Mr. Inc . . . good points. To answer the above question, many sellers are willing to take a loss if they feel that the home they purchase is also at a decreased value and see a reasonable appreciation on that new home when the market picks up. It's similar to pulling out of a mutual fund and putting it into a fund that has a greater historical appreciation value.
I have a client right now who is willing to take a loss on his sale in order to find a newer, more up-to-date home that is more likely to see better appreciation in the future.
It's a confusing concept, but when u see it on paper it makes sense. However, like all investments there is an element of risk.
In my own town (not Swampspcott), many people believe that we have aready seen the bottom. We are not Florida, California or Las Vegas. New England is a different market. Have the realtor with whom you are working run the same analysis for Swampscott & it will give you a clearer picture.
I do love your name.......
There are definitely sellers who are holding on to a hope that there is a buyer out there who will pay them what they are asking (or near to that price.) There are sellers who list and are only wiliing to sell, if and when a buyer meets their terms. There are sellers who are content to sit tight, for a year, or two, or longer. They put their home on the market, and are willing to take it back off the market, and stay. It is their right to do so.
There are also sellers who very much want and need to sell, but hold tightly to a price that might not be realistic. Realtors sometimes walk away from these lisitngs, because they are overpriced. Other times, Realtors take the lisitng, but have in depth discussions about how overpricing negatively impacts the ulitmate sale price. Often, the only proof is when the market does not produce a buyer. Then, a seller begins to accept the message that the market delivers.
Some overpriced lisitngs represent unmotivated sellers; while other sellers really do want to sell.
For buyers, I suggest that they make offers based on the values they perceive represented in the property and have their Realtor submit supporting documentation for the offer price. That supporting documentation comes in the form of recently solds, current competition, and price trends in the recent months.
Homes priced correctly that arent dumps are still selling. I saw some homes this weekend that were sitting around for a few months, and were over priced. I know because over the past couple of months, I have seen homes priced as much as 400k lower in much better condition and those sell quickly...usually within 30 days, but if you tried to explain this to the listing agent along with other economic indicators for price drops, they always come back with the same line of bull:
1. point out some other home in the neighborhood sold for XXXX$, and so therefore this house is also worth the same amount
2. their neighborhood is "special" and immune to the facts.
3. Believe the house they are trying to sell is actually move-in condition, when the only thing they have done to the place is paint, change carpets, and maybe add granite in the kitchen. This is what these sellers believe to be "remodeled to the 9's"
4. It is NORMAL for a house to take 3-6 months to sell.
And my FAVORITE line of BS:
5.They talk about homes in the area still getting "multiple offers" in the area over asking.
So now my husband is asking them why the home they are trying to sell doesnt have these elusive multiple offers. It is very amusing.
Bottom line is...you can put lipstick and perfume on a pig, but a pig is still a pig. I dont think sellers are ready to accept the reality yet, which is frustrating for both sellers and buyers.
A lot of times, it also depends on the motivation of the sellers. In Marin, we have certain areas that have a lot of inventories, but the sellers are holding on tight. They believe that due to the great location, the market value of their homes will stay even or flat. Unless the sellers are anxious to move, there is no incentive for them to drop the price to sell just for the sake of selling; especially if they don't mind staying put if they have to. And they are right, I personally have great faith in Marn real estate market. So, that's that part.
However, with sellers that are motivated; Francesca's example brings something to mind (I am not really quoting her case, as I have not chat with her on her specific deal, but it brings a scenario in mind) -
A seller sometimes has a bottom line in mind, especially if the seller has enough equity in the house; then they will be willing to price the house lower than the competition. With an artificially low price, you will be able to generate interest and eventually getting higher price (even generate multiple offer situation); often times, depends on the price point, could be thousands of dollars over the asking price. Like Francesco said, this still happens quite often; and I have seen see properties go into escrow in just a couple of weeks and way over the asking price.
Another reason? The sellers are worried that if they lower the price, the buyers will still come in with a lower offer.
So the key is to keep your eyes and ears open, have your Realtor watch the market closly for you. Be agreessive and don't be passive - Don't be afraid of going in and make a lower offer - the key in this market or any market is to put things on the paper, then you can get your foot in.
The media is a buyers biggest enemy right now in some areas . . . giving everyone the idea that the nation is a buyers market. You may not be seeing them drop in the areas you are looking because the comparable sales do not warrant a drop.
For example, I just listed a property w/average days on market for their "neighborhood" of 40. Yes, I said F-O-R-T-Y DAYS. Thirty-eight, yes I said THIRTY EIGHT DAYS later we had a contract $5k above the seller's bottom line. All of this in a town that in general is referred to as a "buyer's" market. Well, not in this section.
Hopefully you are consulting with a local realtor regarding the conditions in that neighborhood so as not to be losing the house of your dreams and/or paying more it at a later date.
Actually I think that the Byers are disillusioned since they are always waiting to see a better deal while some good properties get snatched in front of them. All of the sudden everyone is picky and the homes built in 30â€™ 40â€™ and 50â€™ are too old. And few years ago that was not an issue. I even saw a listing where a home built in 1930 was listed as antique. No one wants ranches and splits and everyone wants a Mc Mansion for free. What used to be no problem like wall paper in the room, today is a big obstacle for buyers.
People do not realize that location is all that matters and everything else can be fixed.
The home is not an investment tool it is a place to live in.
But as I noted in my post below, the market is surprisingly spry and prices have actually risen in my town this past year. AND - we also have many unrealistic buyers. Let me give you an example.
Years ago, I bought a piece of land from a woman, to build a seasonal cottage. I paid $15,000. She sold it to me to use the $$ as a down payment on a condo in Boston. BUT, she decided to wait a few years since she was certain the market was going to crash. Well, guess what happened to prices in those few years.... These friends are STILL telling me that the market is going to crash. In the meantime, that lot is now worth more than $100,000. (I sold it too.) And prices have gone up in the past year, while some buyers are still waiiting for "the crash". The crash was here - it just wasn't what the buyers thought it would be.
Mike from Cincinnati summed it up below very succintly. Markets are very regional, and within the region, certain towns hold up better than others. I think the current market dislocation includes a segment of unrealistic Sellers AND Buyers.
The key is questions I have is what measure are you using to calculate "very little houses drop in price"?
In most markets the measure is the median price, however if you have comparable properties, then you can make a direct apples-to-apples comparison.
The price at which a home sells is the price a willing, able, and knowledgeable buyer will pay, and to which a seller will agree. I agree with the seller, have your Realtor run some comps for you.
I do have a couple of questions:
Have ANY homes sold in your area?
What was the list price versus final sale price ratio?
How long were they on the market?
These questions might give you some ideas.
Not sure if the biggest enemy is the media itself or reality. I'd bet on the latter more than the former.
We are currently in one of the biggest real estate economic recessions in 15 years.
You are right. It does depend on the area. However, Swampscott MA hasn't had many buyers recently. Also, many sellers bought their houses when the market was better (and have paid higher prices).
Why bother putting your house on the market, when you can't get what paid for it only five years ago?