Sunday, January 4th, 2009 at 10:07 AM
Not Just Looking, Buying!
Ocrenter bought a house! http://bubbletracking.blogspot.com/
So did a couple of loyal piggies, and it was good to see the warm congratulations being expressed by those who commented. But just because a few people got lucky and found a compelling deal, does that mean anything?
All it means is this: if you endure, you might find a deal.
What does it take to get one?
Patience, persistence, and a little luck.
Are you thinking more about looking around? Here’s what you can expect:
- Bidding wars over the best deals.
- You’ll see a few houses sell for crazy money – more than you’d ever pay.
- You’ll see dozens that are way over-priced, and sellers don’t budge much, if at all.
- You’ll see short sales listed at decent prices, but are they really available for that?
- You’ll see REOs that need work.
- You’ll see 2-3 houses that you’d buy - if the price was 5% to 10% less.
Let’s focus on #6.
How can you get sellers to drop 5% to 10% off their price?
Be Willing To Wait - One lender’s current policy on their REOs is to accept no offer below list price for the first ten days of the listing. Regular sellers tend to react the same way. You regularly hear about sellers who get a good offer during the first week of their listing, only to blow it off, and then regret it later.
If you want a discount off the list price, you’ll probably have to wait them out. My rule-of-thumb is around 1% per week. If you want it for 10% less, wait 8-10 weeks. It takes that long for the sellers to come to their senses.
Have your agent investigate the seller’s motivation, but if it’s not one of the big four motivators (REO, death, divorce, or job transfer), expect that YOUR LUCK WILL BE BETTER, LATER.
Look at the Higher-Longers - Search in higher price ranges and lowball those who have been on the market for more than 90 days. You’ll find an audience, but you needy to be crafty to get an acceptance. Today there are 14,318 attached and detached homes for sale on the MLS, and 48% of them have been listed for 90+ days.
Negotiate Later – It’s a two-negotiation process between buyers and sellers; first they determine price, then a few days later they determine repairs/credits.
The common perception is that banks are selling ‘as-is’, and no repairs or credits are possible, but it’s not true. I think that in many cases it’s because the listing agents don’t want to bother. We haven’t had much trouble getting Countrywide pay for repairs when needed, though when the buyers’ agent makes a weak case and implies that their clients will buy the house either way, then they don’t get anything. It’s all in the presentation! Wait a week or two into the escrow period too, so you can tout how close you are to the closing date.
Best excuse? The furnace was red-tagged by SDG&E, and the VA appraiser saw it and wouldn’t sign off the appraisal until the furnace was fixed. (Countrywide bought a new furnace)
You have the 17-day contingency period to inspect the house, arrange financing, and see the appraisal. Recommendation? Get an accepted offer, and figure out the rest along the way. If you decide later during the contingency period that it’s not worth it, cancel the transaction.
Hope for a Low Appraisal - The sale of the 1,120sf house on Skyline that closed last month? It listed for $620,000 and went pending after 29 days - but closed for $533,000, a 14% discount.
What happened? It had ocean view, but was in original condition and only had one bath. The long-time owner had already moved to AZ, and somehow got spooked about the difficulty in selling for more because of the condition of the house, and the failing market.
On the MLS tax rolls you’ll see a type of deed called ‘Affidavit’, - that usually means an owner passed away. The families are distraught, and if you think there could be some advantage in that, think again. Sellers who take offense usually recoil, and your little scheme could backfire. Just use the ‘affidavit’ as a point of reference – the house is likely to need work, and emotions are running high.
Have The Sellers LIKE You – As a listing agent I hate it, but when representing buyers I want to cause as much personal interaction between buyers and sellers as possible. On any house you are seriously considering, MEET THE NEIGHBORS too! You want to hear their story about the subject property anyway, and if they are tight with the sellers, they’ll put in a good word for you.
Size Up the Listing Agent – If the LA has been on a dry streak, they need this deal to close. The reason they are struggling is because they have trouble presenting a compelling case on the home’s value – DO IT FOR THEM. It’s probably the only chance you’ll have to directly influence the sellers’ decision, don’t miss out. (Sending the LA a case of scotch or a boat might work too.)
It doesn’t hurt to look and make offers, and let’s face it, you might still spend a few years before you find the right house, at the right price. There will be more deals later, but there will probably be more competition too.
With patience, persistence, and a little luck, you’ll do fine.
Three other notes for buyers:
Going Direct to the Listing Agent - The effectiveness of this tactic depends on the listing agent. If they don’t have much experience with dual agency, they could flub it up, breach their fiduciary duty, or cause you to pay too much (or maybe all three!). You’d be surprised to hear that some of these robot realtors handling REOs don’t care much for representing the buyers too – because it’s work!
Kelly Bennett is going to cover dual agency in depth – stay tuned!
Submit Clean Offers – Bigger deposits, bigger down payments and pre-approval letters all help to bolster your case in the eye of the seller. But it also means ‘clean’, literally – that the offer is legible, isn’t missing pages or signatures, and in pdf format. Send the message that you mean business.
We have the ability to sign contracts electronically (via email), without having to print or fax them – a real convenience, especially for the clients! Even though this benefit has been available for a year, we’ve seen only a couple of other people using it. Want to impress the listing agent? Send an electronically-signed offer! If it’s a close bidding war, it’ll make a difference.
Have Friends Submit Lower Offers – Often discussed, but I’ve never seen it happen. If I was the seller or listing agent and found out, I’d be ticked.
Posted on Sunday, January 4th, 2009 at 10:07 AM in Tips, Advice & Links | 33 Comments » | 
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Great write up, Jim. “Have Friends Submit Lower Offers” – interesting idea.. and funny!
jbirdfunk | January 4th, 2009 at 10:50 amAlmost HALF of the MLS is 90 days or longer? Wow. I think it just goes to show how much in denial sellers are. Just another sign that we’re not at (or near) the bottom.
What’s normal for percentage of listings 90 days or more?
The Blur | January 4th, 2009 at 11:21 amThere were 28,946 sales last year, and 32% of them were 90 days or more, but there were undoubtably many that had relisted.
The 2008 actual is probably more like 40%, and today’s active count is probably closer to 60% – including the re-lists.
Jim the Realtor | January 4th, 2009 at 11:46 amWhile there are SOME houses starting to sell. The only ones I’ve seen are the lowest priced properties in the best locations. Everything else is just sitting there.
What I’m not seeing is the overpriced properties lowering their price to the price of the most recently sold in their area. My guess is that denial is playing a factor. I think lower priced comps is going to effect denial sellers ability to refi and pull out $$$ to stay in the game.
There’s also a HUGE amount of REO/Bank Owned that haven’t made their way to market yet.
Finally, realtors always get excited for spring because sales usually go up in spring then go big in the summer and taper off in the fall and winter. It’s just how things work.
shadash | January 4th, 2009 at 12:29 pmLast chance at Icon, the downtown condo. They’ve lowered their last ten units for sale by $174,000 to $239,000 each, and are hoping for a one-time event on Jan. 24th:
Link to site
Jim the Realtor | January 4th, 2009 at 1:12 pmMy jaw dropped when I read that OCRenter bought a house. I was thinking he was at least 6-12 months away from thinking the market was right.
KB | January 4th, 2009 at 1:13 pmWonderful tips Jim. Thanks.
I think that points 1-4 are part of the housing bubble frenzy. Guessing that will go away eventually – maybe by 2010?
It’s been SO long since we had a normal market, many folks don’t know what one looks like. I see two reasons why people give up the fight and buy now, even though waiting makes more sense.
1) They are just plain sick of waiting
2) Down deep they still think that home prices are going to start flying up again and they will be priced out. Until that mindset changes, the crazy behavior will continue.
By the way, I have one more motivator to add to your list of four that will fit this year – job loss.
KC | January 4th, 2009 at 2:18 pmWell to be fair OC Renter got 25% off list, and I’ve known friends who were able to bargain hard rather than wait for the bottom. It’s probably going to be no different than the average house sold in 2009/2010.
BDiego | January 4th, 2009 at 3:36 pmJim at his best !!!
Thanks.
Mike S
Mike S | January 4th, 2009 at 4:13 pmWow, another bubble-sitter jumps off the fence! And a long-timer at that!
Congratulations, ocrenter!!! So happy for you and your family. You’ve been waiting a long time, and I’m sure you’ll really enjoy finnaly being able to settle down.
Best wishes to you and your family in your new house!
CA renter | January 5th, 2009 at 12:23 amhere’s some info on the purchase:
the listing was on the MLS for more than 6 months, with the pricing unmoved at all.
suddenly the price fell by 10%.
we waited another couple of weeks to see if the price drop would create buyers for the seller. it did not.
that’s when we smelled blood and went in with an offer looking at another 15% off.
that’s how we got our “25% off original offering.”
by the way, someone in the same community actually bought recently for similar pricing from the original offered pricing. proving once again that the deals are not advertised, but you need to create them.
good luck everyone!
ocrenter | January 5th, 2009 at 7:46 amCongratulations!
Philosophically, was 25% below OLP a “bargain,” with headroom to absorb further price drops, or does it merely reflect the OLP being that much over what turned out to be this month’s “fair market price?”
GeneK | January 5th, 2009 at 8:08 amJim
You spoke about be optimistic for 2009 cause of some strong buying at the end of 2008. Do you know how much of that buying was people trying to be included in the old conforming limits of over $600K?
LV Renter | January 5th, 2009 at 8:36 amI don’t know, but it would be an interesting subject to try and investigate. I’m not sure that any buyer would rush a purchase just because of financing, but I’m sure for many it was a contributing factor for closing quick.
Jim the Realtor | January 5th, 2009 at 8:38 amJim
Do you know if the Icon is the last ten remaining units or these are ten units of the last remaining they are giving lower prices on? I know some of these are high floors but I remained unconvinced that $500/sq ft in a building with a high percentage of 1 bedrooms less than 700 sq ft is a good deal.
LV Renter | January 5th, 2009 at 8:40 amIf I could find anywhere close to 2000 pricing I’m buying yesterday.
Ling | January 5th, 2009 at 9:07 amLV R,
I’m unconvinced too – more than anything I wanted to note their blow-out sale so I remember to check later on how it turned out.
Ling,
2000 pricing is throughout Oceanside, which good for investors, or those owner-occupiers who can snag one in a good location. Want to take a look?
Jim the Realtor | January 5th, 2009 at 9:40 amAny clues on where OC Renter bought? He’s been very private, which I respect, but he says he told a few peeps and I bet you are one of them, Jim! I just want to know:
BAM | January 5th, 2009 at 9:41 am1. does his new house carry Mello Roos and/or HOA?
2. is it coastal or inland?
BAM, I told Jim if he tells I know where he lives and I “know people.” =)
ocrenter | January 5th, 2009 at 10:31 amSorry BAM, he’s…well, how do I say it, connected? ‘mobbed-up’?
Jim the Realtor | January 5th, 2009 at 10:35 amBrian on sdlookup reported that these are not the last ten unsold units in Icon.
There is a clean foreclosure in Horizons at 1,245 sq ft listed for $625K. In other words less per sq ft than these Icon units. Horizins is better for more reason than I can list but here are a few:
Is not full of small 1 bedrooms
LV Renter | January 5th, 2009 at 10:46 amIs in the preferred Marina district
Has a pool
When will these developers learn that buyers just want the truth?
2009 = Year of the Gimmicks
Jim the Realtor | January 5th, 2009 at 11:28 amI think if they tell the truth they would need to take markdowns on their books and all of their loans would get called in.
LV Renter | January 5th, 2009 at 1:15 pmOCRenter!!…I swear I was not trying to work around you. I just never post on your site like I do here…will you tell me? HOA and MR? Coastal or Non? That surely will not give away your identity.
BAM | January 5th, 2009 at 3:21 pmOC Renter
If you are reading this. One last post on your site. It is a follow up on a woman who bought a place in like Sherman Heights and then a place near SDSU. She took great issue with you saying she made bad investments. She was certain the population density around SDSU would make her a winner. She also said one of her refinances was to start a successful small business. Do you recall this case? Will you follow up?
LV Renter | January 5th, 2009 at 3:30 pmI am guessing Comrade OCR bought NonCoa, no MHoa.
Coconutz! | January 5th, 2009 at 8:07 pmEither that or they switched his meds, JK!
OC is still the man! Congrats and many thanks to him!
Coconutz!
BAM, me of all people understand the power of using very little information to find a lot about a property. thus my tendency to be very careful here.
I’ll just re-state that all said and done, monthly cost per sqft is $0.73/sqft.
ocrenter | January 5th, 2009 at 8:26 pmSorry Jim im up in the LAX region. Those type of price declines simply aren’t in the nicer areas yet. Not even close.
Ling | January 5th, 2009 at 9:30 pmLing,
There have been some very nice price drops in the SF Valley just in the past six months or so. Check out 91367 (Woodland Hills), and you’ll see some recent declines (maybe 20-25% or more) in a desirable area. I’d seriously consider buying there if we could get out of SD.
CA renter | January 5th, 2009 at 11:29 pmCA Renter,
I’m not trying to suggest there aren’t signficant price declines. There just aren’t near y2k level prices.
Ling | January 6th, 2009 at 1:19 amGotcha.
CA renter | January 7th, 2009 at 1:51 amOh, OCrenter, you are so coy
. Thank you for the hint.
Ling, I moved to SD in April of ‘07 from LAX-area, too, and still follow RE in that area…LA definitely behaves differently than SD. There are no master planned communities or overbuilt developments on the West Side the way they exist here in SD. I agree with you. I will pack my bags and move to Canada if LAX-area moves to y2k levels.
BAM | January 7th, 2009 at 10:51 amGood tips, Jim!
Between short sales and high end homes, we have 46% of listings eliminated.
Since 40% of listings are short sales and few people make offers on them, I am guessing that the 48% of 90+ day listings are short sales and homes priced over $ 2 mil (900 listings, 6%%).
– there’s not much left to choose from if you want a house that is not a short sale, and your budget is $1 mil or less.
Schahrzad | January 23rd, 2009 at 9:06 pm