Show No Pity As ‘Pendulum Swings’: Buyers Agent
The Miami Herald has some tips for housing bargains. “He was a government attorney making a lateral move to a federal agency in another city. Like all buyers, he hoped to get the best possible deal for his family on the home he would purchase in the new area.”
“On his first house-hunting tour, he made a happy discovery. The once overheated market in the new city had recently cooled, giving buyers more leverage. He sniffed opportunity, and so did his real estate agent, Tom Early. ‘These days, we’re finding a lot more flexibility on the sellers’ side in more spots around the country,’ says Early, president of The National Association of Exclusive Buyers Agents.”
“After a brief search in their new city, the government attorney and his family found a house very much to their liking. After three rounds of bidding and counter-bidding, the purchasers picked up their prize home at $35,000 off the list price and at least $10,000 below what Early estimated to be its present market value.”
“Here are several tips for home purchasers: Don’t suffer guilt over opportunism. Although sellers still hold sway in some neighborhoods around the country, these are decreasing in number. An increasing number of properties are going up for sale, causing a shift in the supply-demand ratio. ‘It’s a simple matter of economics. When there are many more sellers than buyers, the pendulum swings toward the buyer,’ says Sid Davis.”
“Occasionally, would-be purchasers shopping in a buyers’ market will feel guilty about pressing their newfound advantages when bargaining. But Davis says such feelings are groundless. Sellers are not accustomed to showing pity when they have the leverage, and he asks why buyers should behave differently when the roles are reversed.”
“Consider waiting for stubborn sellers to drop their price. In a neighborhood where the market has recently shifted in favor of buyers, some sellers take a while to adjust to the new realities, Davis says. A price drop is often a signal that once-stubborn sellers are ready to bargain in earnest, maybe because they face a deadline of their own.”
“A price drop may be just the beginning. When a seller drops the price, it may be a signal that he is facing a deadline and will negotiate still more.”
“Never insult the owners of a house you’d like to buy. Sensing they have more power than before, Davis says, some prospective buyers take liberties that could easily backfire. One type of misstep involves any statement you might make about a property that wounds the sellers’ pride in their home. Another involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
Well, pretty soon those “ridiculously below-market bids” are going to be accepted by more motivated neighbors. And then those very same bids will show up in the comps. Then those bids aren’t below market anymore. And the stubborn seller is the ridiculously above-market dumb ass.
Well seller enjoyed the “ridiculously above-market bids” and now it is time for Buyer to enjoy “ridiculously below-market bids”.
My estimate there is atleast 30% overpricing in many markets
I estimate 40% to 60% in many markets.
The more the evidence stacks up the more I get the sense that you’re 100% right - 40%-60% off sale. Lenders will be overwhelmed with FB properties as interest rates climb, inventories skyrocket and FBs can’t wait it out as the DoM numbers wear them out. They simply won’t be able to afford to give in to the reductions necessary to get a sale done. Pretty soon sellers’ agents will be screening sellers to see what their equity position is before bothering to take a listing and add it to the growing list of properties that won’t sell…
They already do that
60% off? Uh uh.
“Pretty soon sellers’ agents will be screening sellers to see what their equity position is before bothering to take a listing ”
That’s what I meant. It’s way too soon to start the 60% off stuff
Markets always overshoot to extremes on BOTH ends- up and down. I am amazed that the real estate whores only think that prices can appreciate 100% in 5 years but can only decline 10%. I agree that the prices will bottom out around 30 % lower, but that may on the rebound from 40-50% lower.
According to this chart we’re in line for a 64% correction here in San Diego. Sounds insane but the numbers don’t lie.
Of course if that happened we’d have a complete banking meltdown of gargantuan proportions… so it can’t possibly happen.
Why can’t it?
that’s the median. but you have to factor in the typical size of these houses. they’re in the 3000 sf up from about 2400 sf during the mid 90 (based on estimate).
Kirk,
I can see no reason why we shouldn’t see at least 35-50% off (more, if it overshoots). That would bring it in line with historical ratios (mortgage pmt vs. rent and income). Again, if credit tightens up, we could lose more.
This is what many of us here are talking about. Do not buy next year at 10% off. We have a long, long, long way to go before it’s truly the time to buy.
Formatting oops! Sorry (need a preview comment function!)
All the more reason to let the current crop of GF’s beat their head against seller’s expectations. It’s going to take sellers unconcerned with comps (think REO’s) to break this thing open.
GF’s?
GF’s = Greater Fools, oh yea Duh!
It’s too funny reading that as GF = girlfriend as that is the common IM chat abbreviation.
Hey Ben,
I think we need to coin a term for “second wavers.” By that, I’m referring to those with patience, foresight, and yes, cunning, who let “first wave” lemmings like Mr. Government Attorney and the appropriately-named Mr. (Too) Early rush in and snap up the first round of “bargains,” with their piddly 5% reductions, while sitting tight and waiting for the massive wave of panic selling that is going to start gaining tsunami-like force by this time next year. To the victors go the spoils….
Sammy,
The term you are looking for is “Bottom Feeder”, a designation I wear with pride…
Vulture keeps the new investors away, who are usually a bit squeemish at some of the realities of bottom feeding.
I like the “Realists”. They ones that refused to believe all the BS that happened in the real estate market in the past 4 yrs.
If you’re going to buy, make multiple low ball offers on similar houses. Reverse the bidding war and make the sellers compete against each other for the sale.
I agree 100%.
Indeed. Walk away from insulting prices.
I’ve done this before on 3 homes and it wasn’t even a full blown buyers’ market. I got a 22% break. The key is to find at least 3 homes that you would be comfortable owning. Then it’s like fishing. I got a counter from one and went to #2. Got a counter from #2 from an insulted seller’s agent and, once I indicated I was about to submit another offer on #1, #2 capitulated. I got the best home. Works like a charm. But, once a full blown buyers’ market turns straight south and defaults become widespread then anything goes, as Ben suggests.
It’s still way way to early in this game to be shopping. Just read the blog and watch inventories pile up. Once the REOs hit, there’s no comp that you can’t underbid confidently. Been there before during the RTC and ended up with a peach to live in, for peanuts.
It’s just the top of the 2nd inning but everyone knows who will win. All that needs to be sorted out is the score…
Chicote and AZ_BubblePopper,
Do you cc you offers to all sellers or just let agents know you’re bidding on multiple houses?
I’ll be happy to let guys like you make lowball offers now and for the next few months. The insulted sellers will refuse, naturally, and won’t want to deal with you. Of course, when weeks and months have passed, no “acceptable” offer has materialized, and desperation is in the air, I’ll show up and very politely and apologetically make my, uh, rather low bid, humbly explaining I’d love to offer more, but just can’t. They’ll sell to me, because selling to you would be admitting defeat, and their wounded pride won’t let them do that — with you. So lowball away!
>when weeks and months have passed, no
>“acceptable” offer
I’m thinking anywhere from 2 to 6 years before true bottom feeding can even BEGIN…
Exactly.
I am. Guy on the space coast wants 260k for 2.5 acres which is part of 5 acres they bought in 1996 for 90k. He also selling the other 2.5 acres with a shack on it, and i do mean a shack…800sf, for 350k. Total for all is like 600k. Realtor called me back to my surprize and said they would seriously consider an offer of 500k. WONDER WHAT THEY ARE GOING TO SAY WHEN I OFFER 130K FOR THEY FIRST 2.5 ACRES?
Indeed, that realtor.org article is giving controdicting advice.
If the stubborn sellers walk away from the low-ball offers, it’s their loss and if I were the buyer I won’t deal with them any more.
I don’t understand the idea of ‘don’t insult’. This is business. The sellers who wanted to read buyers’ bios, and require squirrel-feeding as part of the deal had no qualms about insulting anyone. Simply put, he who has the power will dictate the terms.
After three rounds of bidding and counter-bidding, the purchasers picked up their prize home at $35,000 off the list price and at least $10,000 below what Early estimated to be its present market value.”
Well, they probably still overpayed for their prize home. I don’t see how any buyer today would feel happy even with 20% knocked off the price. It seems that housing prices need to come down 40-50% to get back to “normal.”
I think this is a frightening time for a new buyer. Congratulations, you just got a lowball offer accepted. Question is, how much could *you* sell for in a year?
No thanks. I’m waiting a few years.
Agreed, the “present market value” was probably determined at the time the offer was made, and by close of escrow the adjusted present market value was probably below the sale price.
again - here’s my tool to help find an entry point during the correction -
http://www.files.bz/files/11251/RealEstateValuationMethods.xls
Q: What is the “market price” when no one wants to buy your house?
A: Trick question. If there is no market for your house, there is no market price.
“Ridiculously above-market dumbass.” LOL.
I love how these people are acting like they got some screamin’ deal with 35k off. They’re buying something that probably has a list price of AT LEAST double what it was just 3-4 years ago (it’s probably more). If it was, say, 250k then and 600k now, then buying the thing for 565k isn’t much of a deal at all, in fact, it’s stupid. Wait for a couple years and you could get it for 350k.
Just because some flipper lists it for some outrageous price as the start of a bargaining position, only knocking 35k doesn’t sound all that hot.
there is no mercy when the issue is money. greed is boundless both way. haha.
Had a realtor giving me a sob story about how the sellers “had disappointment in their eyes” at my offer, and needed the money to retire, etc.
I could care less, this is a financial transaction. I’m not going to pay an extra $50K so the sellers don’t get tear-eyed. Further, if the sellers aren’t a bit miffed at an offer, then you probably paid too much!
Further, if the sellers aren’t a bit miffed at an offer, then you probably paid too much!
Good point!
If they accept your lowball offer, your first joyful thought is “Oh my God, they accepted!”
Then you follow with the horrible thought of “Oh my God, they accepted!”
The old sellers can also take solace that they’ll get some government pension money whereas most of the rest of us will get nothing! We gotta extract our pound of flesh where we can too.
“Never insult the owners of a house you’d like to buy. Sensing they have more power than before, Davis says, some prospective buyers take liberties that could easily backfire. One type of misstep involves any statement you might make about a property that wounds the sellers’ pride in their home. Another involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
This pablum sounds eerily similar to Dave Liareah’s warped mentality.
… some prospective buyers take liberties that could easily backfire.
No problem. If one seller doesn’t want to play ball, there is usually a long line of other listed properties a buyer can try.
The huge inventory in many areas shows that we are waiting for some psychological adjustment among sellers. Sellers won’t face reality if buyers get all shy about “hurting sellers’ feelings”. Many people can stay in denial for some time.
The price is all you need to say. Adding hurtful little remarks pointing out defects is no necessary and is counterproductive. They raised their kids in the house and it’s very sentimental. Let the price do all the insulting. If they’ll bite, they’ll bite. If they won’t, they won’t. Your biggest weapon as a buyer is the ability to walk away. Too many buyers get emotionally attached to a house they like and blink first. You have to be prepared to lose it to get it at the lowest possible rate.
95% of the sellers need to hear those little hurtful remarks to snap them back into reality believe it or not.
But the reality is that the seller decided it made sense to put his home on the market based on certain “numbers”. I know everyone is glad to screw the flippers et al. But I do think every seller has a point where they have to reevaluate whether it makes sense to move or not. In NY at my price point ($200s) I have to drop $20,000 in moving costs (mortgage, realtor fees, moving fees) There comes a point where if I have to drop my price low enough it makes more sense to stay and not lose that $20,000 from my equity. A buyer doesn’t have to accept that point but it doesn’t mean the seller is necessary crazy, greedy, etc., just that the seller might be better off staying where he is.
No one wants to deal with an A-hole. There’s no reason to be arrogant and disrespectful toward sellers and their property. I think most sellers would take a slightly lower offer from a courteous and respectful buyer who sincerely explains, “This is what I can afford,” rather than sell to some snarky lowballer.
Unfortunately, the buyer(s) sets the price, not the seller. Without an offer, there can never be a sale….
I plan to insult my way down the lockboxes on everyone’s favorite bench.
I’ll grow tulips on the patio, too.
i know…what are they implying these opportunistic buyers are doing to ‘insult’…offering what they’d be willing to pay, as in any normal market? Are they writing up offers adding that they want the kids’ paintings off the fridge next time they look at it because it offends their sensibilities? It’s hard to imagine “don’t offend” as anything but a ruse related to upping the offer amount…
“Never insult the owners of a house you’d like to buy. Sensing they have more power than before, Davis says, some prospective buyers take liberties that could easily backfire. One type of misstep involves any statement you might make about a property that wounds the sellers’ pride in their home. Another involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
If I were a buyer, I would insult them. If they don’t want to deal with me oh well, there are 100 other houses to look at.
Agreed. This statement might only make REMOTE sense when there is 1 house for sale for every 20 buyers. Certainly not the case now, nor probably for the next 5-8 years.
“Never insult the owners of a house you’d like to buy.”
If the objective is to get the best deal on the house this is excellent advice. Insults won’t induce the owner to lower the price.
Yeah, and note that Mr. Davis said “house”, not condo. I’m pretty sure you can lowball to your heart’s content on the fifty gazillion completely fungible condos that are presently or soon going to flood the market. At least an SFR has at least some degree of uniqueness, but even that argument only goes so far.
You can lowball on a condo and still commit financial suicide. People are aviding them like the plague.
avoiding*
Ridiculously low prices are probably what there true worth is. Is 40% haircut considered too low…ahahahah
Simmsays..
http://www.americaninventorspot.com
The sell-today price market is just about exactly 40% off. If you want to put a house on the market and have it sell in days, that’s the price.
you know, when I think about the houses I’ve looked at in the last year here even in non-coastal Ann Arbor MI, that feels about right. In many cases, if I knock off 30-40% of the price and think about whether I’d be happy to live in the place for that level of payment/debt (*not* considering what has driven this whole craziness, i.e., what the potential for appreciation might be, lol!), some are okay. But the thought exercise is an interesting one, because there is also part of me that worries that even with that ‘haircut’ off current pricing, how many years would it take for anyone to buy it for more than that? Maybe exemplifying part of the psychology behind the alleged affect of overshooting in the down direction at the burst of a bubble…
cheers all!
“Never insult the owners of a house you’d like to buy.”
Do I even give a rats ass about someone I will meet or know for 1-2 hrs.
Do I even care about their worthless ego.
Do they mean anthing to me..
NO! NO! NO! The hell with them! Take my offer or walk there are plenty home on the market.
When I first read this, I thought, “well, of COURSE, don’t insult a buyer” (you know, be polite, civil, don’t attack personally, have some manners, etc.)….then I realized what the writer meant was: don’t insult the sellers belief that their home is worth a gazillion more than the comps.
THAT isn’t an insult…that’s reality. Calling them idiots might be an insult. But making an offer based on what’s REAL isn’t!
I think the buyers agent was the one who said ‘no pity’ and the writer through in ‘no insults.’
Well said. No need to be rude. But no need to be stupid with the offer, either.
What determines a stupid offer??
Comment by mrincomestream
2006-05-08 15:01:15
What determines a stupid offer??
Making too HIGH an offer, of course!
Bwwahhhhaa you made me spit liquid
exactly, and how does he reconcile that w/ his earlier quote:
“Don’t suffer guilt over opportunism.”
f ‘em, see if those smug, high-flying specuvestors and realtors have any backbone.
And you and so many others here looking forward to putting the screws to others as the market heads back down are morally superior to the greedy speculator, how?
Try this, I’m no ethecist but…:
One might argue that a potential buyer turned away by a too-high-priced home is suffering no tangible damage by not making the transaction. A seller who offers to lower the price to the buyer allows the buyer to get into the house but really hasn’t changed the buyer’s life financially for the better in a dramatic way.
OTOH, today’s sellers are watching real equity evaporate by the day. You help him out by making a deal with him — no matter how unfavorable — by putting real money in his pocket instead of leaving it just “on paper”. This is truly a life-changing event for the seller.
yesterdays “ridiculously below-market bids”
will become tomorrows market prices….
Keep pushing for below-market bids….
down down down
A strategy: Two people work together to soften up homeowners. Person A makes a Truly absurd offer (70 % below asking), “shocking” the owner into a new reality, then person B makes a somewhat absurd offer (40% below) which now looks great…
Oh, I like that one
Frick and Frack.
There are already companies that specialize in distressed properties-in Denver, their billboard reads “We buy ugly houses”, what they do is for someone who has some POS they have to get out from under, they call these guys who buy it from them instantly at a deep discount and then resell it. With all the ARMs coming due, etc., I expect companies like these to start doing fishing expeditions. Go to some generic suburb where there are 10 of the same house for sale at the same time on the same street, mail them all a letter that they can get a check by this time next week for x (x being what they calculate to be a truly realistic number) I bet one will bite. These companies are quite astute at figuring out what properties are really worth and how desperate people are-they assume the risk of the property not reselling for the deal they get. The house next to me was appraised in tax records for 195, according to sales record this company snagged it for 140, sold it for 165 3 weeks later. Companies with deep pockets can diversify with enough properties so that even if some of it sits for awhile they can come out ahead.
And all it takes is for one of these companies to buy one house at the super discount price in your zip code for comps to start to plummet.
The problem with that scenario. Is that there are no deep discounts available and won’t be for a least a yr. Even you example wasn’t a deep discount. The folks those billboards are looking for are gamblers and drug addicts or people of their ilk who have inherited free and clear property that has been inherited or otherwise free and clear who would sell at any price just to get a check in their hands. The people who I know personally who do that would laugh at you silly for what you are proposing
When I was in Tampa a couple of months ago, I noticed these huge billboards (from distressed-property sharks) screaming out “DON’T LET THOSE OTHER GUYS STEAL YOUR HOUSE!” Just wait till the feeding frenzy escalates to the sharks turning on eachother in their crazed rush to rip the meat (or equity) from the FBs’ bones.
Bad cop, worse cop.
“Never insult the owners of a house you’d like to buy. Sensing they have more power than before, Davis says, some prospective buyers take liberties that could easily backfire. One type of misstep involves any statement you might make about a property that wounds the sellers’ pride in their home. Another involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
_______________________________
Prices have run up so far and so fast if you don’t insult the current owner then your offer is way too high. This clown thinks he did good by getting the house $35k below list. SO WHAT. I’m sure he overpaid.
Why would any buyer be inclined to feel guilt at this juncture? Even if said buyer does get 10-15% below ASKING price, that price is still double or triple what someone would have paid for the same house 5 years ago. If someone needs a house that badly, go into it like any other business…you’re not in this to make friends, but pay a reasonable price for the house. If that means bidding 40% below asking, then so be it. The only person you’ll be enemies with is yourself if, three years from now, you realize that the house that you bought is now half the price you paid. Talk about regret!
Why not, just not buy, when you move to a new area and rent a while. I love this buyers’ agent acting like this “government attorney” made out like a bandit. This is just another story to try and get the herd thinking they have all this new found leverage in the buying process. I bet the house this genius attorney bought had doubled or tripled in price in the last couple of years and he got a big $35,000 off the top - big deal. When are the sheople going to wake up and realize they are being played like cheap fiddles by the realtors? Give all the morons the perception that they got a great deal and blam, they’ll sign right up on the dotted line. Until prices drop by 40-60%, at a minimum, I’m staying on the sideline.
he got a big $35,000 off the top - big deal
My sentiments exactly.
He caved…Suzanne got to his wife.
Suzanne told him, “With that $35,000 you saved, you can buy a new car. You can do this!”
You can load your driveway with 2 Chevy SLOBurbans with that 35k.
Agreed. Phase 1: prices always go up so hurry and buy no matter at what price; phase 2: prices are flat but interest rates are rising so hurry and buy; phase 3: prices have dropped 3.5%, i.e. this is a screaming deal, better hurry before the next boom; 4) prices have dropped another 3.5%, i.e., this is a really screaming deal, repeat phase 3 and/or 4 till 50% drop.
“…and at least $10,000 below what Early estimated to be its present market value…”
I wish these newspapers would add a % after the dollar amount, so we can see what relative movement they are talking about.
“…Another [misstep] involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
And “ridiculously below-market” is what? Again, a percentage would help immensely, if just to get a bearing on the quoted agent’s judgment/believability.
“Sensing they have more power than before, Davis says, some prospective buyers take liberties that could easily backfire”
Backfire? Inventory is through the roof — the worst-case scenario is that you have to look at one of the hundreds of other similar listings. Especially in megabubble markets like Phoenix and Miami. You can just walk next door to the next identical unit, and start over again.
So, I take it that the former practice of having prospective buyers write sappy letters to home sellers explaining why they deserve to get their beloved POS house are falling out of favor? Perhaps the sellers should be baking cookies and writing thank you letters to the buyers!!
I forgot all about that BS. I didn’t get a house I bid on once and my realtor representative dolt said it was because I refused to prepare a cover letter stating my intentions to take care of tyhe house, Jimmy’s room etc etc. I told the realtor to go screw off…
A Realtor representing you said that?? Wow
I had an agent like that, once. Wanted me to explain to the seller, via the seller’s agent, why I was offering my price, which my agent considered too low. Why in the world should I ever need to explain any more than, “That is what it is worth to me?”
I suspect those “feed the squirrels” stories will haunt many of the coming FBs for years to come. And as for the “(I’m strictly a) listing agent,” seen any lately?
I don’t see a problem explaining a low offer, Even if it’s as simple as saying That’s all my clients feel it’s worth. Word of advice never have an agent present an offer if he’s not behind it, You’ll never have success that way.
Feeding squirells is involved in some extreme cases.
Most people don’t have the first freakin’ clue how to get anything sold in a normal market.
They’re giving up a potential sale because they’re offended. Morons. May they ride the market to the bottom and lose everything.
The author got it backwards. Should be:
“Never insult any potential buyer of a house you’d like to sell.”
I say we all go out this weekend and start making offers based on what the house is worth. I refuse to use the term “ridiculously low” because their price is ridiculously high.
I refuse to buy any wanna-be seller’s stucco $hitbox until they submit a 10,000 word essay to me –with photos– on why I should buy their (still) grossly overpriced P.O.S. I also want a contractual guarantee that they’ll continue to feed the squirrels on the property after I’ve moved in.
LMAO
ROTFL
This is the best comment I’ve read all day. Thanks for the laugh! Heh!
So, what happens to the realtors fees if, when the final price comes through, the owner has negative equity? Does the realtor put a lien on the property he has just helped sell? Or file a civil judgement? I can see people dropping realtors over time as they get real on the price and realize there won’t be anything left for them. And what about the buyer’s realtor?
So, what happens to the realtors fees if, when the final price comes through, the owner has negative equity?
—————————————————————————–
Either the realtor cuts the fee, or the seller is insolvent. The deal collapses unless somebody makes a concession, and it WON’T be the bank holding the mortgage.
“and it WON’T be the bank holding the mortgage”
Not so sure. If the seller has already been served NoD papers and there isn’t too much for the lender to concede to get the sale done, they might do it, rather than going through the courts to get the property, eventually, when it might be worth even less. I remember this very thing happened back in ‘91 and the seller took a hit to his taxes that year for the forgiven amount added to his income…
Your wrong it’s called a “short sale” which is very common in a down market especially when a lender’s book are bleeding red. They’ll take a short before they’ll take it back.
Yes but who gets in line first for their (insufficient to cover all creditors) money-the realtor or the bank? I’m assuming the bank, so what happens to the realtor?
He gets paid his commission from the bank. Short sales are hell to get approved and entail a lot of work (no comments from the peanut gallery about realtors and work please LOL). They usually get 5 to 6% of the negotiated sales price
I once worked for a mortgage servicing company and sat near some of the guys who handled foreclosures and short sales. Their policy on short sales was that the maximum allowable real estate commission was 3%. There was a lot of belly-aching on the part of the realtors, but 3% of something beats 6% of nothing. This was during a strong market.
It’s anyone’s guess what will be the case in a weak or deteriorating market. In that case, the loan servicers will probably review every fee very, very carefully. If the environment really falls apart, maybe they will pay the 5-6%. Maybe they’ll pay 3%, maybe less.
By the way, in a short sale the seller walks away with nothing, except an IRS 1099 form representing taxable income equal to the amount of the forgiven debt. What a lovely parting gift.
Lenders will make allowances for reasonable closing costs, but they’re NOT going to let the seller/borrower walk away with a dime unless the unpaid principal balance has been paid in full.
OlBubba exactly, My point of reference is a bad market when I was heavily involved in foreclosures. As a matter of fact I haven’t seen a short sale advertised for about 6 or 7 yrs in my market.
I’ve just recently seen a few short sales being advertised!
Some foreclosures, too!
Checked the history, and one house which sold for $924,900 in October 2004 is now listed for $859,900. REO already. Still no sale.
I’m keeping track of a few as I catch them. Some flippers in real trouble right now. So sad — NOT!
I can see some couple being offended at some lowball offer that comes from someone and putting them on the “Do not call” list-then frantically searching through a drawer 6 months later to find their phone number….like a girl who shoots down some dork that hits on her at a bar, then proceeds to gain 100 pounds in six months and suddenly realizes she needs a date to her office christmas party….
….like a girl who shoots down some dork that hits on her at a bar, then proceeds to gain 100 pounds in six months and suddenly realizes she needs a date to her office christmas party….
I’m sure this is exactly what every dork imagines.
Haha… Sad but true… and five years from now the girl will still be fat while other hot girls will be throwing themselves at this dork.
it’s easy to get fat but hard to get skinny.
And easy to live fat while you’re riding a bubble up with HELOCS, but hard to trim down your lifestyle to where you were before minus the payments when it pops. Anyone who has ever considered or gone back to graduate school full-time after they have worked in a real job for awhile knows how hard it is to cut your consumption once you have a decent amount of money. For a lot of people, this is going to entail a serious lifestyle cutback, which is psychologically difficult.
Well, I can comment on this subject. I was a .com guy who worked his brains out for a startup. Sadly I thought I was working to build something real, but once the executive team got done with the pump and dump, the company was bust. I spent about a year out of work. Thank god for savings!
My wife and I had to learn how to live poor. Again we were fortunate that when we bought our house, we spent way less than what the RE Hag told us was the right amount for my (at that time) income level. That move kept us from losing our home during those lean years because we were able to fund our mortgage out of our savings if we cut everything way back. Yes, more than once I raided my change jar to get money to buy groceries.
It’s tough to do, but its an awesome lesson if you can learn to adapt, survive and overcome (core USMC traits).
>more than once I raided my change jar to get money to
>buy groceries.
Ah, memories…
I *still* procrastinate on buying useful toys because I think to myself “do I really need that thing TODAY? I bet I can make it last another week (or month, or year).”
Use it up, wear it out, make do, or do without.
1. Never let your “Agent” tell you what the “true value” is of a property. Don’t trust them - they just want to push through a transaction. Do your own homework.
2. Don’t ever be afraid to throw out a “low-ball” bid - fu@k your agent and fu@k the owners.
Exactly what I’ve been thinking throughout this whole process. By the way, since your agent is typically paid a percentage of the sales price, there is always an inherent conflict of interest at work in these deals. The realtor will typically take the easier route convincing you that you got a great deal and collecting the additional commission. The alternative, working their ass off to get you a better deal, negotiating wisely, and making a smaller cut isn’t in their best interest. I trust them as much as anyone else trying to remove money from my wallet - not at all.
Ha. OT but young carpenter who left the business to seek his fortune as a realtor is back hammering nails.
And he’ll be out of that job soon enough.
Heard more talk from some friends tonight that everyone they know in the construction business said things are really, really slow right now. (San Diego)
“Another involves making a ridiculously below-market bid, which so shocks the owners that they may refuse to deal further with you.”
Ok, I just send two friends in ahead of me to make the ‘ridiculously low bid’ to soften them up and then I show up offering a tad more….it’s the bidding war in reverse !
Reading material:
Only Housing Follows the Slowdown Script
By Liz Rappaport
Markets Columnist
5/8/2006 5:54 PM EDT
URL: http://www.thestreet.com/p/markets/marketfeatures/10284331.html
The devil wears Prada, and shops incessantly at Nordstrom’s (JWN:NYSE) despite the price of gasoline, and hasn’t stopped spending even in the worst of times this decade. It seems a bit ambitious to count on the housing market to do the whole job of slowing the economy, especially via the consumer.
A soft landing for the housing explosion is an ideal scenario for the Federal Reserve, which this week is widely expected to deliver its 16th consecutive rate hike since June 2004, and pause thereafter. The Fed wants to put the brakes on an economy and most evidence points to a downshift in housing but a full-throttle economy everywhere else. Capital markets are displaying massive risk tolerance, companies have more cash than they know how to use and consumers keep spending. In other words, the Fed’s job is more complicated than just slowing the housing market.
In the slowdown category, homebuilder Toll Brothers (TOL:NYSE) said last week its orders were down 29% in its fiscal second quarter and its outlook going forward wasn’t much better. Also, Hovnanian Enterprises (HOV:NYSE) said that higher cancellation rates, slower sales and production delays led it to cut its earnings outlook for the rest of the year. Centex (CTX:NYSE) did the same the week prior.
On Monday, when major averages were relatively flat, JPMorgan cut its rating of Centex to underweight from neutral, and on Ryland Group (RYL:NYSE) to neutral from overweight. Centex fell 2.19% to $55.70 per share and Ryland was down 2.61% to $62.64.
On the lending side, Ameriquest said last week it will slash 3,800 jobs and close branches as the housing market slows. Reports of small, regional mortgage lenders cutting jobs also have increased, noted John Lonski, chief economist at Moody’s Investors Service.
On the other hand, Wachovia (WB:NYSE) sure found Golden West Financial’s (GDW:NYSE) $122 billion mortgage portfolio attractive. It announced plans Sunday to buy Golden West for $25 billion in cash and stock. While some analysts say the mortgage portfolio, almost 99% composed of adjustable-rate mortgages, is risky, it is nonetheless a cash cow. The mortgages reset to higher rates with a lag to the Fed tightening, making Wachovia’s purchase “good timing,” says David Hendler, analyst at CreditSights.
Wachovia’s shares ended 6.68% lower Monday to close at $55.42, while Golden West’s rose 6.23% to $74.90.
Broadly speaking, the Wachovia-Golden West deal and other M&A activity are signaling burgeoning business confidence, which is complicating the Fed’s efforts. In other deal making Monday, Fisher Scientific (FSH:NYSE) agreed to acquire Thermo Electron (TMO:NYSE) while Canadian zinc giant Teck Cominco announced a $16 billion hostile bid for Inco (N:NYSE) .
As for the housing market, the timing of the Wachovia-Golden West deal challenges conventional thinking that residential activity has peaked, or worse.
The Bouncing Beach Ball
Housing prices skyrocketed since the early 2000s as low interest rates and loose mortgage-lending standards were facilitated by institutional investors seeking securitizations of just about any and all types of loans. That left consumers owning homes, a valuable asset, but with their necks on the line if rates were to rise quickly or prices fall quickly.
Mortgage lenders developed products that allowed lower-quality lenders to buy costly homes by paying adjustable-rate loans, or interest-only and no principal, or to choose each year among several payment options depending on one’s financial status (these are called Option ARMs). Such subprime mortgage origination has increased 35% in the five years ended 2005. That is double the growth rate of overall mortgage origination, which increased by 19% over the same period, according to Moody’s.
The party hasn’t stopped even though the hangover may be looming. For the first two months of 2006, Moody’s rated $96 billion worth of mortgage-backed securities in the first two months of this year, up 85% from the $52 billion rated in the first two months of 2005. The market for mortgage-backed securities has exploded this decade, from $61 billion rated by Moody’s in 2000 to $548 billion in 2005.
Banking regulators have taken notice of the loose lending standards and floated a proposal for new rules on nontraditional lending. The comment period on the proposal ended recently, and no rules have been adopted, says Hendler. But “we think the goal of the regulators is clearly to slow the riskiest lending and introduce greater scrutiny into the mortgage sector.”
The decline is under way, says W. Scott Simon, managing director and senior member of Pimco’s Portfolio Management and Strategy Groups. “The volume of sales is down at least 10%, the number of homes on the market is starting to really skyrocket, the number of days homes are on the market is increasing, affordability has gotten much worse, and interest rates are up.” (What could be better?)
While some data support Simon’s theory, other reports defy the negativity.
Last week, the National Association of Realtors reported that pending home sales declined by 1.2%, much higher than the 0.5% expected drop. March data showed increases in new- and existing-home sales, but the news was also tempered by a decline in median home price, rising inventories and declines in mortgage applications. In an odd turn, mortgage applications were slightly higher last week, even as the average 30-year mortgage rate as of the week ended May 4 was 6.59%, up from 6.21% in the week ended Jan. 5, according to Freddie Mac.
“The run-up in gold, copper and oil has allowed everyone to take their eyes off the one beachball that is in the process of disinflating if not deflating: housing,” says David Rosenberg, North American economist at Merrill Lynch.
The Fed has its eye on this ball, however. San Francisco Fed President Janet Yellen said in a speech last month that a slowdown in the housing market would dampen consumer spending and therefore reinforce the Fed’s rate-hiking campaign thus far. The FOMC is expected to raise its fed funds rate to 5% this week, at its meeting ending Wednesday.
Fed Chairman Ben Bernanke in his testimony to the Joint Economic Committee earlier this month reiterated Yellen’s point when he said: “Significant uncertainty attends the outlook for housing, and the risk exists that a slowdown more pronounced than we currently expect could prove a drag on growth this year and next.”
A slowdown in housing could create financial restraint in the consumer marketplace, where unlike corporations, the savings rate is nil. The trick is to avoid damaging the consumer too much. Labor is key to the equation, says Lonski. If Americans still have jobs, they can service their debt, and keep spending. (Friday’s disappointing payroll data aside, the 4.7% unemployment rate is at a level most economists associate with full employment.)
Consumers are mired in debt. The Federal Reserve reports that U.S. consumer credit for March reached a record $2.161 trillion. Consumer revolving credit reached $805.6 billion in March. Payment of debt as a percentage of household disposable income is almost 14%, on a climbing trend from near 10.5% in 1994, according to Citigroup.
Most observers agree the low-rate petri dish of the past few years led to unrivaled speculative fervor in housing. But expectations by central bankers and others that the materialistic American consumer will drag down the overall economy due to depreciation in the value of their homes seems a difficult line to tow.
“If I can’t steal it, I don’t want it!” – this is the motto of a very successful multi-multi-millionaire real estate investor i know.
OT, Irvine inventory has added over 100 homes since May 1.
The amount of flipped properties and realtor owned properties in Irvine is unreal. In MLS almost every condo is listed as owned by a licensed realtor. 600K for a 2 bedroom, termite ridden, tenant occupied 1976 condo? Where are these greater fools?
A large portion of these are realtor owned, tenant occupied properties. The investors in Irvine are bailing. 650k for for a 2 bedroom, termite ridden, 1976 bland condo? Where are these greater fools?
still in the alley hugging paint or sniffing glue waiting for their interest-only option ARM to get approved. They’ll close in June and have the meth lab operational by July 1st, just in time for the July 4th rush.
Although hugging paint sounds like fun, I meant “huffing” paint.
dws. The realtors where always there buying and flipping just ahead and with their clients. And as the bubble spread to the less desirable properties they went right along with it. Only stands to reason they would be there standing when the music stopped.
These are probably the individuals that doubled-down, I’ve heard anecdotes of people in the DC area who have left their regular jobs to become real estate agents and speculators/flippers. Now they are in quite a panic because they don’t have a steady income and the value of their investments appears to be heading down.
Get some investors together and buy into a neighborhood where they aren’t dropping prices. Then put it back on the market and sell it 40% below market to your investor group under a new name and publish the selling price. Move a hippie looking family in, have them park their car on the grass, hang towels over the windows and see how long before the neighbors start lowering their prices.
If that doesn’t work go to weekly junker auctions and buy a few of $50 cars and throw them on the street until it is packed.
some hippie looking family? what year is it? you know, Meathead is bald and running for governor of Cal…
Wall street has a saying that would do coming home buyers some good to remember: “The second mouse in the trap gets the cheese”. That govman attorney was the first mouse in the trap….having paid the seller’s commission and calls it a savings plus $10,000 blue sky.
The art of the lowball offer
Rejection is healthy
Unless it’s truly the house of your dreams, don’t be upset if a seller turns down your initial offers. Rejection is a normal part of the negotiating process. Some would even call it essential.
“Never make an offer you think they will accept,” says Thomas Early, president of the National Association of Exclusive Buyer Agents, who lists rejection as his first rule of savvy home buying.
His second rule? More rejection.
“Make the seller say ‘no’ at least twice. It’s too easy to say no the first time.”
Granted, that strategy doesn’t work everywhere. Early wouldn’t recommend it for competitive real estate markets like San Francisco or Boston, where it’s been common in recent years for sellers to get multiple offers above the asking price. But for Early’s practice in Columbus, Ohio, where homes sell for an average of 94% of listing price, he finds the method works well.
Make many offers
Bargain-oriented buyers should also plan to make offers on several homes, says Irwin. An investor who makes lowball offers on 10 houses is more likely to find a willing seller than one who pursues only one or two properties.
That said, Irwin doesn’t see much point in making wildly underpriced offers. They’re rarely accepted.
http://realestate.msn.com/buying/Articlebankrate.aspx?cp-documentid=253527
“A lot of buyers think that ‘If I call the listing agent, I’ll get a better deal.’ That’s not true,” said Bob Wilson, an agent with the Guiltinan Group in San Diego County. Because listing agents have a duty to get the best possible price for the seller, they’re not suitable advisers for crafting a lowball offer.
This is BS. Listing agent would rather get 6% of 95K than 3% of 100K. When buying listed property I have only ever dealt with listing agent.
No the article is spot on, and that’s why buyers agents are becoming popular.
That and dual agency concerns especially with single family houses. With commercial property you would be right in your assumption
Me, too. Plus concessions!
My co-worker put her house up for sale last September at $650,000 and the house is still for sale today for $549,900 after 9 months on the market here in Fresno, CA. Nobody has even made an offer on this house and she keeps wondering why the market is so weak in this area.
Can you say way over-valued or what? Greed! The home was purchased in 2002 for $242,000. They must have hired a great real estate agent that told them their house was worth the sun, moon and stars. This is what you call chasing the market down……
Some of the comments on this thread and another one a couple back are truly funny.
It leads me to ask just how are some of you determining what is fair value for a property and what do you base it on : example in the case of the attorney getting 10% off the price (Which I thought was hilliarious that him and his agent thought they got a good deal at less than 5% off of the comps in an inflated market). That wasn’t a deal. In an inflated market what is the proper percentage to take off. In 96 I considered 40% of the current price in the bottom market a good deal. So in my mind anything less than 60% off the current pricing is stupidity as far as a deal is concerned. And I see a lot of folks here practicing stupidity. In my mind 20-40% off an inflated price is not even in the ball park of a safe purchase in these times.
Secondly just how much do you feel an owner should make on a property?. Seems some of you have real problems with someone making a profit.
Well, to the second point, I have never why some of these housing developments should have any profit, ever. If you buy a house in a “marginal” urban center, with no decent parks or stores close by, then over time it improves-crime rate goes down, parks get cleaned up, coffeeshops/restaurants go in within walking distance, then that makes perfect sense. Also, as a city improves, then for land within some distance of it, they really are not making it any more, so appreciation makes sense here too. If, however, a housing development gets built 40 miles from Phoenix or Denver, after five years how has that good improved? Or become more scarce? People who want a generic mass-produced property and don’t care about these locations will probably want to buy in a new development-so hasn’t the old neighborhood actually depreciated? Once again, maybe some restaurants or something has gone in close to you, but often not. I am just not sure what drives even moderate appreciation in these places, except maybe if cost of building materials used to make that home have risen, so basically the rate of inflation. I’m sure there is a reason-I realize that you look at comps to get an appraisal price, is it just that as a city center improves this gets extrapolated out to areas 40 miles away?
Yes I see my typos…
I’m not the typo police. I could care less
I don’t have a problem at all with someone making a profit. What I do have a problem with though, is someone doubling the price of their house in 5 years with no actual investment.
We looked at a bunch of houses over the weekend just for laughs… and it was unbelievable the number of homes we went to that didn’t even bother to make sure their paint lines were straight, or the wallpaper wasn’t separating… there didn’t seem to even be an attempt to give the illusion of any real effort put into the houses. Floor boards were separated from the wall… door jams separating… wall paper rippled and peeling… paint lines on the ceiling… for the love of pete throw up some cheap ass crown moulding or something if you can’t tape off the windows or the ceiling. It was unbelievable… just shoddy a$$ work and yet many of these were asking double if not more than what they paid for the houses just 5 years ago… I have a problem with that. I won’t even think about acting like a serious buyer until these things are priced 40% less… then I will make an insulting offer of my own.
But you do realize that everything you mentioned in your post has absolutely nothing to do with the value. If those types of things are your value indicator then you are in serious trouble as a buyer.
nah, you are right they aren’t indicators of value really, but they were really irritating in general. As for value I look at how much work will I really have to do to the house, in terms of its age- does it need to be rewired etc… maintenance, location, and just how much would I enjoy living in it… and is the price what I am willing to pay to enjoy living there… those are my main considerations. However, it is majorly annoying when you look at a place that has had no tlc at all and the people are asking top dollar and the house already needs 200-300k in work! good grief that is just irritating. In one house that was in the perfect neighborhood, with a great yard and view and the layout was good, but in the downstairs apartment bathroom I could SEE the dry rot… they did a half a$$ed attempt to pottery barn color the walls, but it was so sloppy it was laughable… and yet asking $700k. There were brand new houses double the size just down the street for the same price… that to me doesn’t say good value. I actually prefer older bungalow style houses. Like the character etc… and I would rather have a well priced older home that may need a tad bit of work but isn’t in need of a total overhaul than a brand new stucco box… But the house I liked isn’t worth the value to me at its current price. I would buy it for half their price and put work into it… but wouldn’t pay $700k and put another 200k into it. Not worth it- and I can’t imagine that the size or land would be worth the investment into it even in 10 years. it just doesn’t have million dollar house written anywhere on it.
ps there was much more wrong than just the dry rot and the paint etc… but those were a couple of the glaring things that made me question why THEY think their house is worth $700k. There has been nothing that has changed in the area… nothing up and coming, no major jobs, not close to anything really… it is merely up the hill by 5 houses from the houses on the lower level of this terraced neighborhood so they tacked on a couple hundred thousand dollars.
Just down on the flat land there was a victorian beautifully redone, very little work to be done other than minor cosmetics with a much better lot, and without the risk of mudslide, landslide etc… and it was $200k less… like I said, it is just irritating when the expectation of exorbitant profits is all out there to see. That irritates me and makes me much less likely to appreciate their expectations.
“But you do realize that everything you mentioned in your post has absolutely nothing to do with the value. If those types of things are your value indicator then you are in serious trouble as a buyer.”
Mrincomestream, we are in a different market than the CA market, but we bought a fixer upper, & my husband was formerly in construction so we did everything ourselves. One thing I learned from this experience is, guess what? Those shoddy little details that you think oh, I’ll just fix later…well they all cost $$$$$$. There is the big picture with value but it needs to be balanced with all the cash you need to dump into the place to make it clean and well kept. All part of the value picture!
Right ….in the heat of the market last year people were over-looking these fixer items that should of got the buyer a discount …Right now it is so difficult to determine value in a declining market . On the one hand sellers are not willing yet to sell at the prices the market will be at in say 2 to 5 years ,and they will be wanting what the market price is today . People on this blog want the price they know its going to fall to with time . By the same token , during the boom people were over-paying on the assumption that the property would have greater worth in the future . This is a mistake either way . If you want a really good deal 40 to 60% off ,you might have to wait until the market gets there .
Method 1: Use the long term trend line for the area. Example: Here in Arroyo Grande, the long term appreciation trends indicate that current prices for homes around $700K need to fall 35% to coincide with a 10-year trend line. Prices of the past 3 years or so are all outside the trend line.
Method 2: Cost of renting vs. cost of owning (taking tax break, etc. into account). I haven’t run the numbers here, but that last time I did the calculations for Altadena (above Pasadena), California, I was looking at 50% of current prices (in the $800K-$1.3M range).
Truthfully, if the housing market does what it did last time (at least a couple of years of declines, foreclosures, etc.), I expect *some* prices to be *much less* than “fair” or “reasonable”, due to peoples’ reptile minds propelling them away from real estate, even “reasonable” real estate. It’s all psychology at that point.
I think I’m going to make any of my offers conditional on the seller attesting to the health and happiness of the surrounding squirrel population.
I refuse to insult anyone with my lowball offers until I start seeing 30% price cuts from asking price.
Orange County can sit and sit and sit as far as I’m concerned.
I also refuse to go to any open houses until October.
I plan on beginning to insult homeowners with my lowball offers sometime in the Spring of ‘07.
Whatever is currently listing for $1 million will be bought for $500,000 next year. There is simply no rush to begin the ‘insulting’.
By the time I begin shopping, it won’t even be considered ‘insulting’ any more.
It just might be considered ‘charity’.
Realtors who own Orange County property for flips, listen up.
Times me by about 10,000-
…and you’ve got your ‘target market’, and your ‘target buyer’.
The sooner you people accept this, the sooner you might break even.
LOWER YOUR PRICES, MORONS.
I won’t even attend your open houses until you do.
I went surfing this weekend, all you Realtor-Flippers.
What did you do?
“By the time I begin shopping, it [low-balling] won’t even be considered ‘insulting’ any more.”
I think you are spot on correct with that one. The first wave of (as they will see it) “casualties” probably will be those who bought at a price where they can take a 40-60% reduction from 2005 prices and walk away with no debt or a small profit. I’ll comb the tax records and try to focus my bids (for my one home) on those, first, as a cash buyer ready to make their pain go away.
I totally agree with you. What is their target buyer except each other? They can’t move their own property to buy the property with the 3 car garage and the 3 car garage house can’t sell their property to the move up buyer because the condo move up buyers can’t sell their over priced “apartment” to move into the middle house. Reminds me of whose on first. Some people might still be able to make the jump and think they’ll be happy about it until they realize their tax base is forever. 1.25% of the purchase price here in Orange County. A “friend” at Lending Tree said they will be laying off a large group of employees this week.
“A “friend” at Lending Tree said they will be laying off a large group of employees this week.”
If people would only get the message out, this wouldn’t have to happen.
Lowering the home prices in Orange County means not firing people.
It’s really that simple.
That’s sad, and even sadder, avoidable.
Clever messaging.
The bullish bear position.
Lower prices to save jobs.
If I remember you had media training that is a very interesting meme.
I second that Auction, though I’ll go to the desert for some MX.
There will be be thinner squirrels out there, as new buyers will specifically make sure that the “feed the squirrels” clause is checked NO. Guess they will have to rely on natural instincts to eat now. What a shame.
I hope that they will consider my offers insulting. Would love to hear about a lot of CA area folks who HELOCd themselves to death to lose their shirts (and everything else).
I knew a guy who, when asking women out would be quite insulting. His theory was, if you do that to 20 women, you’ll get slapped 5 times, and they,ll storm off angry 14 times but you only really care about the one who’ll say yes. With 5 sellers for every buyer, insult away, somebody might say yes.