There are some agents out there who think they are Gordon Gecko or Terrell Owens’ agent Drew Rosenhaus and try to negotiate as such. I have often said that trying to negotiate with strong-arm tactics and ultimatums don’t seem to work well. And easiest answer to give when you are pressured is “No.”
I have read books on negotiating but those usually apply to big business where negotiating is an everyday thing. I am also not the agent who thinks my clients are mine to control though I have been told a few times by agents on the other side that I needed to. I told one that it was a great idea and to go ahead and do that with her clients and we could get the deal done.
Last night I was reading “The Upside of Irrationality,” (p20.) In it they talk of an experiment with rats and shock, which is a favorite element for research into stressors and deterrents. They used the shock to see how well the rats learned where to walk. Low voltage didn’t affect them much. Medium voltage caused them to learn quicker than normal. With high voltage the rats could not focus and were unable to figure out how their environment was structured.
They gave some human examples of where stress overloads our ability to make rational decisions or perform to our best. In the human examples they studied CEO’s, created experiments with monetary gain, and watched “clutch” NBA players. These motivations were linked to money or notoriety. They found that the higher the money reward the worse they performed. In the case of players that were considered “clutch”, their percentages did not improve. For the others, the fear of losing the monetary gain makes them react and decide worse.
So even though agents negotiate day in and day out it is still the clients that have to make the decisions contrary to the type of agent I mentioned above. So back to my original premise that strong-arm tactics don’t work well. If a client is already in a situation that some say is a stressful as a death in the family, there is the fear of loss, and the now the agent is creating more stress with time deadline (really? 3 hours to respond to an offer?) or ultimatum that they accept now or it’s over, it is very likely they will say no. I have seen it plenty of times.
Story Time: My clients counter-offered some tiny conditions from a pushy agent two years ago who bashed the house and relayed some comments by her clients that were unnecessary. By chance, well actually it’s a thing I do that gives my clients a little extra time, another offer came up for exactly the same price and conditions. My clients felt that the agent and buyers were going to be difficult through the transaction and revoked their counter offer and then went with the second offer. The first offer might have been fine but the conduct of the that side backfired on them.
Many people wondered, or predicted, that the tax credit would just steal sales away from the future. That may very well have been the case though we can only hypothesize what would have happened if we didn’t have the tax credit, well, unless you are a politician.
I wasn’t a fan of the original tax credit and, besides the fraud, it looks like it didn’t spur a lot of sales that wouldn’t have happened anyway. I really wasn’t a fan of the extension either. With it ending in Spring I felt there was a good chance that it could kill our Summer. Though it is possible the tax credit which brought rates down even lower with less demand.
The latest news for real estate isn’t good which just drops confidence in a time when real estate doesn’t sell well anyway. The news likes to report bad news, “If it bleeds it leads,” is the line often quoted. The recent headline is that sales are down 27%, the largest drop in four decades and the weakest in 15 years. Great, while those are meaningless numbers it still scares the crap out of people.
So where are we? I, along with so many others are shocked at how low rates are.
Truly historic levels and I don’t know when they will go back up. Last year or so Time Magazine suggested buying because they thought interest rates would go up. They made the point that a 1% rise in interest rates would counter any gain from a market being down 10%. As of today we are down a point and down about 10% in many areas.
My advice is always, if you have the money and you plan to live somewhere for 5-7 years than it’s probably worth the risk, but remember, it is a risk. The pendulum has swung from “Real estate is a no lose investment” to, well, you know. And lastly, you can’t make your decisions based on fear. I am bring you the numbers and perspective. Truly no one knows what is coming whether it’s good or bad, the market and the economy is it’s own beast. Just make thoughtful decisions.
I don’t hear as many people talk about this as much as before but if dollars per square foot was all you need then banks wouldn’t require appraisers when they gave loans. If it was that simple then sites like Zillow wouldn’t have to work on an algorithm to come up with their Zestimates
About the only place I can see where this metric works is for condos and large developments where they have built the same floor plan over and over. The dollar per square foot metric doesn’t and can’t take into account the floorplan, condition, upgrades, lot size, amenities, views, shape of the lot, and individual taste.
I have had plenty of clients be shocked when a home with 200 sf less than a previous home actually felt bigger. Floorplan layout is one of the biggest factors to a home selling especially once you get past 2000 sf. I could keep beating this but if you just look at comparables you know if a house is priced within range without taking the time for this useless math problem.
The RMLS Comparative Market Analysis (CMA) report shows the percent difference between sales price and final list price. While doing some research on Short Sales, that later sold as bank-owned properties, I found some very interesting numbers.
11 out of 14 listings had some huge price drops. The following numbers showing the discount from the original sales price as a short sale and then from the bank’s original listing price.
88.1% 94.7%
75.4% 96.6%
66% 98.8%
92% 80% (In this case the bank actually went above the original Short Sale price. Dumb.)
87% 91.5%
80% 100%
No short sale 73%
67% 86%
82% 91.3%
No short sale 91.2 %
81% 98.3%
I have seen many numbers average about 97% in many cases from Last Listed Price. Remember that people raise the price to include closing costs which again interferes with this number making it less meaningful.
None of the numbers help much except it shows just how badly some agents are pricing homes. I don’t create the typical CMA in part for these reasons. I don’t like artificial numbers and it can become distracting to rectify all of the them.
I pull the listings and then look over them with my clients while comparing individual similarities and difference with their home to help find a price because that is what buyers are doing. Once again, if these useless statistics mattered we wouldn’t need appraisers and Zillow wouldn’t need an algorithm to create their Zestimates. It’s an art as much as it is a science.
Quite often buyers ask me how long a listing has been on the market and sellers ask me what is the average days a listing has been for sale. I usually grimace a bit because I know they are most likely going to read too much into that number.
Every listing has a number linked to it in the RMLS. Not too long ago if an agent wanted the listing to look fresh they would cancel the current listing and do a new listing, get a new number, and the DOM would start over at zero. Previously our average DOM was anywhere from 30-90 days. RMLS finally decided that we should show a true number and now, as long as the string isn’t broken by more than 3o days, they count all of the previous listings to get an accurate number and that is around 150 days now.
So why doesn’t the number matter much to me? If I list a 1 bedroom home facing the freeway for $1,000,000 will it sell in 150 days just because? No. If I list a 5,000 sf new home for $1,000 would I expect to wait 150 days to sell it? No. Another reason for a five month average is because many sellers either can’t or won’t price their home at a reasonable price.
Also short sales have a large effect on the number. Even if we get an offer on a short sale it will stay on the market until the bank approves the numbers. I had an offer accepted in January and the bank accepted it in late June which added five months to the average to it’s DOM that weren’t real.
Buyers like to look at that number to guess how motivated the seller might be. The number can matter to me a little here. If the seller is sitting on one number for three months I am guessing he might not budge but that isn’t always the case either.
Sellers look at the number to guess how long they have to wait before they will move. It just doesn’t work like that. A house will sell when the right buyer comes by for the right price. Houses are still selling above what you would expect just because buying is still an emotional decision.
I was looking at comparables for a listing and in the history of some sold listings. I saw they had a pending offer at a higher price than the final sale price. Someone was willing to pay more earlier but than the deal fell apart for whatever reason.
I think if anything, DOM shows the prevalence of short sales and either a seller or agent overvaluing a listing.
A family was packing up as a foreclosure loomed in the not to distant future. The home had been in the family since at least the 1950′s. While going through the basement they find 8 or 9 comic books.
One happened to be the first appearance of Superman in Action Comics #1. That issue has sold for upwards if $1.5 million but the article guesses that their copy could go for $250,000. I am guessing it wasn’t in great condition if they didn’t even know it existed.
