Learning from the Bubble Blog

Posted on February 22, 2009 by Jim Duncan

A few snippets from which I’m liable to do some blog posts -

MLS “gaming,” ethics, ” internet search terms, meta tagging, sellers’ motivations, training v. education, buyers’ points of view, the difference between unethical and sneaky, educated buyers, pricing, the state of the market, and the value of a buyer’s agent. Etc etc etc. Quite the read. (ed note: regarding this post)

And

It is also important to me that this is the same agent. And what the “similar” price is. Is it a $20K price drop for a $400K house? That type of “drop”, about 5%, is unrealistic for something that has been for sale for at least a year.

…

Additionally, I am going to be suspicious of this particular seller’s agent in the future, as s/he hasn’t done his/her “homework” on the local and national economy.

And

Assessments don’t have anything to do with what the house is worth in this market. Why don’t seller’s agents tell them this?

The occasional snark aside, the insight available in this discussion is worth a read from sellers, buyers and not least Realtors.

It can be a good time to buy – but not always, and not for everyone.

About Jim Duncan

A Charlottesville Realtor who tries to stay on the bleeding/cutting/functional edge of technology and real estate trends. I have been selling real estate for the past 10 years, lived in C'Ville for twenty+ and am married to one of few Charlottesville natives left.
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  • Cville Buyer

    Since I see myself quoted above (!), I thought I’d add my two cents here. I’ve been on the market for quite some time (as, apparently, has Downtownenvy). I have come to know the “pricing” strategy of a number of seller’s agents. They’re very predictable in what they’re going to do and where. Additionally, there also seems to be a pack mentality. Suddenly a particular amount will be the way to price a certain sized house this month. Also, I’ve started to notice price cuts coming more rapidly. They’re still small drops, 3-8%, but they’re happening after a place has been on the market for one or two months, rather than six or nine. I think this area has a long way to go to be competitive. And I think what Downtownenvy said over on the bubble blog may be true, that when buyers go to qualify for a jumbo, they might get a surprise. But I’m on the market, fwiw, b/c my family needs a place to settle. I wonder how many are buying condos and townhouses right now which seem to be dropping fastest, since there are so many of them. And despite the huge number of places on the market right now, a lot of the ones I’ve seen over the past year or so are not “move in ready” which honestly is often shocking considering the asking prices.

  • downtownenvy

    Cville Buyer has it right. Jim himself can attest to the fact that we have been in the market a very long time. We probably have been unrealistic in our offers in the past, because frankly, we have felt for a long time that this market is ridiculously overpriced. We aren’t into starter homes either. We want to pick a house and stay. We have a school aged child and we know which school district we want to stay in, and we know which neighborhoods we prefer. Unfortunately, they are also the priciest downtown neighborhoods. These are kinds of places we grew up in and we love this area. Our parents were lucky that they didn’t face these kinds of price run-ups. Don’t feel sorry for us though:) We are more than willing to wait. We keep running our little calculator and it keeps telling us that renting and saving are way better for us right now than buying. We keep checking and it keeps reinforcing that prices are still too high.

    We are confident that patience will be rewarded. My husband said 3 years ago that these prices can’t keep going up forever and he was right. Now I am just waiting to see if his predicted drops will also occur. I would love a home of my own that I could paint and decorate, but not at the cost of my children’s future. A $500-600,000 home is just not a good economic idea for anyone with a realistic budget who hopes to retire and send their children to college someday. Are there some families who can easily afford this? Sure. Are they around in the numbers that are suggested by the current MLS listings?I’m betting no. I guess we’ll find out if I’m a good gambler or not.

    Also, since it has been thrown around the local blogging community lately, I would like to reiterate that I’m not trying to steal a house from a desperate seller. I would just like for prices to naturally drop instead of being artificially propped up by the government and two year old assessment data. There are buyers around now, but I really don’t believe they are the same breed of buyer that used to exist. They are more patient, more focused, a little ticked off, and determined not to buy into three year old marketing information anymore. The rest of the country is starting to get it, and now we just have to wait for Brigadoon (Cville) to do the same. Cue theme music.

  • Serious Buyer

    My experience has been very similar to Cville Buyer and downtownenvy. The pricing in Cville does not reflect the reality of the US housing crisis. Why is this? Something is horribly wrong with a local industry that does not promote competition. There appears to be MASSIVE group think among Realtors listing in mycaar. Whether this is inability to understand economics, desire to squeeze a living out of a few home sales, or what I do not know. Sales tactics smack of the “used car salesman” who expects to bamboozle his customer into taking the lemon off the lot. Buyers are taxpayers and many who CAN buy are not those who overlevered in the first place . We are angry about footing the bill for irresponsibility and lack of accountability by a few. I for one, won’t let an emotional sale put me in the poor house like some of these insolvent Sellers. You can call that stealing if you choose to, but I have to wonder who is the thief here?

  • Scott Pershing

    Serious Buyer, while I can understand your frustration with the prices that are out there, nothing stops you from putting forward an offer at a lower price point.

    Most sellers are selling in this market either because:

    a) They have to, or

    b) THEY REALLY HAVE TO!

    A lot of people are in bad to really bad situations. They bought when the market was high, they have debt they have to service, and they may have lost their jobs. Their only valuable asset left to sell is their house. If you put yourself in their shoes, they are going to try and push the envelope as high as possible, and Seller Agents as well as Buyer Agents are motivated to keep the average selling price high.

    My recommendation is don’t get angry, just make an offer for what you feel the house is really worth. Show comps and make a persuasive argument as to why you reached your price point. Sellers may not like your offer, but if they get enough buyers who take the time to make a well though out offer justified by comps as opposed to lowballing a price it will get Sellers to “reset” their price point.

  • serious buyer

    Your points are understood Scott, but throwing spaghetti on a wall to see if it will stick is not my idea of a productive two party negotiation. There are NO comps in the C’ville market for most neighborhoods since there have been NO recent sales for months. Buyers , obviously, also have personal and financial reasons for desiring to move during this timeframe. No one is truely exempt from what is happening. Wake up.

  • http://www.realcentralva.com Jim Duncan

    and Seller Agents as well as Buyer Agents are motivated to keep the average selling price high

    Hang on -

    My job as a Seller’s agent is to get the house sold for the best price, not necessarily the highest but the best – and the best may be lower than the sellers need/want.

    My job as a Buyer’s agent is to get the best price – frequently as low as possible – for my buyer clients.

    My negotiations are as data-driven as possible, and often times there are not comps – I’m negotiating right now using withdrawn and expired “comps” – that things didn’t sell is compelling for a lower price.

  • downtownenvy

    Serious Buyer,
    I understand how you feel, but I have to agree with Jim here. If you feel that your Buyer’s agent is not helping you craft the best deal for you then you have the wrong agent. Jim has tons of posts about how to interview and hire the best agent for you.

    Please note, Jim is our preferred Buyer’s agent. I want to disclose any possible bias here. If you have the right professional helping you, then you can come up with a fair offer even without recent comps. You have to do the due diligence unfortunately because there are still some people in real estate that aren’t in it for their clients. It’s our job as clients to weed them out, and protect ourselves.

  • Scott Pershing

    Serious Buyer,

    You always have a comp for the house: the price they paid for it. With minimal research you can always find that. The way I am doing my comps is looking at what the seller bought the house at, factoring in any improvements they have made, what is a realistic appreciation percentage and then assessing whether they bought at a market high before I do my downward adjustments which include repairs and modifications to the house, adjustments for overbuying in a hot market, etc.

    Jim,

    I don’t doubt that you try to achieve the best price, but best is in the eye of the beholder. If a seller has been trying to sell a property for a year for lets say 1M and you help them by reseting to $900K and sell their property then you are doing your job by resetting bad expectations of what the market price will be.

    But in general a real estate agent wants a high transaction volume and a high transaction rate and a seller wants a high transaction rate and short time period to transact.

    From a seller and seller’s agents perspective their interests can be aligned. Assuming that a seller’s agent doesn’t need to close a property for a commission, and that the seller has ample cash to wait it out.

    The same can’t always be said about a buyer’s agent and a buyer. If a buyer’s agent has a client that can do the deal at the listed price, the buyer’s agent is going to be hesitant to push the price down too low in fear of blowing the deal. They will “counsel” their buyer to see the value of the price even at the higher price point. To be fair seller’s agents that need to close the deal will do their own “counseling” on the seller to get the deal done.

    This is not a slam on agents this is just the reality of selling via agents with varying priorities. I have seen it done enough times that I eschew using a buyers agent… but then again I am not the average buyer.

  • serious buyer

    Scott, thank you for your comments. In my opinion, “the price they paid for it” is not a comparable. Your approach is akin to traditional appraisal methods, but without RECENT comparable sales of other like properties in the vicinity. A realistic economic appreciation % is exactly what the Bubble Blog is trying to promote. It is missing today in the price of homes listed on mycaar and it is what you have referred to as a “lowball offer”. As more supply comes to the market this spring, we shall undoubtedly see prices fall of their own weight. Enough said. I will no longer post on this topic here.

  • http://www.realcentralva.com Jim Duncan

    Serious Buyer – Thank you sincerely for your comments and input, and for stopping by to comment.

    Scott –

    The same can’t always be said about a buyer’s agent and a buyer. If a buyer’s agent has a client that can do the deal at the listed price, the buyer’s agent is going to be hesitant to push the price down too low in fear of blowing the deal. They will “counsel” their buyer to see the value of the price even at the higher price point. To be fair seller’s agents that need to close the deal will do their own “counseling” on the seller to get the deal done.

    Thanks again for your time and comments. I’d argue that you haven’t found the right buyer’s agent. Seriously.

    Here’s how I regard buyers with whom I work (with the caveat that I see everyone as people/families and frequently friends) –

    1 – A transaction when I sell them their house
    2 – A transaction when I sell the house for them
    3 – A transaction when they refer a friend or family to me.

    Whatever minor gain I would achieve by “getting my clients into a home” would be jeopardized a) I pushed them or b) they perceived that I had pushed them into something – ultimately, I’m not making the decisions, but providing guidance and context as appropriate.

    My market analyses are as data-driven as possible – and I provide them for my clients, rather than “taking my word” for it. While I hope and expect my clients to trust me, I also firmly acknowledge that I am not the one paying the mortgage, and I see my role as one of guiding and counseling them to make the best decisions possible.

    Downtown Envy –

    Thank you so much (as always). We’ll get there. :)