Now is a great time to buy real estate. I was quoted 3.75% on a 7/1 ARM today (great if you are putting a lot down and plan to move in 5 years or less), and 30 year fixed are getting deliciously close to 5%. The high inventory and low prices are all in the buyer's favor. I see homes off 25-30% from their peak in some very nice areas, and even more in some parts. Sellers want to make a deal too, and I am seeing them do things they never would have done even 2 years ago: include furniture, help with closing costs, eating the difference in low appraisals, and even agree to significant repairs. All this points to a strong buyer's market.
Yet some buyers are frustrated. Why? Because all this talk in the media has them thinking that if they offer $400,000 on a gorgeous $500,000 home in a prime location that the seller will fall down and kiss their feet! Worse, when someone outbids them for that gorgeous, well appointed home in a prime location they are perplexed! Prices are down 50% in Shamokin! I should be able to get something in White Plains or Scarsdale for 25% off! Isn't a buyer's market a license to steal?
Of course it isn't. A buyer's market isn't a flea market. That $500,000 house was selling for $650,000 4 years ago. That's your discount. If I am your buyer agent, you might get it for $460,000 or $475,000. And the seller may throw in the deck furniture, the snow blower and the breakfront you liked. But a market, by its very definition, is not where theft occurs. It is only a good deal if the seller goes for it. And until we are able to hypnotize the seller, their agent, their lawyer and Uncle Vinny, you aren't gonna raid the neighborhood like an invading Visigoth.
Moreover, in those perplexing cases where you are outbid, you have to understand that if you adore a fantastic place that is aggressively priced, then someone else will probably love it too! Hot properties still have a larger audience. So happy househunting for you brave, smart people out there actually looking in earnest, and do remember that a buyer's market is distinct from a hold up.
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The buyer mentality os odd. I went through a discussion on this wiht a client who was bidding on n REO. He said "well if people want to be stupid and bid the price up, then forget it". i had to keep tellig him if a million dollar house is listed for $800K and you can buy it for $900K aren't you still getting a great deal? Somehwo he just wasn't getting it. People get too fixated on the on the LIST price rather than the narket price.
It is a strong buyers market but it is so good we are moving to a sellers market.
Which simply describes the mideset of much of the home buying public. Many are not really seeking a HOME. They are seeking a DEAL.
When I hear a buyer attempting to set a price for a home for sale, i.e., "my price for the home is. . ", I suspect that they are only looking and not seriously needing to buy a home.
The seller/owner has already priced the home in the MLS offer to sell at $________.
When negotiating becomes more important than finding a home that fits the buyer's needs, it is clear that they consider themselves investors and not necessarily home buyers.
As an experienced agent, I study comps of homes my buyers are seriously considering although that's often difficult for new construction because they aren't always in the MLS. However, I have a firm grasp on value. When the buyer seeks to buy at an unreasonably low price compared to comparable sales in the area, my experience is that they are not likely to buy at all. Often they will, sooner or later, leave the market because they "couldn't get their price".
Understanding buyers' motivation will save agents the angst of "I showed these buyers homes for a year and they never made a reasonable offer"
Hey Phil, you write so well. You put all my sarcasm and complaints into a well written blog! Maybe I can just forward this to my buyers, especially those ones wants to spend $800K for a 2Bedroom apartment in central Manhattan New York! :-)
Wise words, Phil. Buyers who recognize good value now will be in a great position in the future. Greedy buyers will still be looking for bargains when prices are higher and terms are worse.
I am working with a few first timers. I tell them, right now it's a buyer's market. That doesn't mean you can get a 500k home for 400k. Bidding wars are starting back up in my area and I can see a seller's market closely approaching.
Lenn- absolutely, I often ask aloud if people have forgotten that they are actually going to live there when they get penny wise and piund foolish. When getting over is more important that putting your family in the right home you need to re boot.
Eileen- I'm here to help.
Jenny- How true. When the steal supercedes the family needs you have to wonder where they are coming from. And these were the same people who were lemmings in 2005 because that was the groupthink.
Indeed, Philip. Sadly, I have such a buyer...I have nearly given up hope for them. When the light turns on, it might be too late for them. Oh, well.
So true. Buyers are odd for the most part. I have a buyer just like you described above and we have lost about 6 homes. They ar getting better though since we lost the last one.
There are some who are not looking for a deal but are looking for a steal. Some of this mentality can be traced back to tv infomertials where claims of buying a house for $300 are common.
Hey, if you snooze you lose, as they say. There is no better time to buy than now.
Patricia/Seacoast NH
Phil:
With so much in the media about the fact that it is currently a buyers' market, buyers have to be brought into the real world by showing them comparable sales of exactly what properties have been selling for, particularly in nice neighborhoods.
Claudette: why use comps when the buyers have Zillow to set them straight? ;-)
Great post Phil. Thanks for the insight.
I like to say there is always a market. If we do our job as a real estate financial advosir, and we can show the advantages to a buyer, then we have created an atmosphere for a buyers market. Of course, this is predicated on being able to determine real value.
J. Phillip,
Well said. I have been working mostly with buyers lately, and it has been frustrating because I call to set appointments and "Sorry, that went under contract yesterday." If a home is in good condition and priced well, it is SOLD.
Here in Waco, Texas, we are teasingly close to a balanced market. We have 6+ months of inventory, down from last months 7.8. However it will go back up as inventory increases in the next few months. But it is still better than it was a year ago, and hopefully worse than it will be a year from now.
Most buyers are looking for a "deal" or "steal". Buyers seem more focused on short-sales and foreclosures and are passing up some outstanding values. New construction prices are down, why would you pass up a brand-new "Green" home with a 10 year structural warranty for almost the same amount of $$$$ or maybe less. A New Home at a great price often is the real "deal" in this market.
Linda Metallo, Re/max Impact, Lockport, Il. (Chicago)
Philip, you are right that a buyers market is relative. Sellers have a say in this too and DON'T have to let you steal their house. They will just sit instead.
Great Post! Jenny (post #1) you took the words out of my mouth. I just had that same conversation with two different buyers. Here's the CMA on the property... it's worth 300K. It's on the market at $238K. The bank won't look at anything less than a full price offer the first 7 days, and we're just killing trees writing this $200K offer.
Great post! I just had a buyer who made a REALLY low offer on a property because some out of the area realtor friends told them that our market was down 60%. Our statistics say otherwise, and of course the offer was rejected. Now we start over...
Buyers always think the price is too high, while sellers thinks it's too low, regardless of the economy. It is more important than ever that realtors creatively negotiate and find common ground. The other complication is the abundance of inventory, which makes buyers believe there is no reason to rush, and the added onbstacle of a sub-par economy, including concerns regarding employment, recession, energy prices, etc. We are undergoing pre-buyers & pre-sellers remorse!
I agree that there is a bargain hunter's mentality. This is not a flea market. Often times a seller cannot go any lower in price because then it becomes a short sale which opens up a whole new set of problems. By the way, if the buyer has a good credit score and an LTV at 80% or less, 30 year rates are below 5%. Come and get them while they're hot!
funny post..you already got your discount buddy,lol i tell buyers all the time that the actually house want is it's own market. if you love that house and there are other offers on it, well now it's a sellers market so go strong with your offer. the seller can take their pick...
It is our job as Realtors to explain the workings of buying a home(not stealing) and to be able to tell if they are ready ,willing an able. If they don't listen to the explanation of a buyers market...(not steal a deal)....then you should cut them loose.....period...
Great post. Points well taken. I've got a lender at 4.625% on a 30 year fixed right now by the way. They've been under 5% for a couple of weeks. Just FYI.
This is a great article but the media does do some brainwashing to the public as well as all those experts
Good advice. Buyer's market does not mean STEAL ME NOW.
I like the "audience" terminolgy. A good buy is a good buy already so multiple contracts frequently occur much to the surprise of an unrealistic Buyer.
It is amazing to me how buyers think they have to rob the sellers, rather than being happy to get a great deal.
It is our job as agents to educate them on the market, what kind of offer to make, etc. I do a buyer's CMA before we sit down and write an offer. Also, before we start the search, I interview them, try to figure out their motivations, and work from there. Missing out on 6 houses means those buyers are wasting your time, #9. Sometimes during my initial interview I can tell that the potential clients care more about a "deal" than buying the right home. I pass on them.
Phil, I do agree with your argument. However, if I have a client that wants to low-ball, that's what we do. You just never know what is going through a seller's mind.
The things that gets me is how different our corners of the country are.
You have lots of inventory... Over here, I think we are hanging at about 2 months... Anything bank owned has 20+ offers in 5 days and just goes away. Asking for closing costs? Forget that, you are not going to get it, and they generally would like to see you raise the price just to get the house, I have seen offers come in 30% over asking price - and naturally - the appraisers pull that back down.
I have not had anyone write a lowball offer for a year now, it is crazy - BUT - it is good for values, and we are going up again.
This is an important post as it's important that buyers understand what the market truly offers them, and it's not the theft of a property, though it may seem that way in comparison to prices of just a few short years ago.
It can take some buyers longer to understand this than others, but must usually understand it after they have lost a few .
When buyer's are frustrated I usually ask "Do you want to buy a house or do you want to learn a lesson." That gets them thinking about what they are doing.
It is best to help a buyer focus on what a house is worth to him/her. Comps are interesting but not very meaningful right now. What is important now is the rent/buy decision. Prospective buyers should consider the cost of renting vs. owning. Except in areas where supply is artificially restricted, rising interest rates are going to squelch price increases for quite a while. When buying real estate I believe that a person's 3-5 year outlook is far more important than what is going on now (which is what comps provide). If you aren't much worried about resale value and your house is just a consumption item then most of what I've written doesn't matter.
Great post. I have experienced someone trying to "steal" one of my listings. I wouldn't go so far as to just blame the buyer though, there are agents out there informing buyer's to low ball properties thinking they will be heros if something actually goes through. They waste a lot of time and money not informing their client of how things really are.
Thank you Phil for your GREAT post! To some a buyer's market means getting the property way below asking price, just the same way some look at a home inspection report as meaning EVERYTHING on the report gets taken care of!! Education, education, education! We have to educate our clients and try and teach them "the rules" of "the game".
Sometimes they have to lose a few homes to realize that they need to offer closer to list price rather than lowballing every home "just to see what the seller does".
You made some fabulous points here. I have had to re-educate buyers in my market about hot waterfront inventory and that they aren't going to get a hot property for 50% off. I re-blogged your post!
The market has been showing a shift in the past few months, but buyers just don't seem to be getting it. Inventory is down, and nice inventory down even further. Buyers need to know that sellers are still reluctant to put their homes on the market because prices, although more stable, have not improved enough, so if they find a nice property, they need to offer a fair price. The market is not tumbling anymore - sellers have more than done their share - buyers are more than likely going to lose a nice home if they don't change their mindset.
Great post. Your message was right on! As Realtors it is our job to educate the buyers on what is realitic and what is not! A great deal only happens when both Seller & Buyer agree!
Preaching to the choir....the "buyers market" is in the low prices and low interest rates. I have a lovely young client who won't listen to me and thinks anyone who pays asking or over asking are idiots since it's a buyer's market. Not like that...but if he loses enough, maybe he'll learn? He keeps sending me news reports and links....I'm sad, but I think he's going to miss out on some great homes and find prices so much higher next year.
I had a client who asked me why in the world anyone would offer more than the asking price. In his opinion they were really stupid suckers. After looking at a house he told me he'd like me to write an offer for him at a specified price, below asking price. I was in my car ready to leave when another buyer and agent drove up. Out he popped from his truck, ran over to the car and told me to raise the offering price. Funny how reality sinks in when they realize they're not the only player in the game and we might know what we're talking about.
We teach our buyers that "list price" has nothing to do with value. Some properties are listed too high, others are listed too low. We construct our offers based on what we think the home is worth, not the list price. Some of the best deals our buyers have obtained were purchased only because we offered above list price.
Phil
Real estate, fact, fiction or a mix in between. Inherit value is hard to put a price on as well as family safety and neighbourhood
Ty
There are so many buyers that are not taking advantage of this great buying opportunity they have because they want a better deal. Get off it already. Tax credits, incredibly low interest rates, lots of inventory, and they still want a deal or want to wait.
It is only a buyers market it you compare it to the prices of a few years ago. Buyers are actually having trouble finding houses.
You are preaching to choir my friend! I only wish I could get this same message clearly to all the buyers here..sigh~
It depends. If you want over million dollar homes in metro Denver take your pick. If your looking sub 85K the amount of inventory is less than a month. Best blog line ever, you aren't gonna raid the neighborhood like an invading Visigoth. This is good.
I agree with Gene, people are confusing a buyer's market with the fact that prices are still well off the peak prices of 2005/6. In our market, the inventory is roughly half of what it was at the high point. Well priced homes are gone within two weeks. Buyers who wait for the "steal" are getting left behind. I have several buyers right now waiting for another good house to come on. The ones who still aren't willing to be aggressive on these homes are probably wasting all of our time. The market really has changed back to a normal market. Sellers who price their home properly are seeing it move quickly. The rest are sitting.
There's a buyers market and then there's a fire sale. Buyers often have a fire sale mentality. They aren't aware that the prices they are seeing are great prices. Ironically, the only ones who are seeing that are the sellers who are selling at a loss. But there is nothing like a buyer losing a house in a multiple bid situation in a so-called "Buyer's Market" to cure them of their misperceptions.
Thanks Phil,
I have to repeatedly talk to my buyers about the particular market and price range they are looking at as it is not cut and dry. Each house almost has to be evaluated for it's potential buyer competition. But in general none of the sellers, including banks are accepting offers 25% lower than the listing price. Before I let my sellers accept a really low offer, I would encourage them to lower their listing price significantly and see if that generated multiple offers. If one person were willing to pay that low a price, there could possibly be many others and that would help drive the price up. We see it with foreclosures all the time. Buyers need to understand these kinds of things.
Good example of a buyer market. As I always tell my buyers, yes the market is flexible at this time but the sellers have not gone insane! After a couple of hard knocks, loosing out with dual offers, they get a different perspective.
It is a buyers market but most 1st time home buyers think they are buying a used car from Kurt Rusell in "used cars"
meaning they can make REDICULOUS offers(like you said 400k on a 500k asking price)
All I can say to these buyers is rates are VERY low(and stick with a fixed so you dont screw yourself---high 4's on 30 year), and so are the prices of homes so take advantage...........sounds like in next 6-12 months rates will go up .5% and stay there
anything i can do to help please keep me in mind....i'm right in Peekskill/ctld manor area
DOMINICK GACCINO
ABC123 Mortgage Corp
914-391-2388
www.abc123mortgage.com/dg
Unfortunately Mr. and Mrs. Buyer have the notion they are the ONLY buyers out there. I just lost a couple who took their sweet time in responding to listings I sent for their review via email. Six of the seven they chose to see had contracts on them. I don't think they believed me. They no showed for the appointment I set with them to meet in my office for the purpose of selecting other properties to view in person. Perhaps they found another agent; perhaps they will see that the 'deals' (decent shape and price) are gone in the blink of an eye. Perhaps they will then realize I was telling the truth. Perhaps none of the above. Oh well, NEXT!