Most sellers think their home is bigger, nicer, different, unique, better than everyone else's. They absolutely block out of their minds any analogy I give them: I paid $32 a share for my stock last month. It's now selling at $2 a share "I gotta get, I'd like to get, I WANT to get, I NEED" all those things mean nothing. No one is going to pay more than $2 a share for my stock. Or. . . I have a 1999 VW. I "NEED" 68,000 to buy a porche. So can we advertise my VW for $75,000? I need some negotiating room too? And to make matters worse there are agents who will list for whatever pipedream the seller wants. It's endless.
If everyone is paying $600/SF then the market value is about that. Will "waiting" to get $1K per square foot be a successful strategy? I am not clear about that. Our market here in Santa Clara County jumped so up fast from 2001 to 2007 that it is possible we won't be back up in those seller market numbers for the foreseeable future.
The decision to buy is pretty easy -- you are getting great rates, and you have a lot of inventory to choose from and the prices are less than they have been in years.
The decision to sell is much more complex. I am seeing these sellers sell:
-A seller who is clearly already moved into a new home. They found something better, and holding the vacant home is not making sense anymore.
-A seller who moved away and rented here for a few years. They are watching their investment decline and want to end the bloodshed.
-A seller who inherited the home. Probate sales are now standing out because the seller (s) often have a lot of equity so there is no danger of a short sale or a foreclosure, and the heirs are watching the declining market crunch away at their inheritance.
-A seller who is retiring and wants to take the equity and move to a different community where $200,000 can buy a mansion with a stream
-A divorcing couple who wants to close the doors on the relationship and the assets owned jointly.
I'm not seeing as much of the move for the school as in past years. For several years around this time of year I am peppered with calls about buying a new home to get the child into the right school -- thus selling the home in the "wrong" school and buying into the new. These families are renting the old home and buying a new one.
Just because I carefully watch and study the market daily, I have no crystal ball on the mortgage industry; the foreclosure wave that I do not believe has capped out; and the future of home values if more companies lay off workers and trim "fat" on payroll.
Of course, if your Los Gatos friend would like a realtor who can sell a home quickly for competitive market pricing, I'm available! I'm a Bay Area native and moved to the South Bay in 1966.
http://www.EricaNelsonEstates.com (search foreclosure listings on my web site)
When you deal with someones home, it is personal and that's why they sometimes just don't get it. The agent is wrong to tell him wait for the perfect buyer. The perfect buyer may never see his house. You have to appeal to the masses and that means a lower price.
As for the insurance idea, I vote for AIG lol:) Sorry, they changed their name today. I call them I.O.U. Group.
I really don't think insurance is the answer. Some sellers and buyers will still argue that someone else is getting it wrong. It is just the way it goes.
While understandable you want to gain new clients, you simply lose credibility stating that the market in palo alto is strong. Prices are down 20% from last year with an unprecedented level of inventory, especially for high end homes. There are numerous threads discussing not whether palo alto is going to fall, but by how much.
To state otherwise simply insults a buyer's intelligence.
It struck me that an otherwise sophisticated person would fail to see that homes are priced no different from any other financial instrument. His realtor was no help say that he has a unique property and is just a matter of time to get the 'right' buyer to appreciate it. He had no issue taking large losses in his stock holdings, but somehow his home was different. I believe it is unwise for him not to sell given the market uncertainty we face that will continue to erode his equity, while incurring not insgnificant carrying costs.
If someone like him has difficulty understanding the market, it is not surprising that it takes so long for a correction in real estate to run its course, causing great damage to the economy in the interim.
It seems to me we need an additional mechanism to signal real estate value to both buyers and sellers. I am wondering what everyone thinks of the following scenario:
Extend the scope of what PMI covers. Currently it is designed to protect the lender if the buyer can't pay the monthly installments. This insurance could be recast as to also protect the buyer from a downturn in the market. We already have fire, theft, and flood insurance, why not insure against market risk?
If we could set this up, it would send a strong signal to both buyers and sellers as to the pricing of the transaction. If the insurance premium is very high it signals to the seller the property is overpriced, if it is low, it is a signal to the buyer to go ahead and finalize the transaction.
Preempting comparisons to the cdo debacle, this should be done in the context of traditional insurance, with regulation and healthy reserve requirements.
When I start working with a Buyer, I sit down and find out what their personal Home Buying needs and wants are, and Motivation for purchase of a home is. In the same manner when I take a Listing, I find out what the reason for Selling is: need to, want to or Have to Sell.....and taking into consideration current market conditions, comps in the area, and condition of the property, then price the home accordingly.
You may feel the frustration of not being able to get a home at what you feel should be at a lower price! But in a good neighborhood with good schools, homes hold their values and there is no such thing as a "bargain!" For a moment put yourself in a Sellers shoes, and think about what you would do?
Those who want to Sell in this market ARE selling, those who are brave enough to make a move in this market ARE buying and getting great homes at good prices and at great interest rates!
So, if you are looking to buy, make your move, this is a good time to write a REASONABLE offer, and get a good home without in most cases getting into a multiple offer situation! Its not happening, so, dont wait for Sellers to unrealistically drop their prices, specailly in Palo Alto.
Contact me, Lets Talk Real Estate! If what I say doesn't meet your needs, I will wish you well for the future, and part ways! Check out my website.
Be well and safe, regards,
You pose an interesting question and I'll give you my gut reaction. This may change upon reflection, but I think that it is because buyers act like consumers, and as such, are always looking for the best bargain. Since bargains are everywhere these days and interest rates have never been lower, it seems logical to announce loud and clear that their greatest wish has come true: this is an unprecedented period when both prices and rates are both low at the same time. All of the logical factors are positive, but it remains to be seen how long it takes to restore consumer confidence. Advertising and PR may or may not be effective, but at least there is a clearly defined target.
On the other hand, owners are making a much more personal decision, not just about declining market values, but giving up a part of there lives and personal history. Mass marketing is not effective in addressing these issues for sellers, but I assure you that every competent realtor is focused on providing a reality check to their clients. We are now in the equity preservation business. It is a one on one process and very challenging to convince someone that they should accept less than they want today or face even lower offers in the future. Stories abound about sellers turning down a $1 mil offer only to settle for $900,000 six months later. That's not the type of outcome that lends itself to an ad campaign. On the other hand, some homeowners decide that at current price levels they will simply stay put. They are prepared to wait the 2 to 5 (or maybe 10) years for the housing market to recover. Are you suggesting that we run an ad campaign to motivate them to get the hell out of homes so that a bargain hungry buyer can live there?
Again, thanks for the interesting question. It would also be interesting to know what prompted it.
Good question and great answers so far. There is one difference between buyers and sellers. The seller needs to net a certain amount of money out of the transaction (after paying off the existing loan, commissions and closing costs. For example, if thery are selling to purchase a larger house, they will net to net enough for a down payment. Without this financial motivation/result, sellers will not sell unless they have to for reasons such as financial hardship, divorce, out of state move ect.
The biggest problem listing agents have is pricing a sellers home. I've written a blog on this subject. Even when you show them the comps, they usually feel that their home is nicer than their neighbors and should sell for more. Do you know what a home is worth? It's worth what someone else is willing to pay for it!
The reason some agents take over priced listings is because of fear. They are scared that if they don't agree with what the seller wants, they wont get the listing. So they agree to take the lising for more than what the home is worth, and hope for a price reduction later. This costs both the agent and seller time and money.
I prefer to level with them upfront instead of letting them down later.
Have a nice weekend, KPS.
Dave Tap Tapper
"The Art Of Negotiation, With The Results Achieved".
We could never claim to be professionals if we assign a price to a house without taking into account a multitude of factors, of variables. A buyer's market simply means there is a huge inventory available. But, apparently, it's not the size of said inventory but the quality !!!
This does not mean a house does not still have it's intrinsic, unique value.
The same situation in Palo Alto is happening in Berkeley area, and surprisingly in a small pocket market which is San Leandro ( others of course).
If you put an unrealistically low price on a house, repeat, in certain areas of great appeal to the buying public, area where they want to live, where schools have good reputation, there is less crime, you get a mutiple offer situation and the final price will end higher than the asking price.
Thus, there was a buyer for that house in Palo Alto who overbid the rest!
In final analysis the average selling price will be influenced by the transactions in the area and on and on -
What's important, too, the seller is a "person" who most likely knows very well his house, researched his neighborhood for prices and averages, talked to a few professionals before listing the property and, if it's not some dramatic circumstance, decided to keep the (unpopular) price and not "give away" the property.
Conclusion: there is your average market, on one hand, and the "pocket markets" on the other ... aslo, the buyer should be persistent, perseverent & focused and he will prevail and, eventually, work with a real estate professional to find out more ....
You have a good point................ we are recently seeing agents resisting taking listings from owners who are so far out of touch with the market, they must decline the listing. As more and more of this happens hopefully, sellers will get the message.
The problem is owners know they can find someone that will list the property at their price, so they move on the the next agent, until they find a winner. .
It isn't easy convincing sellers to lose thousands and thousands of dollars on a transaction. This is a process that takes time because they are still hoping for that special buyer to come along and pay their price.