Some Buyers and Sellers Become Unrealistic In This Market
Paulia and I have been sharing ideas this week for a good blog entry. I have been asking her about behavior changes in buyers and sellers as many have had to rethink housing plans due to a shifting real estate market. I asked Paulia to check her 'send box' to see what types of email questions she has been responding to, as this is a great source of information for the here and now.
One such individual who wrote Paulia was interested in purchasing a condo on prime Lake Hamilton property in Hot Springs, AR and gave Paulia a laundry list of 'wants'; most entirely unrealistic for the $100k he wanted to spend. The list reads:
A 2 or 3 bedroom condo.
In a well run condo complex.
But, a condo that has been neglected, once a rental that had been abused, etc.
Fairly low monthly fees.
On Lake Hamilton.
Price, less than $100K if possible.
It is important to stop here and note that even at today's real estate prices a 3-bedroom condo with a good floor plan, in a well-run condo complex with fairly low monthly fees on prime lakefront lists for, on average, $300k.
So, I had to take a second look at the 'wants' of the buyer versus the 'reality' of the situation and ask myself, why IS this buyer being so very unrealistic? He wishes to pay 1/3 of what a condo in this location is priced. Not half the price… or $25k below the comparable or even $50k below, but 1/3 or approximately $200k less than the listing value. Why, that's 3 condos for the price of one! How much more did he really think the market was going to 'bottom-out'? So I reread his email a bit further to understand this thinking. The potential buyer admits, "I may be unrealistic. That's okay. If something like this does not materialize, that's okay to. I just know my retirement account has declined by 40% in the last month. That has made us alter our thinking quite a bit." He also added, "Don't really have a timeline. I've always been slow on purchases. I drive a truck with 199,000 miles on it. My wife's car is the new one and it has 113,000 miles."
I ask more questions…Why did he add all of this extraneous information about his 401k and his wife's car? I believe this man is suffering and he wanted Paulia to know this. Perhaps he was looking for a sympathetic shoulder. Since his correspondence was in the form of an email, there was little risk involved for a face-to-face potentially embarrassing conversation. I also conclude that this buyer is having grave difficulty adjusting to change. Evidently, he has the same list of 'wants' from the past such as living on a popular lakeside location; one luxury he simply cannot bear to give-up. Rather, he would much rather raise his family in a beat-up condo and succumb to the renovation expense process than to give-up the lake view. I really find this behavior to be fascinating! To me, it is like buying a beat-up 1972 Cadillac, without modern day safety improvements and gas efficiency just for the sake of owning a Cadillac.
I asked Paulia if she's noticed any other changes in buyer behavior. Paulia observes that, "It’s becoming more & more difficult for the folks with a fixed income, and the middle-class folks to purchase a home. And we’re also seeing more people, being unrealistic with their wants– they seem to want to buy cheap and sell high -- and that “ain’t gonna” work."
On the other hand, in the luxury home buying market, Paulia indicated, "We've noticed more of a shark-like tone from the upper clientele – they’re hovering around like vultures ready to pounce and snatch-up bargains from the desperate sellers that are in a financial bind."
Paulia's own responses to those who are inquiring about properties have also been revised. As The Kennedy Team of Trademark Real Estate, Inc. does not participate in property management and rentals, an unusual but practical deal has been worked out with one particular group of developers they work with, for example, who has agreed to offer the properties for lease. Paulia explains, “In the past, we would quickly refer the clients looking for lease options to the property management companies in the area. Now, we’re trying to hold onto them because there are fewer potential buyers out there, so we’re doing whatever it takes to hold on to the clients and help them out until they are in better positions to buy or sell."
For those sellers who have listed with the Kennedy Team, Paulia states, "We’ve had to change the mindset from telling them [sellers] that, It’s not good to have a home sit on the market too long - to - It’s okay to have it on the market a while, as we need to be sitting and ready for when the market shifts back and the buyers pounce.” She adds, "We are keeping our sellers posted of all activity through our online seller reports (which is a great system that most Realtors do not offer) and we are keeping sellers posted on market stats, by reviewing the comparable home sales & active listings with them much more frequently. We are making sure that they are right on-price, as we do not want to miss out on any buyers, especially due to pricing. We have very thorough pre-listing packets with tons of initial information offering the seller lots of helpful tips and information on the selling process. We often spend two hours on our initial appointment, explaining the process."
The beauty of cut-backs, downsizing, price-reductions, slow-downs, etc., is that it does compel those who are optimistic to develop creative strategies that otherwise might not have been pursued. The difficulty is watching buyer behavior change so dramatically that sensibility becomes non-existent.