‘Price The Only Weapon’ For Disenchanted Seller
Bankrate.com fields a question from a disenchanted homeowner. “Q: Four months ago, I signed a six-month listing contract to sell my house with a big local real estate office. I think it was a mistake. They’ve only gone through the motions, and didn’t bring a single offer, showing my home just twice in a fairly hot market. Now, I’m getting calls from them, saying the price is too high and I should cut it. If price was my only weapon, heck, I could have gone FSBO.”
“A: Your best option at this point, unless you desperately need to sell your home immediately, is to wait out the balance of the contract and shop around for a new brokerage. But that won’t necessarily strike at the root of the problem. While there’s certainly a chance your agent is a slacker, there’s a better chance your home is, well, a tad overpriced.”
“Anyone who’s been in the real estate business for a while will tell you that the most common reason a property isn’t selling or being shown is a too-high asking price. Think about it: If your agency thought there was a good chance of selling your home at or near your asking price, it wouldn’t be trying to talk you down, they’d much rather hold out for that higher commission check.”
“I presume your home is priced above the area ‘comps’ that your agency should have compiled for you in a comparative market analysis. Sometimes, if such higher-than-market homes do attract suitors, the deals can disintegrate when buyers have trouble securing financing. For example, if present market conditions and comps for the past six months don’t support your asking price at the bank, the home will not appraise favorably for a home loan.”
“Be careful trying to hold out. If your house remains on the market too long, it might actually get harder and harder to attract good offers. After a while, buyers may assume you’re getting desperate and will try to lowball you. Also, it doesn’t sound as if there have been many, if any, buyer’s agent tours of your house. In the first couple of weeks after it went on the market, there should have at been at least a few such agents dropping by to preview your place for their clients.”
“The price may have kept them away. If buyer’s agents are not bringing potential buyers around it could be a good indication they, too, think your house is priced too high.”
“If you do plan to change agencies, interview three different ones and get estimates on your home’s price range. But don’t just pick the one that best agrees with you. Sometimes, agents will use that tactic, all the time intending to talk you into lowering your price later.”
Too bad we can’t see the reply from the guy asking the question. I can only imagine what it would be…
“But but but it’s different here”
“But I need to get my asking price to be made whole”
“But my former neighbor got $xxxx last year”
Any others?:)
I am entitled to my price.
“My house is WORTH it!”…despite probably selling in 2000 for half what believes it is “worth” now.
We deserve universal healthcare!
Whoops, sorry… I know that was bait but I couldn’t resist.
A useful comment is that as much as we were irritated by the agents pushing prices up, they will also push the prices down. Their job is to make a deal happen and that is what they will ultimately attempt to do, by raising or lowering the prices as necessary.
The good ones provide additional value. With the ungodly number licensed in the last 5 years, the good ones get proportionally harder to locate.
I just posted this elsewhere, first quoting DC_Too:
“‘Quick thought - we know the ranks of the realtors has swelled considerably in the last few years. That suggests many, if not most, real estate agents in business today have NEVER EXPERIENCED A DOWN MARKET.’
Good point!
California: 26 million adults; ~500,000 realtors
adults to realtors = 50:1 = too many new and naive realtors = bad decisions/advice/pricing
It’s cliche by now, but this is going to be very interesting.”
But, the ‘Automatic Millionaire’ says…
I need xxx to pay off my refi , 2nd, and heloc, unless you want to cut your commission to 1% ?
Here’s some first-hand evidence from the Big Island of Hawaii…
A neighbor two doors down put his house on the market for $730K a few months back. He got no takers. Cut the price to $695K. No takers. Cut it to $665K. Still no takers, so it’s now down to $629K! Still no “Sale Pending” sign on the lawn.
We thought his asking price was too high, but we’re a bit surprised that he’s had to chop $106K off his asking price. There are two other houses for sale on my street that have been for sale for a few months, and they’ve also cut their prices, although not as sharply. Still no buyers, as far as I know.
Glad I don’t have to sell right now!
But my kids want a pony?
Ponies, like chickens, only appreciate in value.
Feeding and housing them are irrelevant.
The ponies and chickens that is, not the kids.
no kids too!:)
US foreclosures up 45%.
Wow Ben, +45% at this stage of the game. Sounds ominous.
Wow Ben, that is a huge figure for foreclosures!!!!! Bring it on…
But Gary Watts said a 15% in appreciation this year. Buy, Buy, Buy.
MA foreclosures up 200%, but the actual number is still pretty small.
The housing market is determined at the fringes. People don’t turn over their houses all that often so smaller percentages of the market have larger influence.
That is why prices are so “sticky” and they are such great investments, right?
Right?!!!?
What is your point? I understand how foreclosures can influence comps, but MA will have maybe 15,000 2005 foreclosures in a state with 3,000,000+ homes.
I guess my point is that the foreclosed / total ratio is not as informative as the foreclosed / current sales volume ratio.
but this goes to the point of how to determine the impact of some of the stats that float around. I always contend that things never end up as bad as the gloom and doomers predict. this blogs has people weighing in for the most part that disaster is almost upon us, but when you look at the relative (actual numbers) impact- foreclosures, ARM adjustments, etc. the economy should be able to handle them without much problem (my opinion). To your point what is the relationship between current volume and foreclosure anyway? Most foreclosures don’t occur in the same year the homes were sold, and if that were important then with volume up huge in the last few years foreclosures should be up huge and we shouldn’t worry.
Foreclosures will add to current inventory and current sales / inventory is an important indicator. As I just said somewhere else, I also try to be contra-contrarian at times, so I don’t have a huge point. Just an opportunity to be sarcastic, which I’ll never pass up.
Don’t discount the “wealth” effect though. Just because I don’t have to sell, the neighbor down the street getting foreclosed or selling for 25% less than the high will hurt general spending in the economy, and there are lot of service jobs based around real estate that will have to find new areas of productivity… but they will.
I don’t expect to be crossing radioactive wastelands in a couple years. This cycle will probably be more severe than most, but here’s a quote from my own blog:
I would see foreclosures as heading up based on the ARMs.
Again if you read my other posts on monetary policy, I write that I don’t expect the dollar to explode, implode, or do any sort of ploding at all. It is possible, it is also unlikely.
This too, shall pass.
My neighbors put there house on the market Thursday. They had an open house Sunday. Monday, she told her boss, a friend, that they got and accepted an offer for their asking price of $490.00 a square foot.
For the sake of comparisons, we bought our house on a double lot for $110 per sq. ft. in 1997.
And your point is…………?
Just when I think the bubble has burst…along comes some fool who’s willing to pay 3/4 million dollars for a 1500 foot single family home. I feel like Alice in Wonderland… I can’t see the rationality. It blows my mind. Then I start doubting… maybe I’M the one who doesn’t get it. Maybe things are different. Of course they’re not… but $750,000 for house on half my lot and with 70% my living space? It’s frickin’ crazy. It’s delerious.
I’m with you Glenn. Everytime I get of glimpse of reality, I hear/see/read some insane RE deal involving the local Walmart cashier and I have to wonder if I’ve been transported to a parallel universe.
Sure there is a rationality …at least in the mind of the person who just paid the $750K and that being, that their new home will be worth at least $850K by next year and $935K the year after (you know, that’s accounting for the slow-down to “normalacy” of ONLY 10% appreciation per year). Boy, that kind of return is worth eating beans and rice, having no furniture, etc. The NAR, the nice Realtor, and the nice Mortgage Broker that helped your new neighbor wouldn’t knowingly lead him astray with their unregulated advice, would they? As we all have known, the hardest part of a bubble is calling the top. If you can still find a “greater fool” to buy your house right now for a price you think is ridiculous, then you should sell asap. Of course that is a life decision and if you don’t want to move, then sit back, enjoy your double lot and laugh at all the other idiots getting into financial hot water. Just don’t lament about what your house “was” worth when things come down.
Out of San Diego, what was it that convinced you there was a problem in SD? Being an outsider (from Chicago) it was easy for me to see the forest for the trees (although I struggle still to make my wife understand why we haven’t bought a house yet). Yet you sold your house and I merely decided to sit on the sidelines. It must have been something compelling for you to make that decision.
I beleive the key factor is having an intimate knowledge of the local market and understanding underlying fundamentals along with luck (since no one can time their transaction perfectly). I think what helped make the current San Diego bubble situation clear to me and that there is indeed a serious problem is that I was a fairly long term San Diego resident, (since 1984 when I graduated from college) along with my vision being balanced by short term moves in and out of SD due to my Navy Officer career. Being a finance undergrad (with several Real Estate courses [learning the economic fundamentals, NOT how to hype and sell]) the SD market intrigued me. I witnessed the last bubble from beginning to end. At the end of the 80’s early 90’s, the last bubble spike, I didn’t think I would EVER be able to buy in SoCal. So I just kept renting in great places where I could never afford to buy (condo in Coronado) and saving the difference. Boy did things change by 1992 (the bubble burst). Home owners all over the county were upside down and couldn’t sell their homes for what they owed. The same type of enthusiasm that made people buy as prices increased, reversed itself and became fear, causing buyers to not buy (unless they got a great deal of course) through the rest of the 90’s. Real real estate investors (not speculators) still could make money, but you had to assume appreciation at approximately the same rate as inflation. Equity was primarily built up by paying down the principal on the loan. I was scared out of the market in 92 and ultimately bought my home in 99 because my job forced me to stay in SD and it was actually easier at that time to find a great home to buy as the rental home market was very tight (opposite as now). I bought because I needed a nice home to live in (one small kid and a pregnant wife at the time). You did need your 20% down…maybe that was the barrier to entry as compared to the easy loans these days. The house was built in 1992 (nice, upgraded, on the golf course, etc.) and I paid the original owner $50K LESS than what she origianlly paid seven years earlier. Don’t ever try to convince me that SoCal real estate ONLY goes up! Anyway, price wise the house was stagnant through mid 2002 (it wasn’t an investment, rather my dwelling, so I didn’t care…I just didn’t want it to go down) but all of a sudden with the bubble it skyrocketed between 2002 and 2004, up 2.5 times what I paid. There is absolutely no way to justify that. It was appropriately priced when I bought it (I thought it was a fortune at the time). NONE of the reasons brought out in the hype as to why SoCal real estate was worth the crazy appreciated prices made any sense. The sheeple were eating it up and jumping on the band wagon. This was the same land, the same air, the same ocean and the same place relative to other parts of the U.S. (and internationally) that it was a few years earlier. Nothing changed except the hype. I could see all the factors converging and knew that when interest rates started to creep back up, that the bubble would pop. So we made the tough choice and sold (tough because we love SoCal). The pop happened slower than I expected, but the speculators that jumped onboard throughout 2004 and 2005 have added the exclamation point that will make the POP even more drastic (fuel on an already lit fire).
You didn’t say when you moved to SoCal. If it was mid 2003 or later, then I think sitting on the side lines was the best choice you could have made. I truly believe that prices will come down a minimum of 20% over the next two years (you’ve seen more drastic predictions on the blogs) and if you want to buy (to reside, not as a speculative real estate investment) then do it when it feels right and the cost of ownership (i.e. the P/I, taxes, maintenance, etc.) is within your budget. I would guess that you didn’t buy because you analyized your situation at the time and it was too expensive and risky. When that feeling changes, you will know when the right time is. Your wife may feel she missed out on a great opportunity to make money over the last few years, but she may feel better when the Union Tribune starts running stories of all the people losing their shirts over the next couple years. You truly realize that most people have no common sense. The true irony is that there really are LOTS of people that made a LOT of money flipping properties…they were just lucky and it required no intelligence. This will be balanced out by all the late comer speculators who will lose an equal amount.
this is the tail end crowd. not the sharpest knives in the drawer.
not the brightest crayons in the box…….
Sounds like a souffle to me.
Are you prepared for the explosion?
Bad link
It’s opening up for me… anyone else having an issue?
No workie for me either
nada
The articles line on trumpets website is also having problems… weird…
It worked for me 10 minutes ago, but no more.
“more like a bomb than a bubble”
New website Ben - thehousingBOMBblog.com
use mozilla….
Works for me Melody.
It is working again… good article as well, should read it.
I think it’s the website. Some times it works and some times it does not. Go to http://www.thetrumpet.com and click the link, bubble with a fuse.
Since Ben’s Blog seems to have some extremely bright people posting (and rather honest). I had a few questions. What does everyone feel is a better judge of the true value of the US dollar right now. Oil or Gold ?
Also is Gold to expensive to buy right now ?
Besides storing gold coins and refined oil products in a underground bunker what are some of the best ways to hedge inflation right now.
thanks Ben for the great blog.
Think “Peak Oil.”
http://www.princeton.edu/hubbert/current-events.html
Great link, and the peak is happening just when China & India are demanding ever larger quantities of oil to fuel their new cars, homes and factories. Americans have shown little interest in energy conservation, regardless of price- Think Hummers and heating a McMansion.
I believe the dollar is overvalued by about 15%.
Like the housing bubble, the dollar is in uncharted territory. We have a current-account deficit of 7%!!! No currency has been able to sustain that and keep its value.
The only thing that I can’t figure out is why the dollar hasn’t ALREADY lost 15% or 20%.
I’ve got most of my stock market money in international stocks… Europe and Southeast Asia… until this whole thing boils over.
The term is “irrational exuberance.” That, and the dollar is currently paying 4.5% interest and will be paying 5% soon, possibly up to 5.25% or even 5.5%. By way of comparison, the British pound is paying about 2% (I think…) and the yen is at 0%. By comparison, the dollar looks like a great “investment.” It is particularly interesting since as the deficits rise, the government will need to pay higher and higher rates to keep investors’ money in the US. Otherwise… crash.
The dollar may be overvalued, but relative to what? People who take dollars and give us things for it and then loan those dollars back to us, inflatiing their own currencies… so their economies aren’t all roses either.
A significant question is what will happen when millions of people realize that a $500,000 mortgage is real money and not just some fantasy monthly payment. At that point loans will be harder to get. People will want dollars. They may get MORE valuable, not less. All the dollars in the world repatriated would represent about 10-20% of the mortgage debt in the US (from memory). If 30% of that mortgage debt becomes worthless then the value of the dollar rises, not falls.
Of course then the FED steps in and does finally destroy the value of the dollar by making good on all the worthless mortgage backed securities. That is when to jump headlong into gold and oil.
But for the time being, I would take a goldilocks approach and not get too hot or cold on hedging inflation or deflation.
Now, let’s hear what the smart and honest people think…
Of course then the FED steps in and does finally destroy the value of the dollar by making good on all the worthless mortgage backed securities. That is when to jump headlong into gold and oil.
Trouble with this logic is, you’d probably not have sufficient time to “jump headlong into gold/oil”. Have you heard the term “jump discontinuity”? That happens quite often in the currency markets. Nothing says the USD is immune to a very sharp drop as sentiment changes, literally overnight.
This is why I’ve tried to remain positioned at 50% gold / 50% US cash in recent years. I don’t trade in and out of my gold position, though.
Just a quick question: I haven’t heard TIPS mentioned on this board as a tool to hedge for inflation. Am I missing something? Why not buy TIPS instead of gold or oil ETFs, because of default risk (gasp)?
The return on TIPS is based on government calculated heuristics.
The risk is they underestimate inflation as many believe they have and will… essentially you are letting the fox report on the status of the henhouse.
Assuming a significant collapse of the housing market, the ensuing presence or absence of inflation will depend upon the Fed. But guessing the course of the Fed, especially one with a new chair, is a tricky proposisition.
Personally, I’ve moved a significant percentage of stocks into international funds. I’m also looking at American manufacturer’s that will gain an advantage from a declining dollar.
I move half the family investments overseas in Nov 2004. After the election the trend in the current account deficit and the federal deficit were set for the foreseeable future. Plain old mutual funds, but they made 40% returns until end of January. However, the future is uncertain. No one can guarantee that *all* equities wont get socked when the bubble deflates. Best to diversify into everything except real estate.
If USD goes into decline you have to be careful about investing in US. Currency declines are a real b*tch for eating principals and eroding capital.
Home Builder’s bargain.
Wow, big price cuts. Wonder if they sold any houses at the original prices. Have seen any cuts like that in the SF Bay Area. This may be due to the land being more expensive.
Meant to say “have not seen”
When they get to $95/ft call me? hehehehehehe
That has been floating around this blog for a few days. The interesting thing is that it appears in the Mercury news but no local Sacramento papers. It’s rumored builders in sac are getting ready to significantly slash prices but they do not want to lose the deposits on homes they have already sold. Once they clear out their current pending sales the axe will fall. Publishing in the Bay area paper but no Sac papers kind of demonstrates this.
Slash prices but keep it from the locals.
This thing is floating around the internet big time. I have had this ad forwarded to me no less than 10 times, by indivduals who are not bubbleheads.
is this like car ads? Only one car at this price kind of stuff?
I see lot number in the add and there is a disclaimer– about time sensitive information and check availability.
Any one on this blog from SAC can confirm that it is not SO?
That area has an enormous amount of inventory. The majority of the building in Sac was in that area and last last quarters sales were down 95%. No tricks there. and don’t worry about availability. All the local HB’s are slashing prices.
Also, this is a REALLY crappy area: Out in the flat farmland 40 miles north of sacramento. You are talking an hour+ commute into sacramento, and absoluetly piss-all closer.
It’s basically “0-cost land, 0 cost permitting”.
Sacramento refers to it as the Rice Pattys. depending on traffic your looking at 20-30 minutes. I drive that route often to get to the airport.
Drhorton is not the only hb making cuts, Centex is offering 50-150 of its entire inventory. I assumed the large cuts were on their $800,000, but they could be offering $150,000 off $400,000 as drhorton is doing.
Does anyone know?
What part of Sacramento isn’t flat?
I lived there many years and it used to be lots of farmland. 25 years ago it had lots of charm. Now it sucks 
Over 80% of $1M+ Santa Barbara homes are bought by people who live on tips, namely waitresses, cab drivers, janitors, etc. They can only delay the bust for so long.
these homes should be avail to purchase on the courthouse steps …..soon…..
Not soon. HELOCs to pay the mortgage, then missed payments, short sales, the banks are going to have to renegotiate some of these toxic mortgages then insurance costs rise and the taxes are crushing (1.25%)then we start seeing foreclosures and then it will take a few months as the banks whip the property into shape for sale. Then and only then will the banks stop taking back the house when they are carrying inventory to their legal limits and finally let the houses go to the highest bidder at the courthouse steps. Say Sept ‘07.
That soon? I’m thinking ‘08-ish and then ‘09/’10 for the general disgust with all things housing to set in.
goleta -
Do you have data on that? That’s amazing.
I wonder if it’s close to that in parts of Marin and Sonoma in the Bay Area.
I know of one that was actually auctioned and sold at auction in the last month. I think there are 2 others at the auction stage and looks like about 13 on deck…. we will see if they get that far… the others are all listed for sale and so far just sitting, waiting and wondering.
Greenlander - the US$ is priced right — althought we are inflating like crazy, so are all the other contries, in fact compared to Japan and China the US$ probably should be higher. I would consider the Swiss franc as the safehaven to the dollar.
The fundamentals on the Euro baffle me, I think it’s absolute crap but maybe Iran and other countries trying to convert to it’s use support it.
You and I will have to agree to disagree on this topic. No currency has ever sustained a 7% current account deficit over an extended period without tanking.
greenlander, it’s not just the deficit - it’s also the money supply. It’s a scandal the way the Government abruptly stopped publishing M-3 just when it suited them, apparently to “cut costs”. Measured in terms of money supply, US inflation rate is probably much higher than what the Government dares to report (CPI and friends).
IMO, all paper currencies are highly suspect at this point. The situation is somewhat reminiscent of the “beggar-thy-neighbor” competitive currency devaluations that were pervasive during the 30’s depression. Another hallmark of that era was protectionist sentiment - we’re beginning to see a lot more of that, too.
“Bretton Woods 2″
thank the Peoples Bank of China and the Saudis for keeping the dollar up.
Glen & Greenlander
Thanks for the advice. The international markets do look much more appealing than anything in dollars right now.
OT….. I asked earlier in the week, and I couldn’t remember what post I wrote it in, but are there any other listings for foreclosures besides realtytrac? banks don’t list this info anymore or so they tell me. Thanks for the help.
there are sites but you have to pay.
BEWARE. This same thing happened to my Aunt and Uncle. They picked the realtor who had the best sales, which she touted as a selling point, and said their house was worth the most. They signed and got suckered in. She said the house was too high, but they were stuck. Apparently she became a top seller by getting listings and trapping people. Rather than reduce, they held out and signed a contract with a more honest seller and sold their home.
HONEST AGENT.
Actually the inventory for OC is 12287, the larger number includes their listings for part of Riverside county and extreme north San Diego county. However, no one can deny that inventory is rising, the only question is when we will see some undeniable YOY declines in prices. Right now, realtors are brushing off the decline in January saying that those numbers reflect cheaper housing like condos being sold and are not reflective of the broader market.
To be honest, I have not yet seen prices dropping and rents are rising here overall. Hopefully many of those who are waiting it out wont jump on the housing bandwagon for fear of falling behind.
Rising rents mean higher interest rates.
Rents are included in CPI.
Higher interest rates contribute to bursting the bubble.
Funny how lower median prices are caused by cheaper condos, but higher median prices aren’t caused by tearing down a 2br/2b and building a 3-story yardless McMansion.
Anyone looking for price drops, there’s a place near the beach in SoCal that’s gone from $8 million to $6.3 million asking. I guess, we can toss that out as an outlier.
Which is that?
Is it the tower in Sunset Beach?
It has been for sale for ages with 3 different agents.