Tag Archives: Buyers

Buyers Will do What Buyers Will do

The Bruce Lee Axiom of Real Estate:

“Those with Power, have No Need; Those with Need, Have No Power.”

Dr. Roger Sperry said of the Reticular Activating System, “What you Focus on Expands.”

These two ideas are running the minds of buyers right now. Buyers believe they are powerful. Buyers are allowing this idea to not just percolate, but expand.

These two ideas are critical to untangling the real estate mess. The fact that I just said mess indicates plenty about what I am focusing on today.

Your on-board Google Processor at Work

The strangest data I’ve seen in the 4.5 Years that I’ve tracked data for The Stat Pack was last month: September 2010 saw MORE (not less) pending sales than May or July 2010.

Typically, May and July are  two booming months of the year. In 2010, it would have been smart to schedule a vacation during that time, because it was deadsville.

Flip around to early October: I did four transactions in one week. I had not done that since 2004. Sure, one fell apart, but working on four deals in a single week? Something is going on. Buyers are buying.

How buyers are buying is another story. The reason the market is more likely to come around a little bit in 2011 has to do with this perception: Buyers are telling themselves that there are deals out there. The dumbest activity in real estate are practitioners “educating” consumers that “now is a great time to buy”. Baloney. Every consumer has a brain of their own. The believe what their brain tells them. Every brain has a Reticular Activating System. The Reticular Activating System is not trained to act on someone else’s opinion; your on-board Google Processor is trained to lock-in on only on things it knows to be true. It takes way too much mental RAM to make that sucker lock-on to something it doesn’t believe or know to be true. So agents, lenders, title reps and the government can beat drums and evangelize all they want about how good the timing is; it doesn’t matter because Reticular Activating Systems don’t act on this chatter.

But right now, the tide is actually moving towards “belief in the buy.” That belief was best summarized by a buyer’s statement in a late night email exchange last night: “we want an incredible buy in this market.”

Appraisers like to glorify their profession right now by saying the most critical component in a house’s marketing is it’s price. That is ALWAYS the case. A seller sets the expectation and the buyer determines market value. Price is always the first and most critical component to proper marketing. I would not buy an iPad at $1200. At $499? I’m interested. What is different now is that the seller’s initial asking price determines if there is even a chance a home will sell. Last year, 55% of all listings sold. This year, that number is just below 47%. That “8%” decrease is really closer to a 14% drop off in probability of sale. Sellers are starting to get the feel of this by pricing appropriately; again, in the 4.5 years I have done the Stat Pack, the relationship between all-market-average-list-price, new-to-market-list-price and sold-price on a monthly basis had never been as close as it was on October 1. But what sellers still have not got a hold of, or the stomach for, is that if you’re well-priced at $198,000 and get an offer at $180,000… you won! It doesn’t mean as a seller you have to take an $18,000 hit. Counter that junk offer!

"Those with Power have no Need; Those with Need have no Power"

But… you got…an…offer! Fifty-three percent of all sellers right now don’t get offers. If no one wants to buy your house, you can’t sell your house. Getting the offer is the critical piece to the equation. Fifty-three percent of sellers are not getting offers.

 

Buyers are smelling deals. They will hold out for that. But this Christmas, more and more people will look at their personal well-being this way:

  • My commute stinks
  • We out-grew this home. Years ago.
  • I could save $45,000 in interest over that 30-year life of the loan.
  • That Dave Ramsey said I could save $112,000 in interest on a 15-year loan.
  • I want a better master bedroom.
  • The kids need a yard to play in.
  • None of my other investments are doing a lick. If I could pull the money out of my house and do something constructive with it, I will.
  • There are some really good deals out there in real estate
  • I think I need to buy a new home.

This self-talk is the germinating seed that leads to buyers convincing themselves now is a good time to buy. But one of the key components in getting them from “maybe” to “yes, I’m ready to go”, is their feeling of “power” in the process.

After the Tax Credit. What now?

The first listing I sold was 1620 N. Nevada in March, 2000. After pricing the house at $325,000, I looked up the public record to see what the seller paid for it back in 1989: $88,000. 370% appreciation in 11 years!

A present downtown listing

Was that lovely 1898 Victorian Grand House shiny and new in 2000? Or was the value of that property something established by something fundamental? Examples: there are photos of it in the Pioneer’s Museum; Old North End dirt has been considered valuable for 125 years. Why is that house now today probably worth $500,000? Hint: it has nothing to do with the kitchen counters!

I predicted that the market would hit 9200 sales this year. That is exactly the pace the market is on. But I no longer think the market will hit that number. Statistically, fewer homes sold the first four months of 2010 then in 2008. Anyone care to remember the real estate bliss of 2008? I had a moderately bullish forecast in January due to supply and demand trends that no longer exist. The market is better now than it was in 2008 or 2009: but those were lousy years. Comparative analysis requires thoughtful honesty. If the market was actually “improved”, the market would have less than 6 months inventory right now which would catalyze summertime appreciation. It is at 6.5 months despite a massive 1500+ under contract properties. With the 31% increase in listings year to date, it might not get below 6 months this year . More at The Stat Pack.

I financially benefited from the tax credit. This has personally been one of my most successful years in the business. Yet it has also been the most puzzling. 1.) A great number of the listings that soared onto the market this spring were trying to capitalize (too late) on the move-up tax credit. Will these people stay on the market without a $6500 government incentive? 2.) Shiny and new is always popular, but it is also always depreciating. Why oh why is there a 15 month supply of housing of pre-1950 housing $200,000 and up downtown, while there is only a 5.5 month supply of housing of 1998 or newer over $200,000 in Powers? Yes, there are more buyers for properties in PWR than CEN, but we’re comparing 77 active listings downtown to 275 in PWR, and still there is 1/3rd the months of inventory out east? Consumers are habituated to buying disposable things, like a flat screen TV, a Starbucks, or a car with a loan. This behavior seems to be alive in real estate purchasing. I am guessing that the “sale” aspect of the tax credit encouraged it.

The real value of buying in 2010 is to leverage REMARKABLE. Prices went down for 3 years. Buying power is  25% better than it was in 2007 when you account for pricing drops and money leverage. This opens up a lot of 1620 N. Nevada scenarios for a lot of people.

Location is the first and greatest real estate fundamental. Prime location areas have not sold well year to date. It’s not just Broadmoor and upper Peregrine, but downtown, Manitou, Old Colorado City and places where the value is in the dirt.

If you are choosing to sell or buy, qualify your “WHY.” Why are you doing this?  If you are selling and can seize other opportunities, then get it over with. If you are buying, what’s the most remarkable area you can afford?

Real estate isn’t fair; never is, never was. Removing the carrot from before the horse helps consumers more honestly assess their wants and needs.

Why my listings are not on Craigslist.org

This link will take you to the seminal YouTube experience  to describe Craigslist in a way that I can’t with words. The combined media of song, video, editing, and satire encapsulates everything that is magical about this online commune of weirdness… and nails it on the head why my listings are never found on this site.

This has nothing to do with bashing Craiglist. I have seen scams that involved my listings, but that happens with a free list-serv. I think Craigslist is a good tool. I use it in my own life. I just do not think it sells real estate the way sellers want their real estate sold. The reason is that it keeps sellers from getting the highest possible offer.

Craigslist is a great place to get rid of a 27″ tubed Phillips TV. If you want to get rid of your faceless angel dolls in a heartbeat, put them here. If you have Al’s “Styrofoam peanuts” but want to keep the trash can… you can’t find anything better.

But a $250,000 property? If someone is going to haggle over the $20 TV, and as Mr. Yanokovic adroitly satirizes, the winner of the free styrofoam peanuts is going to want to them delivered or accessible after work hours… well how on earth is a posting on Cragislist actually positioning a seller to be in the best negotiating position possible? All it does is say “bring the offers, however ridiculous”.

The point of marketing is to tell the story of the product. I was once educated in a national franchise training class that “the point of marketing is to place the product in the eyes of as many people as possible”, that “effective marketing” accesses as many people at one time, and that more equals more.

Well more does not equal more anymore.

We are bombarded with advertising and chatter and noise. Advertising is a pitch; marketing is story telling. If the product is not worth telling a story about, the product is not worth buying. If the story is worth telling, tell the story so it can be understood. Put the story in the appropriate context. Put the story in a medium where it belongs. There are a million other real estate related websites out there. The online flea market classifieds is probably not the best.

Places I have used Craigslist (or my clients have right after closing or right before listing) effectively in real estate include the following:

  • Obtaining or getting rid of moving boxes
  • Finding an electrician who could help out on a basement re-wire that afternoon
  • Marketing an Open House
  • Marketing an Open House near a specific event or at an unusual time
  • Getting rid of furniture on a property that needed to be listed and sold quickly.

These are all services and needs that are not directly tied to the negotiating aspect of selling a home. All of these are value-adds that make things easier for sellers and easier for buyers to do something in conjunction with the property. In these cases, Craigslist is a very effective tool for real estate. It’s the pitching wedge for the short shot.

But don’t want use the pitching wedge on the green.

Smart marketing places the product in the right field of play. Bernice Ross, in her post today on “5 Reasons Your Home has not Sold” on Inman News gets straight to the point with her number one reason: it is not so much price as it is price range. Crazy stat around here: $375,000 to $399,999 has 13 months of inventory right now. $425,000 to $449,999 has 16 months. $400,000 to $425,000? 6.2 months of inventory. Now that does not say that a home priced at $395,000 with no traffic will see traffic at $410,000… but stranger things are sometimes true. A fellow agent in our office had a property in Walden at $490,000 and no showings. She changed the price to $500,000 and offered 2% buyer concessions (same net) since no one associated listings of that price as possible in Walden and got 3 showings in 30 days.

Smart marketing places the product in the right field of play.