J. Philip's Westchester Real Estate Blog

I have written before on what a buyer's market is and what a buyer's market isn't. Westchester County and our surroundings are a sought after destination; even if a home has been on the market for a year, once the price is right it will sell. I wish I could impress this upon a few buyers who have lost opportuntities when more motivated people came along and outbid them.  

We recently listed a newer build in a desirable subdivision. While it was a short sale, it was also upscale. Not long afterward, an offer came in almost 15% below asking price, a hefty discount not supported by any other market activity. The rationale? It's a buyer's market!

The seller countered, and the would-be buyer raised their number gradually, but well short of what we thought we could submit to the bank for acceptance (by "we" I mean my seller and their attorney). This went on for weeks. They never came up to the bottom line number we felt we could work with, and this resulted in some frustrated emails and phone calls from the agent. Then even the buyer called me directly. I don't know if the buyer thought they could be more convincing than the professional they had representing them, but I told the person both times that there was no comparable sale that justified accepting the offer. 

"But it's a buyer's market!" I was told. The house has been for sale for TWO WHOLE MONTHS and hasn't sold. I was risking having the bank take the house back if my client didn't take their offer. Furthermore, I was told, they were perfectly happy to wait until the bank repossessed and buy it at foreclosure to get their price. 

How lovely. This actually happened with two different byers on the same house- the same pattern and rationale. 

In each case, I asked the agent to ask the buyer to stop contacting me and go through their rep. 

Not long afterward, another buyer came along and made a stronger bid, which was accepted. They got the house.

Fatal mistake number one: Buyers should NEVER assume that they are the only game in town.  
Fatal mistake number two: A "buyers market" does not give the buyer fiat to set the market unilaterally. Comparable sales matter. 
Fatal mistake number three: When a buyer circumvents their agent and tries to negotiate on their own, they aren't accounting for the fact that they probably suck at negotiation and are hurting their own cause.  

In all three cases, the "buyer's market" phrase was thrown around as if it were some childhood game wildcard phrase that granted immunity from logic or true market forces. And in that buyer's market, the would-be buyers lost a home because they were their own worst enemy. The people believed that if they gave in just a little that they'd "lose." 

Pigs get fat, hogs get slaughtered. 

Price and Terms. 

Price. Terms. 

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

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

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

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

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

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

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

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

Let me preface my remarks by stating that when I act as a buyer agent I truly enjoy negotiating the best deal I can for my buyers. But make no mistake; we make a deal. I'll explain after I list a few examples of what I don't mean:

• On a $450,000 listing, an offer of $400,000 comes in with a remark on the cover sheet: "Buyer is unable to be very negotiable with this offer."
• On another listing, the buyer agent tells us that their buyer has been looking for a home for 2 years. 2 years. After I get the seller to accept their offer, the buyer walks. We took too long.
• In a multiple bid situation, we ask each party to make their highest and best offer. One party withdraws, not wanting to get into a bidding war.
• In about a half dozen aborted deals in the past 3 months, I have been told by either the buyer or their agent that they are looking at homes they do not qualify for and that they just make 80-85% offers because they want to steal something.

None of the buyers in the above examples bought anything! All they did was go from property to property bullying and posturing, and they still live in their in-law's basement. And with an $8,000 tax credit, insanely low rates, prices down to 2003 and 2004 levels in some places (and lower), and sellers willing to do more to cut a deal than they have in years, if you still live in that basement apartment, you missed out. It takes a special kind of obtuse to be a buyer in a market where so much is done to help you, and still not actually buying anything in multiple attempts. My advice? Go to the corner store and buy some gum. Prime that spending pump. Then work your way up.

A buyer's market gives buyers an advantage. Buyers are getting better deals now than they have in the past 20 years. To take advantage of it, however, the buyers actually have to BUY SOMETHING. Beating the crap out of a seller and then walking away because they didn't throw in their 17 year old daughter is not making a purchase, it is being a serial haggler. Now, some seller's are unreasonable. But if you are on your 3rd offer, it probably isn't the seller.

It isn't a "haggler's market." You have to be a buyer to take advantage of a buyer's market. To be a buyer, you must actually buy something. Otherwise, all these incentives and advantages are just words on paper. I'll tell you what isn't words on paper- living with your mother in law.