Real Estate Home Buyers Need to Get Over It

By
Education & Training with -- www.matthewferrara.com
At some point, we can't blame sellers for everything that troubles the housing market. It's time to give buyers a wake-up call - and tell them that whatever's holding them back, it's time to get over it!

It's fashionable to point out how home sellers are unrealistic - in this, or any market. Traditional real estate lore contains countless stories of sellers who think their home is "special,"  not subject to market forces that sometimes sweep away equity and exceptionalism. Many such stories may be true, but to the extent that today's buyers are still hesitating, even smart sellers have to scratch their heads.

Which is why smart REALTORS need to to kick their buyers in the butts.

In case anybody hadn't noticed, now is probably the best time to buy a home since the invention of wood. Mortgage rates at historic lows, home prices reset back almost a decade, and a weak economy pushing down the costs of buying (moving, inspecting, repairing, etc). It's simply the perfect example of a classic "low" in a commodity market. Yet even in stable neighborhoods, where prices never soared and likewise didn't plummet, buyers are waiting.

Why?

Many buyers today will tell you they're waiting because they're afraid their purchase will lose value in a few months or a year. The trouble is that most REALTORS have been trained to handle this objection by talking about how great a long term investment buying a home is, or what a smart savings vehicle it represents, or some other such investment speak, when what they really should say is:

So what? It's not like you haven't shown you're willing to buy other things that have lost value, right?

Oh.

What today's buyers need is a dose of realism. Almost everything they have ever bought has lost its initial value. Fancy new car? Loses thousands the second you drive it off the lot. Super new smartphone? Put it on Ebay in two months and see what it fetches. Designer clothing? Worth nothing at the yard sale.

Buyers are surrounded by their everyday purchases that have lost their initial value; they still bought them and they got over it.

The real estate industry has caught itself in a trap of its own makings. After telling people for decades that housing was a great investment - the jury is now out on that in consumer's minds. Today's buyers are trapped in a thought process that is causing them to hesitate: What if today's purchase isn't worth "more" at some point in the future? Even if homes still are a good financial investment by certain spreadsheet calculations of future points in time, what matters today is that Gen X and Gen Y consumers simply don't believe it. They are hesitating because they can't predict the future.

But maybe we can get them to act by pointing to what they have done in the past.

Most buyers have never cared about how much money they lost on past purchases; they bought the car, computer, vacation anyway. That's why it's high-time real estate agents started telling buyers to get over it. So what if it's possible the home will be worth less if measured a year from now? Most buyers won't be flipping it within a year. It's a fictional problem! No real loss will occur. Their down-payment equity (if any) will be trapped anyway, because no bank is going to let them pull it out ATM-style ever again.

It's housing; live in it, pay for it, get over it.

REALTORS better disabuse buyers of this non-problem soon, too. If market conditions change, it's not going to be for the better any time soon (can you say unemployment, inflation, flat income gains?). Agents can help their buyers move forward in two ways: First, stop talking to them in investment speak, about prices in a future you cannot possibly predict. Second, gently point towards their buyer's car, shoes, smartphone and kid's' college education: Remind them that they were perfectly happy losing money on those purchases.

Why stop when it comes to buying their home?


Comments (7)

Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Depends on whose ox is getting gored and the blame game.

Aug 03, 2010 03:02 AM
Lisa Delzompo 951-704-4559
Sand to Sea Properties, Inc. - Palos Verdes Peninsula, CA
Experienced, Trusted, & On Your Mission: Home

Yes, they have lost money purchasing other things that they "consume" or use up over time.  But housing is more complicated than that, since they can rent or buy.  And, over time, if they stay in that home, then the loan gets paid off and they have an asset that - if rented out - pays them income.  Thanks for the food for thought.

Aug 03, 2010 03:05 AM
Matthew Ferrara
-- www.matthewferrara.com - Boston, MA
Matthew Ferrara & Company

@Andrew: maybe, but I think they're still missing the boat by waiting over a future they cannot predict.

@ Lisa: I'm not convinced housing is more complicated. It certainly didn't resist any other market forces in a "more complicated" way than any other commodity purchase. And they also "use up" a house by wearing it down, damaging it (and needing to repair it); in may ways, the Total Cost of Ownership (TCO) of a house is higher than other commodities (cars, laptop, etc). And there's very little chance that people will be staying in their homes long enough to pay off the loan - that's from another century altogether, IMHO.. :>

Aug 03, 2010 03:08 AM
Harry F. D'Elia III
WEDO Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

All we can do is give our buyers information so that they can make an informed decision.

Aug 03, 2010 03:11 AM
Bob Willis
Berkshire Hathaway HomeServices California Properties - Orange, CA
Orange County & L.A. County Real Estate Agent

Great post.  Very blunt, to the point and accurate about how people will buy just about any consumable item that instantly loses value, but hesitate to buy a home for the long term.

Aug 03, 2010 04:13 AM
Heather Oberhau
Prudential Fox & Roach - Newtown, PA
Bucks County Real Estate, e-PRO

Matt, I wrote a post about this a few years ago, which everyone started compulsively asking me "How's the market?"  Really, at the end of the day, does it matter how the market is?  People have children and outgrow their house, people die and have to sell their house, people make more money and want to upgrade, people lose their job and have to downsize...Life keeps on rolling along, no matter what condition the market is in.

Live your life.  Move one.  Make the smartest decision that you can at the time, and let it go.  Trying to get clever and outsmart a market that no one can predict just leaves you hamstrung by indecision.

Aug 03, 2010 04:35 AM
Matthew Ferrara
-- www.matthewferrara.com - Boston, MA
Matthew Ferrara & Company

@Bob: Yes, we have to consider the consumer psychology when it comes to the house purchase; I think we've tried to turn them into "investors" for decades; now we are all struggling - buyers and agents alike - to learn that we're just consumers... :>

@Heather: Exactly! Either you're a buyer, or you're a house-flipping-investor. Most people can't be both. Tomorrow is too unpredictable to worry about what will happen. Put the minimum down, pay your monthly payments, and put the balance into a trading account if you want to "make money" in the market... :>

Aug 03, 2010 08:54 AM