buy? Not right now. I can only hope that if I stay in touch with them once they move here that when they are ready to buy they will come to me.

What had happened was she talked to a loan officer when they got back home and found out that the payments on what they wanted would be to much. Yes, we have to TRY to educate, but you can't teach those that don't want to learn.

FEB

2007

Very true Roberta. For the first timein a long time (most of 2006) we are getting multiple offers of good quality on existing homes. The last 2 that went under contract had several offers on them. A sign the market is changing.

I loved the analogy you used here and this was a very well thought out and written post. You made some really excellent points that are very true. Well done!

Lisa

MAR

2007

I love the art of negotiating.....willing Buyer....will Seller.

MAR

2007

Thanks Lisa...I enjoy your posts too!

SEP

2007

Great explanation about a buyers market. It doesn't help when there are desperate Sellers. We have more and more Sellers holding on until the market stabiizes.

SEP

2007

A lot has changed since I first wrote this article. We have sellers who have been on the market for over a year. They have now come to realize they are NOT "giving their house away" nor are they selling it. They are gradually realizing only the best priced homes are selling at FAIR MARKET Value. Fair market value is what a buyer is willing to pay period.

Thank you Lola!

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