Last year, I had written an article for buyers in this market titled Surviving the Feeding Frenzy. The advice in that article still holds today. Market conditions for buyers haven't gotten easier in the past year, perhaps it's even tougher today to get through this process. It's gotten to the point now where we're seeing multiple offers on short sales pretty frequently, where 30 months ago, you could barely get showings on these properties. Crazy days, just flat out crazy.
In recent months I can't even count the number of times that I've talked to my fellow agents about their frustrations with trying to get their buyers into a deal. It's become common for us all to have to write offers on 4, 5, maybe more houses before for a buyer before we get one accepted. And it occurs to me that maybe the people we ought to be having that talk with now are our buyers. So if you're out there trying to get in on this market, sit down and listen. I'm going to be direct with you, and you might squirm a little if this gets too close to home.
To my thinking, there are three distinct kinds of buyer prospects that we deal with. In many, maybe most cases, we see people go through all of these phases. Sometimes they start a little further up the chain. Sometimes they drop out before they get there. Here they are:
The Tourist
These people want to go out and see property, but they really don't want to mess around with talking to a lender and getting prequalified. They'll call around various offices looking for someone to give them information on specific listings. But you know what? These folks are spinning their wheels, wasting their time and ours until such time as they make enough of a commitment to find out what they'll really qualify to buy, and what the payment they have in mind will get them. Once they do that, they move on to...
The Shopper
Now we're making some progress. They've talked to a lender, and they're comfortable with the numbers. This is good. But the education process in this market is still ongoing. Just about every agent I know worth his/her salt will sit down with these buyers and lay out for them what they should expect to see in their price range. And we'll tell them that we're in a tight inventory market, and that buyers are having to compete for properties. And they'll nod their heads in what appears to be some gesture of understanding. Then we'll go see some homes, and they'll insist that we write an offer 10% below asking on a house that is priced well below recent comps and already has 3 offers on it. They're working on the advice of a friend who bought a house 3 years ago, or they saw some article in the paper that said that we're going to see some big tidal wave of foreclosures, or some other piece of less than current or accurate information. This can go on for one or two offers, or maybe more. Sometimes, they try this approach once or twice with one agent, then figure that they'll have better luck with another agent, and do the same thing. I've encountered people who have gone through three different agents. Eventually, when they figure out this isn't working, they graduate to...
The Buyer
These folks are serious. They want to own a home, and they'll do what they need to do - within reason - to get there. They understand the realities of the market. They'll answer our calls and emails when we find a property that might be right for them. Sometimes they'll even call us about a new listing before we've even had a chance to see it on the MLS. They know that they need to move - right now - on a good home if it fits them, and they make time to go see it with us. They'll write competitive offers based on comparable sales. These people end up owning homes.
Don't get me wrong - I'm not saying that there's anything wrong with the first two types of buyers. We've had plenty of good clients who started out as Tourists and wound up as Buyers. It's simply an education process. If you're looking to buy a home, and you'd like to just skip past those other time consuming and sometimes painful phases, here are a few points of advice:
Trust your agent. You have to trust someone. If your cousin Steve has been through several real estate transactions in the past couple of years, he might be a good resource, but otherwise I'd be looking for better advice. Maybe the talking head on CNBC actually knows about the value of a house in the North Village, but probably not. Look, I'll freely acknowledge that every profession has some less than stellar examples. Ours is no different. But in the 4+ years that I've been in this business, the vast majority of the agents that I've ever dealt with are quality professional people who are genuinely concerned about the best interests of their clients. It shouldn't take you long to be able to figure out if you've found a bad apple, or if you just don't click with someone. By all means, if that's the case, find someone else. But I'll tell you this - people have an amazing ability to find what they're looking for. If your mindset is that real estate agents are a bunch of sharks who are only looking at you as a commission check, I'll just about guarantee that's what you'll wind up finding.
Be realistic. Look at the comps when you are evaluating a property, so that when you make an offer, you'll know where you stand. Sometimes you have to keep in mind that the list price is not necessarily reflective of value. That can work both ways - we still have some overpriced listings out there. But more often than not in this market, we're seeing aggressive pricing strategies that are resulting in multiple offers over list price. Well over half of the properties that sold in our market in the past year sold for at or above list price.
Don't be afraid to compete. One of the things that I've heard frequently is "I don't want to get into a bidding war and overpay." Don't mistake multiple offers for an auction. Here's what I advise all of my clients when we are looking at a multiple offer situation: Don't assume that you're going to get a chance to negotiate. Know what your best offer is for that property, and make it up front. Maybe the seller will come back to all the potential buyers and ask for "highest and best" offers. Maybe they'll just take the one they like best and run with it. If you make your highest and best up front, you can always just resubmit it as such if/when they ask for that. If you don't, and they wind up taking another offer without a counter, you might wind up kicking yourself later.
Keep your eyes on the prize. There's a reason - a very good reason - why you are going through all this. Between prices at incredible levels and interest rates bordering on obscene, this is the best buying opportunity in years, even with the lack of inventory. Maybe prices will go lower, but if you've been reading this blog, you know that I don't think that's likely. Maybe interest rates will go lower, and maybe you'll wake up tomorrow and look out the window and see a swarm of flying pigs. So hang it there, and do what you need to do to get the job done. In the end, persistence pays in a big way. Persist.
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