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Category Archive: ‘Frenzy’

Handling Multiple Offers

offers

 

Our listing on Cherokee closed yesterday.

It was the 2,527sf three-story house that backed to the I-15 freeway – the one where we had 200+ people attend the open house.

The final tally at the Zillow page was 3,745 views, and 77 people had saved it as a favorite home, which are both extremely-high counts. (Josh was the seller)

2022-cherokee-ln-004_web

Yesterday, we marveled at how the bidding war ended up.  The listing had hit the MLS on a Saturday, we had the open house on Sunday, and by Monday we had six offers.

Because not every bidder knew there was competition, we gave everyone the chance to submit their highest and best offer by Tuesday at noon.  I like to keep a tight timeline and promise buyers that we’ll select a winner promptly in order to retain as much urgency as possible.

The list price was $549,000.

At the end of the highest-and-best round, we had a $565,000 financed offer, a $570,000 cash offer, and a verbal $571,000 cash offer (the other three stuck with their $549,000 or $550,000 original offers).

The agent who wrote the $570,000 offer was 80 years old, and was using forms from five years ago.  I actually had to hand-write his original offer for him, but thankfully he was able to scratch out a one-sentence H&B.

Because I had concerns whether he could make it to the finish line, I pressed the $571,000 agent to get his deal in writing.  But he called back with bad news – his buyer, a savvy, multiple-property owner, decided it was too rich.

I called back the $570,000 agent, knowing that I’d be carrying his luggage for the next three weeks.  But he had more bad news – he took his buyer’s family to the house, and they vetoed the sale.

With the other three bidders unwilling to budge, we signed the $565,000 financed offer…..before they changed their mind!

Most people would have been tempted to hold out.  Yes, it would have been sexier to close escrow in 2-3 weeks with a cash buyer. But after 200+ open-house attendees and 50+ showings, are there two in the bush?

Though my phone hasn’t rang like this since back in the REO days, there was no disputing the facts – most people didn’t make any offer, and those that did weren’t in love enough to go crazy.  It was a trend that was likely to continue.

In spite of casual observers telling me we were giving it away, or it was too cheap, the actual results were telling.  The duty of the listing agent is to check the ego at the door, and focus on the facts.

We made the deal at $565,000, and it stuck.

Posted by on May 10, 2016 in About the author, Bidding Wars, Frenzy, Jim's Take on the Market, Listing Agent Practices, Market Conditions, Thinking of Selling?, Why You Should List With Jim | 3 comments

More Vancouver

vanc

Seen at Mish’s blog:

A Point Grey house with a stunning view has sold for more than $9 million — $1,172,000 over the property’s list price. The 1928 house on Bellevue Drive was offered for sale for $7.888 million.

Realtor Bo Park said the seller received 11 offers on the property after the first open house weekend. They were all cash offers with no subjects and most were for more than $8 million.

All but one of the offers were from Chinese buyers, she said.

“It was fast. I was surprised by the number of offers and the price it sold for,” said Park, a realtor with Sutton West Coast Realty.

“It was the view. It is spectacular.”

She said the house was an estate sale and the buyer plans to rent out the place then rebuild within a couple of years.

“The house needs a lot of work — at that price it makes sense to rebuild,” Park said.

Last week, a Kitsilano house on a standard city lot sold for $735,000 more the asking price.

“I’ve been doing this for close to 25 years and I’ve never seen anything like it,” Park said.

“There is not much product out there — that’s why things are so crazy. How long will this last? I have no idea.”

vanc1

Posted by on Apr 10, 2016 in Bidding Wars, Frenzy, Jim's Take on the Market | 0 comments

NSDCC Higher-End Stalling?

panic

There has always been some sort of relationship between inventory and sales.

When inventory is tight, sellers have the advantage because buyers get frenzied up and just pay the price to win one.

With a smaller increase in inventory, the frenzy can soak up the supply – sales can increase too because more demand gets satisfied.

But there comes a point when a larger increase in the inventory causes the buyers to back off, and sales stall.

It is a delicate balance because buyers want more choices, but when it feels like not much is actually selling, buyers regain control of the market.  They adopt the wait-and-see approach – even with homes that appear to be well-priced.  They want someone else to go first!

Let’s examine the local data to see how we’re doing.  There isn’t a direct relationship between new listings and sales in the same time period, because many if not most of the sales were listings from the previous quarter or quarters.  But we can use the ratios to compare the velocities:

San Diego County Detached-Homes, 1st Quarter

1Q – Year
1Q New Listings
1Q Solds
1QNL/1QSolds Ratio
2014
8,544
4,556
53%
2015
8,752
4,794
55%
2016
8,607
4,626
54%

So far, so good. When we look at the whole county year-over-year, there has been a very similar relationship between new listings and sales in the first quarter.  Let’s check around the northern coast:

North San Diego County Coastal Region, 1st Quarter

1Q – Year
1Q New Listings
1Q Solds
1QNL/1QSolds Ratio
2014
1,235
581
47%
2015
1,275
629
49%
2016
1,372
549
40%

We are getting a little queasy now – there were 8% more new listings to consider, and sales dropped off 13% but we know that 2015 was a strong year so tough to keep up.

Let’s break down the NSDCC stats by price to find the trouble:

North SD County Coastal Region, 1st Quarter, UNDER $1,400,000

1Q – Year
1Q New Listings
1Q Solds
1QNL/1QSolds Ratio
2014
733
409
56%
2015
722
418
58%
2016
654
375
57%

No big problems there – the Under-$1.4M sales declined, but so did the number of new listings so the ratio was about the same as the previous two years.

But that means the higher-end market isn’t enjoying the same benefits:

North SD County Coastal Region, 1st Quarter, OVER $1,400,000

1Q – Year
1Q New Listings
1Q Solds
1QNL/1QSolds Ratio
2014
513
178
35%
2015
568
216
38%
2016
734
178
24%

Yikes, the number of new listings over $1,400,000 zoomed 30% higher than last year, and sales dropped 18% – an example of how too many choices are causing buyers to pause (the identical 178 sales in 2014 and 2016 was a fluke).

The higher-end market could be stalling just because of the additional choices.  If there were only 5% or 10% more listings (like last year), it probably wouldn’t be that noticeable – but the +30% is leaving a mark.

The extra listings may not even be ‘over-priced’ on paper (or by zestimate), but with so many active listings stacking up, the buyer’s confidence in the wait-and-see program is rewarded – and also causing their ‘picky-ness’ to increase rapidly.

There are 186 pendings listed over $1,400,000, so the market isn’t dead.

But last year at this time we had 564 active listings priced over $1,400,000, and today there are 695 listings – a 23% increase.

Having 30% more new listings overall this year but only 23% more active listings today means we were able to soak up some of the extra supply.  But the rest are lingering.

How should these sellers proceed?  Be sharper on price, and if you’re not getting offers in the first 2-3 weeks on the market, then do bigger price reductions faster.

You don’t want to look up in July and wonder what happened.  You know now.

Get Good Help!

Posted by on Apr 9, 2016 in Frenzy, Jim's Take on the Market, Listing Agent Practices, North County Coastal, Sales and Price Check, Why You Should List With Jim | 1 comment

Is It a Good Time to Buy A Home?

A twitter guy wants a yes or no answer to whether it’s a good time to buy.

He claimed that I said Yes, because of my post about it being a great time to buy if you’re selling a cheaper home and buying a more-expensive home. It’s because the higher you go price-wise, the colder the market gets.  Fred said it is a good time to buy as long as you don’t plan to move in the next five years.

It’s a question that deserves a full answer, not just yes or no.

The most common blog chatter is that history always repeats itself, and it will just be a matter of time before this cycle runs out.

The economic cycle will sputter again, but the housing market is different now.

Why?

Because distressed sales are well-managed. 

The California Homeowner Bill of Rights mandates that loan modifications be dangled in front of anyone in trouble.  The foreclosure process gets drawn out for months and years so we’ll never see a flood of trustee sales again.

As a result, making your mortgage payments has become optional.

If we have another economic downturn where homeowners can’t pay, then the government will insist that lenders give them a break.  The cast was set in the last crisis – the government will create bailout programs that allow everyone to kick the can down the road.

With distressed sales few and far between, the vast majority of home sales will be elective.  Sellers with the mantra – “I don’t have to sell, I’m in no hurry, and I’m not going to give it away!”

Prices will maintain a tight range of +/-5%, because the minute a seller thinks he is being forced to ‘give it away’, he will object.  Different neighborhoods will have periods of stall-out, where few or no buyers will pay what sellers want, and real estate loitering will be common.

But days of drastic price dips are gone.

The other buffers to a housing downturn include reverse mortgages, rampant flipper business, and baby-boomer estate distributions.

If today’s buyers have assurances of pricing protection, is it a good time to buy? Well, yes, if that’s all that matters.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

But for most, it is a terrible time to be a buyer, which is different.

If you are on the low-end of your market, you can forget about buying your “dream house”.  The competition is fierce, and compromise required – if you can even get your hands on something.

2022-cherokee-ln-004_web

My listing at 2022 Cherokee in Escondido – the one priced at $549,000?  We had six offers, and four of them were all-cash.  All were at list price or higher.

It was viewed 3,198 times on Zillow since Friday, and I received 100+ phone calls and texts from agents.  I had over 200 people visit the open house on Sunday, and it was probably shown at least 50 times between Monday and Wednesday.

http://www.zillow.com/homes/2022-cherokee,-escondido_rb/

Almost all of the lookers didn’t offer, so they will be competing against each other on the next one – literally hundreds of buyers floating from new listing to new listing, hoping for a miracle.

Was it a giveaway?  Agent comments included, “Price was fair and reasonable’, and ‘The defects were properly discounted’ (defects included no direct access from house to backyard, master suite downstairs and kids’ bedrooms up, and it backs to the I-15 freeway – the rear fence was the CalTrans chainlink).

Buyers have to endure bidding wars on anything decent, no rules about how to win, and shady realtor tricks that seem to favor insiders.  Buyers are quick to jump to that conclusion, but it is more due to a realtor’s incompetence that bidding wars are vague and hard to win.

If you can get a house into escrow, it almost always happens that it’s condition is worse than imagined.  But sellers are in the driver’s seat, and do little or nothing to assist. Buyers usually end up feeling like they are buying an over-priced turd.

But it will probably be your turd forever!

Posted by on Apr 7, 2016 in Bidding Wars, Frenzy, Jim's Take on the Market, No-Foreclosure as Banking Policy, Thinking of Buying?, Why You Should List With Jim | 5 comments

FHA to the Rescue

herewegoagain

Do you buy anything that’s cheap(er), figuring that the demand will become unglued and prices continue racing towards the sky – or sit this one out? P.S. Three offers are in on Cherokee, and more expected.

https://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_story.html

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.

Obama pledged in his State of the Union address to do more to make sure more Americans can enjoy the benefits of the housing recovery, but critics say encouraging banks to lend as broadly as the administration hopes will sow the seeds of another housing disaster and endanger taxpayer dollars.

“If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from,” said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at mortgage giant Fannie Mae.

Posted by on Apr 4, 2016 in Frenzy, Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 3 comments

Hot Times in the Southland

competition

Some great quotes on the current market conditions:

http://www.latimes.com/business/realestate/la-fi-spring-market-20160328-story.html

The couple is looking for a home under $2 million, but they’ve found little suitable near a good public school. They’ve put in only two offers in the roughly six months they’ve been looking — and were unsuccessful both times.

This month, Lee, 32, went to a packed open house for a four-bedroom house in north Redondo Beach. It was so busy that the real estate agent ran out of fliers. She put in an offer for more than the $1-million asking price but lost. Instead, the home went into escrow to another buyer, less than a week after it was listed for sale.

In such a hot market, would-be sellers are conflicted about whether to cash in now or wait for prices to rise further. Some have begun to question how long the hot market can last.

“They think we are due for a correction,” said Nikki Hochstein, an agent who specializes in the Westside and is helping the Lees find a home.

On a recent Sunday, about 150 people flocked to a three-bedroom condo in West L.A. for an open house, agent Tregg Rustad said.

Among the interested buyers were Sameena Shaikh, a medical researcher, and her husband, Muddassar, who works as a software engineer in Santa Monica.

The couple have been searching for a home for about a year but haven’t pulled the trigger. In that time, they’ve seen prices rise and now fear mortgage rates will jump. As they surveyed the packed open house they vowed to be less picky.

“We don’t want to make the same mistake,” Sameena said.

Muddassar explained their new tactic: “Let’s just buy something.”

Read full article here:

http://www.latimes.com/business/realestate/la-fi-spring-market-20160328-story.html

Posted by on Mar 28, 2016 in Frenzy, Jim's Take on the Market, Market Conditions | 1 comment

PQ Follow Up Part 2

13450-chaco-ct-024_web

The process of selling a house has many variables – let’s keep examining.

What were the comps used to determine the price?

The most important thing about evaluating the comps is to see them through the eyes of the buyers.  I cannot stress enough how critical this is to selecting an attractive price – every seller has a high opinion about their house, but they’re not the ones buying it.  Today’s buyers are looking for any reason not to buy, and they are being conservative.

Consider those thoughts as we progress here:

A. The last sale of this model closed for $612,000 in June, 2014:

http://www.sdlookup.com/MLS-140023602-13493_Chelly_Ct_San_Diego_CA_92129

It had been moderately upgraded to sell, and you could say that the backyard was a more normal setting.  My listing on Chaco had superior upgrades, which makes buyers feel good, but they prefer to pay about the same as the last guy for them.  This is where over-improving your house for the neighborhood can get you into trouble, price-wise – you’re not going to get a dollar-for-dollar return for the good stuff.

A discerning buyer would probably call them even at best, because they will be tempted to ignore it altogether because of it being old news   The San Diego Case-Shiller Index has gone up 6% since, so let’s adjust accordingly, even though no appraiser will use it (they want/need comps from the last six months).

Comp #1 adjusted value = $648,720.

B. This is a 5% larger one-story model in Crestmont that closed for $612,000:

http://www.sdlookup.com/MLS-150041823-8811_Sparren_Way_San_Diego_CA_92129

The original list price was $645,000, but after three weeks they put it on the range $615,000 – $645,000.  Eighteen days later, the listing agent found his own buyer who paid $612,000 cash, and it closed on September 16th.

The house only had a couple of upgrades, and my listing had at least $100,000 of improvements. We already mentioned that you don’t get full value, but for the sake of evaluating I’ll assign a 50% credit. It means we need to deduct $50,000 off this comp – but then add back 10% because it was a one-story plan which have been selling for a premium over two-story plans because of the older folks.  The ‘cash’ purchase would indicate these buyers were probably elderly on this sale, and they probably ignored or didn’t realize that nobody else was willing to pay $615,000 for this house so they may have been able to grind out a better deal.

Buyers evaluating this sale as a comp may not think that hard, but as a listing agent trying to factor in every variable, I need to consider that the $612,000 sales price here could have been optimistic.  But I’ll subtract the $50,000 for improvements and add 10% for one-story.

Comp #2 adjusted value = $623,200.

C. Same one-story model as above that closed for $605,000 two weeks ago:

http://www.sdlookup.com/MLS-150047953-8849_Ellingham_San_Diego_CA_92129

This house was in original condition, so I’m going to subtract a little more – $70,000 – and add back the same 10% even though this was an estate sale by the original owners who paid $150,000 in 1988.  The seller was recently widowed and didn’t try too hard to sell, and let’s face it, a quick $605,000 was a big win.  It was listed on the range $590,000 to $605,000, and the buyer went direct to the listing agent, but we can call it a mostly-retail sale of a house in original condition.

Comp #3 adjusted value = $595,500.

There are two pending comps to consider too:

D. This 1,486sf one-story with $50,000 in improvements was listed for $635,000 and went pending in five days:

http://www.zillow.com/homedetails/8756-Twin-Trails-Dr-San-Diego-CA-92129/99572944_zpid/

E. This newer 4 br/2.5 ba, 1,733sf house listed the day before us for $674,900, and went pending in 4 days.  Hopefully it got bid up:

http://www.zillow.com/homedetails/13347-Russet-Leaf-Ln-San-Diego-CA-92129/16774611_zpid/

The Wild Card

F.  This 1,681sf two-story house has $120,000 in improvements with pool and backs to the canyon.  It sold for a whopping $730,000, which was above the top of the range ($699-$729) in six days:

http://www.sdlookup.com/MLS-150030194-13587_Calderon_Rd_San_Diego_CA_92129

THE LIST PRICE SUMMARY

My seller has taken a new job out of the area, and wanted a realistic assessment of the market.  Many sellers would ignore the rest, and jump on the $730,000 as proof that more buyers will come along and pay the same.  But given the rest of the evidence, a normal buyer will throw out the high sale and use the rest as the accurate market data.

The realistic range for my listing was $600,000 to $650,000, and because we had the 100,000 in improvements it deserved to be at the top of the range.

I didn’t have a problem with angryPQneighbor expecting a higher sale – I had every intention of selling it for more.  My seller saw my reasoning that pricing the home attractively would create more action and urgency early on, and create a frenzy-like bidding war.

Other Factors:

1. Zillow reported lower school scores on the subject property’s zillow page.  I addressed them in my remarks, and included snips of the actual scores of 10 for each school in my photo galleries.  I think that lends respect to the equation in the buyers’ minds.

2. The zestimate for my listing was $630,000, and after I inputted my listing there, they dropped the zestimate to $614,749.  You have to anticipate that bad things will happen that are out of your control. But price fixes everything.

Chaco zestimate

3. Zillow also has this new local market meter that is positive for Rancho Penasquitos in the small print, but the ‘Cool’ and blue color could dissuade buyers from looking at it much harder:

Chaco Zillow

4.  The biggest factor in my mind was the experience of the buyers’ agents.  Any agent can handle writing an offer on an attractively-priced listing, but the houses priced too high tend to befuddle all but the best agents (who are good enough to lowball you anyway).

It was competitive to the end between the six offers – five submitted their highest-and best offer, and it was close.  We took the buyer represented by an agent who had closed 32 sales in the last 12 months.  The other agents averaged 8 sales in the last year, which was still pretty good.  But if we hit any bumps in the road, I want to take my chances with the most experienced agent.

We still have a long way to go to the finish line. But this is the type of start every seller should appreciate – you got a good price, the hassle of showing the house was over in 6 days, and the chances of it closing are pretty good when the buyers knows he beat out five other contenders!

Get Good Help!

Posted by on Nov 5, 2015 in Frenzy, Jim's Take on the Market, Listing Agent Practices, Thinking of Selling?, Why You Should List With Jim | 6 comments

PQ Follow-Up

Yesterday this comment was left by angryPQneighbor:

Why did you list this one so cheap? The same model sold almost a year and a half ago in a bidding war over $610K!

We are listed for $639,000 in most places, and on the range $619,000- $639,000 in the MLS.  He/she didn’t say what they thought the price should be, just that my price was wrong.  Do we expect double-digit appreciation every year?

They haven’t been following the pricing discussion we’ve had on the blog here, or considered that, given the current market conditions, it is better to price attractively to take advantage of the urgency that a new listing enjoys – at least for the first week or two before going stale.

The attractive list price makes the listing stand out, and grabs the attention of the buyers – have you noticed that most listings aren’t priced attractively?  We were on the open market for six days (including Halloween), and here’s how the market responded:

Trulia:

Chaco stats on Trulia

Redfin:

Chaco on Redfin

Zillow:

Chaco on Zillow

The frenzy died a couple of years ago.  Why?

Because the prices stopped looking attractive.  But using the same pricing principles, a mini-frenzy was created here.

We received six written offers!

However, they were all within the range. Is that it?  Do you just select one?

No – we’re not done yet!

I carefully and respectfully caused each bidder to consider going higher on price, and we ended up over $650,000!

Get Good Help!

Posted by on Nov 5, 2015 in Bidding Wars, Frenzy, Jim's Take on the Market, Kayla Training, Listing Agent Practices, Why You Should List With Jim | 5 comments

Frenzy vs. Frenzy Sales Overlay

Every day we hear some pundit talking about the latest real estate bubble forming.  Can we learn anything from comparing recent sales to those during the bubblicious 2004-2007 era?

graph (56)

Sales were dropping precipitously in 2005 and 2006 after the 2003-2004 run-up.  There was one last blowout at the end of 2006 and into 2007 when Countrywide began pushing the no-doc, 100% financing up to $1,500,000.

When Angelo took away the punch bowl in the middle of 2007, the party was over – you can see how sales tanked, beginning in August, 2007.

One big difference when comparing these two eras is that the neg-am teaser rate in 2007 is today’s 30-year fixed rate.  When the teaser rate went away, and people had to qualify again, the market collapsed.

It doesn’t look that way today.

This year, sales have been strong, in spite of the San Diego Case-Shiller Index rising 42% since January, 2012.  If we hit an unsustainable stretch, the first indicator will be sales dropping off, like they did at the end of 2007.

Posted by on Aug 22, 2015 in Bubble-Era Pricing, Frenzy, Jim's Take on the Market, Market Buzz, North County Coastal, Thinking of Buying?, Thinking of Selling? | 4 comments

Frenzy History In Color

frenzy graph

Let’s describe the frenzy era…..so far:

2012: Rev the engines, we have liftoff.

2013, first half: Full tilt boogie, prices going up as fast as they can.

2013, second half: Mortgage rates rise 0.75% to snuff out price rally.

2014: Normalizing.

2015: Rates dip under 4% to begin the spring selling season, sparking a rally.

If the Fed does raise a rate this year, it won’t be much – maybe 0.25%. We will survive a similar bump in mortgage rates, and it might be a relief for it to have finally happened.

http://journal.firsttuesday.us/california-tiered-home-pricing-2/1592/

Posted by on Aug 21, 2015 in Frenzy, Jim's Take on the Market, Sales and Price Check | 1 comment