Why Tons of Buyers Are Screwing Up

By
Real Estate Broker/Owner with J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY License # 49FA1074963

Luke's first train ride. He got a window seat. Price and Terms. 

Price. Terms. 

I will bet you a 6-pack of Old Milwaukee that if you ask first-time buyers what the term "terms" is that a bunch of them would screw it up, maybe because their buyer agent is a glorified door unlocker who is a payment behind on his car. But that's another post. 

Right now, thousands of buyers across our great land are poisoning their prospective home purchase over an appliance, a repair to an electrical panel, or less than 1% of the price of the home. Because, after all, it is a buyer's market.  What is a buyer's market? Well, to a carrier pigeon buyer agent who won't properly advise their client out of fear of losing them, it is whatever the buyer wants. And typically, the uninitiated buyer will subjugate the seller to their will to get a great deal. And why shouldn't they? Sellers were making buyers waive inspections, come up with extra cash with under appraised homes and equally insane things 5 short years ago. Point conceded. And if buying a home is a tit-for-tat event for you, read no further. But if you want to buy intelligently, read on. 

We got off track in the earlier part of this decade by calling homes great investments. Everyone bought that. Later in the decade, homes became bad investments, and almost nobody bought. So I don't begrudge anyone for taking a wait and see attitude. Yet homes are like insurance. They can behave like investments, but they serve a greater utility- while you hope to never actually use life insurance, you do use your home as a place to live. It isn't a cold asset. You derive utility from it. Live within your means and you are OK, as many prior generations will attest.  

Any honest perusal of my blog will attest to the fact that I have never had a mantra of "Now is the time to buy!" I am rethinking that. 

About a year ago, some guy was featured on Active Rain advising people not to buy a short sale because they were going to miss some narrow window of opportunity for historically low rates. Those rates were higher than they are today. With current rates so low they are starting to resemble Mariano Rivera's earned run average, too many people are missing the train because they want a window seat. They have to dominate the seller or no deal. And that's a shame. Right now, the monthly payment on a 15 year mortgage is just a tad higher than the payment on a 30-year mortgage 3 short years ago. If you throw an extra payment or two in annually, you could pay your house off in 10 years. 

I have witnessed buyers lose fantastic deals on homes that have everything they wanted over a $5000 difference on a $600,000 home. The seller had the temerity to attempt to negotiate. Bad seller. No sweat off my back; I have a home and if my company were going to go under it would have a long time ago. There is no one buyer I need. But these people need a home. They can't justify the move until they have subjugated the seller to their absolute will, and if the seller won't submit, they are banished. The buyer keeps hunting. Here's why that's crazy: the town crier won't announce when the market bottoms out. Nor will he let us know when rates will rise again

A 3/8 percent rise in rate over the period of the loan will dwarf that $5000 buyers still want from the seller after rounds of offers and counter offers. The riding mower or the chandelier won't pay that extra money, but many of today's buyers aren't thinking of that- they feel a societal-driven compulsion to chew sellers down ever more. I don't blame them for being this way. I blame their agents for not educating them about local conditions. I blame the NAR for running bland commercials that sound like 1970's era Amway commercials that build trademark recognition and little else. It is only a good deal if the seller actually agrees. If you are making offers on your 3rd or 4th house, wake up- if your agent won't say it, I will. Sellers have never been this motivated. They just dislike being your gimp. Smart business people don't have their trading partner humiliated. Magnanimity is not weakness. 

I would advise buyers to get on the train. With the terms available now, you are in the best position any of us have ever seen. Be happy you have a job and a down payment, don't kvetch about not riding in the conductor's car, and rejoice that you are one of the fortunate few when you arrive.  

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Topic:
Home Buying
Groups:
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I Love NY
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Tags:
interest rates
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Rainer
30,752
Peter Rozsa
Cupertino, CA - Cupertino, CA

In my humble opinion, this is the result of most younger buyers raised by their parents who gave them everything they asked for and when they didn't get it, they held their breath and stomped their feet until they did.

The "me now" generation expects everything to be done their way and are spoiled beyond rotten! They don't want to negotiate and they think the world owes them everything they want.

One first time buyer diddled with negotiations with three different homes that were exactly what they wanted (excellent schools, location, price, etc.) and meanwhile the seller received offers from others so my buyer was told to fly a kite (much harsher words were used).

Then my buyer said that there should be a way to force the seller to give it to them because they offered almost the asking price. I told them the seller can refuse to sell to anyone.

They got their "just deserts" when they finally accepted a full price counteroffer on the fourth house and 9 months later, and literally the day after contracts were signed, the wife lost her job. There is cosmic justice in this world!

Nov 09, 2010 12:11 PM #191
Rainmaker
648,710
DeeDee Riley
Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA
Realtor - El Dorado Hills & the Surrounding Areas

I agree Phillip.  I recently had a friend ask me if there were any good deals out there.  I told her "everything is a deal right now".

Nov 09, 2010 12:11 PM #192
Anonymous
Geo Gervasi

Great post Phil. Honest and forthright. Not too many agents take the high road and not too many do the right thing. We need more agents like you and some of the others on here.

Nov 09, 2010 12:27 PM #193
Rainer
123,815
Nicholas Caron
Caron's Gateway Real Estate - Derry, NH

Phil,

Its hard for buyers to see past the buyer's market mentality.  They feel that means they are in the driver seat and can dictate everything.  While they do have the upper hand, greed sets in and overtakes rationality.  If they saw the bigger picture then things might be different.

Nov 09, 2010 01:10 PM #194
Rainer
196,480
Stacey Brown
ILM Realty - Colchester, CT
REALTOR

being a gimp? LOL. Buyers that walk for pennies are not serious buyers. That said, it is seriously aggravating, regardless which side of the transaction you are on.

Nov 09, 2010 02:06 PM #195
Rainmaker
334,102
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Phil, well said and it takes a buyer and his/her agent to realize that.

Ty

Nov 09, 2010 08:51 PM #196
Ambassador
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Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Philip, a post that is right on the money. The buyers still do not recognize the value of the deal they are getting and their agent's must be too panicky about losingthe deal to get them to recognize that.  I'll raise you a case of Schaffer or Ballantine Ale

Nov 10, 2010 01:13 AM #197
Rainer
32,488
Sandy Vale
Punta Gorda, FL

While we all realize your preaching to the choir, it helps vent the frustration we are going through.  Better days are ahead and hopefully we will see a better balance between buyers and sellers terms.

Nov 10, 2010 01:57 AM #198
Rainmaker
679,495
William James Walton Sr.
WEICHERT, REALTORS® - Briotti Group - Waterbury, CT
Greater Waterbury Real Estate

Philip, I can't argue with you. Buyers, and sometimes their agents, just aren't thinking these days. Don't buyers know that a bird in the hand is always worth more than two in the bush???

Nov 10, 2010 05:24 AM #199
Ambassador
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

J. Philip, "They have to dominate the seller or no deal. And that's a shame." This is unfortunate but so true

Nov 10, 2010 12:49 PM #200
Rainer
222,458
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

Thanks for formulating this so nicely.  I have been watching my buyers blow their deals one after the other because of their unreasonable expectations.  I think I will start sending this to my buyers before we even make an offer.  Of course, sometimes the sellers are just dreaming about their price still, so it works both ways.  At the end of the day, it works best wehn both sides feel like they won.  A bad taste on either side is good for no one.

Nov 10, 2010 02:52 PM #201
Ambassador
703,651
Lee & Pamela St. Peter
Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522 - Raleigh, NC
Making Connections to Success in Real Estate

J. Phillip ~ I'm not sure I could write anything that's not already been said...  You've obviously hit on a topic that's pretty close to a lot our hearts.  Our work is such that we must be able to communicate effectively with everyone we come in contact with...  the buyer/seller we work with, the other agent, the attorney, the appraiser, the inspector, and on and on. 

To me taking the "let me show you the facts" approach is much more effective than hitting them over the head with "you should".  And for the most part folks will look and reason with facts...  but nobody likes or wants to be "told".  Putting pencil to paper does a good job of visually showing what the reality really is.

 

Nov 10, 2010 11:36 PM #202
Rainer
15,715
Katy Cardinale
Douglas Elliman Real Estate - Northport, NY

Thank you for the great post.  This attitude you describe is closely related to the "entitlement" society we live in.  Many people want something for nothing, and it complicates the deal.  Getting back to prior generations' attitudes of hard work, integrity and personal responsibility would go a long way.

Nov 11, 2010 12:50 AM #203
Rainer
124,370
Michael Myers
King-Rhodes & Associates - Cherokee Village, AR

"glorified door unlocker"... priceless. That's just too funny.

All in all, a great post on today's market. Well done and well written.

Nov 11, 2010 12:55 AM #204
Anonymous
Sylvia Jonathan

Great level-headed post. No hype that it's now or never for buyers. The reasonable approach is, if you want a home, don't let the small stuff keep you from getting one.

I think the trouble with a lot of buyers is that they listen to friends and family who are second-guessing what they should and should not pay or ask for (without ever having seen the subject home!) and the inexperienced buyer does not want to appear the "chump" who did not know how to drive a hard bargain.

I agree with you about NAR's broker mantra towards buyers buying a home. NAR should promote more common sense consumer advice than hammer the Realtor brand at them. Realtors have garnered enough bad press in the past years, at times even being made responsible for the housing bubble. Self-serving promotion by a trade union sucha s NAR is not helping to dispel the pulic's perception that all we only act in our self-interest.

Nov 13, 2010 05:41 AM #205
Rainmaker
273,670
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

Well said Philip. Some Buyers think that they can get the moon and the stars. Hammer out your best deal and forget about the leaking faucet in the utility room.

Nov 14, 2010 10:09 AM #206
Ambassador
536,877
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
REALTOR® - Charlottesville Virginia Homes / Horse

Buyers today think that they can and should get everything that they want no matter how unreasonable.  And they get mad when they won't.  Its hard for then to realize that just because a seller doesn't accept their lowball price that he is not unmotivated.  Perhaps he is just not able to go any lower without being upside down.

Nov 16, 2010 12:25 PM #207
Rainer
28,333
Connie Wildasinn
WGroup Realtors - Long Beach, CA
20 + years at your Service

Great post, for years I have voiced your thougthts...

Nov 16, 2010 06:55 PM #214
Rainer
62,039
Eugene Lew
RE/MAX equity group - Happy Valley, OR

Well, too many buyers are on that bandwagon of beating the seller up. As a friend of mine said, the deal is more important than the house. I took a buyer over to a subdivsion, which this friend had listed with a builder. The buyer then proceeded to tell him that he had to sell, and what he was willing to do to sell to the buyer... later on, the seller told my friend, that he really hoped the buyer wouldn't buy a house from him. This is also a buyer who burned me by gonig to another agent after this appointment!

Its amazing, how many buyers are like that, and just cuz a bank owns the property, they think they can submit a ridiculous offer and stand any chance of getting the home. Banks are looking to move the property, but they are not looking to give it away.

I counsel my buyers to ask for reasonable repairs. In new construction, it is acceptable to write a long punchlist, with items such as a ding in paint, cracked caulking, or a door which drags carpet. However, in a bank owned property, often the bank will only fix major items, such as leaky roof, bad furnace or water heater, or an out of code electrical panel. Often these items are repaired before the home is put on the market. With retail sellers, having a furnace service, or fixing a dripping faucet is reasonable. This is subjective, and buyers should not give the seller too long of a list, or the seller may just do a poor job, or counter back with no repair. Each case is different. Often buyers will take on a lot of small repairs in order to give the seller an incentive to fix something bigger.

It is totally silly to lose a $600K house over $5K, or a $200K house over $500. The big picture is missed here, so often its up to us agents to give some persepective. If you get your buyer to ask for too much, and lose them the house, then you aren't helping them out either.

Nov 17, 2010 08:19 PM #216
Anonymous
Debra Chiarello

BRILLIANT!  Finally got to read this post and I totally agree!  Seems like many of today's buyers feel the need to slap sellers around into humiliated submission!  Ugghhh!

I try really hard not to take my buyers to over-priced listings.  It is a set up for disappointment.  Which is another reason why it is so important for Realtors to carefully price properties in the current economic climate.  If a listing agent cannot make the argument for correct pricing, then they are probably not going to be successful convincing unrealistic sellers to accept a "low" offer, however reasonable it may be!  If my buyers insist on seeing an overpriced property, I tell them right up front that they must be prepared for stubborn sellers who will probably not be very open to negotiating on the price!  Sadly, I am almost always correct and we move on to looking at other properties.  With unrealistic buyers, many times this experience is the turning point for them.  If they don't "see the light", I usually need to cut them loose.  I don't want to waste my time running around with buyers who are looking for the deal of the century!

Nov 19, 2010 03:09 AM #217
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