A hearty thank you to Vicki Mabrey, Matt Stuart, and the ABC News staff for last night’s spot!
I thought it was a courageous move by them in this environment to feature anything positive about realtors. Hopefully it’ll motivate other media outlets to keep reporting other good things about the business.
I have also been impressed with the accuracy in which stories are being reported. Last night was factually accurate, and other stories this year have been telling it like it is. I think the media wants to get it right, and have struggled to sort it out. I applaud their recent efforts!
Reviewing the great news about real estate:
The market is fine, and working perfectly. Those areas with greater number of forced sales are coming down faster in price. Areas like Oceanside have dropped so far in price that the demand is very healthy again – there is no shortage of people who want to buy a house. It just an issue of price. It is the same everywhere.
Realtors would do themselves a favor by getting the word out – especially with sellers. I’m convinced that the agents in the tonier parts of town either refuse to believe that lower prices are needed, or if they do think it, they don’t know how to cause it. IT’S OUR JOB to have tough conversations with sellers about price – sellers want to sell their house, and buyers want to buy
The government’s actions will not make much difference, if any. Their attemps at intervention will be forgotten by the end of summer, and the reality of natural market forces will weigh heavily on sellers. The competition between REOs and all other sellers will be the primary driving force for the next few years.
More than anything, I’d like this TV spot to be what inspires both clients and agents to boldly pursue their real estate objectives. There is a great deal to be thankful for, and I am very grateful to those who continue our exploration of the marketplace here at bubbleinfo.com! Stay tuned!
Here is a link to last night’s show:
http://abcnews.go.com/video/playerIndex?id=7358684
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Let’s tackle a touchy subject – multiple offers, and bidding wars.
A regular commenter No_Such_Reality said yesterday:
“Anything over list is stupidity.”
While everyone would agree that paying more than list sounds ridiculous, virtually every quality home with an attractive price is getting a lot of interest. The wealth of knowledge on the internet for all to see has heightened the anxiety among buyers, and the race is on to fetch the hot ones.
There was a short sale yestetday that had five offers, and the seller had decided to negotiate with two of them. Here’s a guy who has nothing at stake, yet feels the need to negotiate with the best two?
If prices continue to improve (go lower) this insanity will only get worse.
The Dixon property is up to 13 offers, and we’re desperately trying to get Countrywide to commit to a buyer, and end the freak show. Most of the bidders have gone a little above list price, but it’ll take the boldest (or craziest, depending how you look at it) to bid high enough to win.
Would you feel comfortable offering 5% to 10% over list price?
It’s a question that buyers should be considering, because if you are only willing to buy that smoking deal, it is very unlikely that you’ll get a clean shot at it.
The internet is making it virtually impossible for you to be the only offeree on the good ones. If you kept losing out to higher bidders, would that cause you to bid higher next time?
These questions are on the minds of anyone trying to buy today in competitive areas. Trying to weigh the threat of global depression against seeing 5, 13, or 40 offers being made on hot listings is a burden.
What would you do?
This is a tee-up for further exploration of how to handle multiple offers.
Jim,
Congratulations — well deserved attention for an insightful and honorable realtor. You deserve all the good things coming your way.
-Don Q
The most savvy buyer is one who knows how to measure intrinsic value. If *I* can make a good determination about the value of a house, then I’m free to offer that value, regardless of what the asking price is. If the intrinsic value is greater than the asking price and I think that I have competition, why would I not want to offer intrinsic value.
Of course, I have to have to be a good judge of intrinsic value and trust my own judgement, which is easier said than done.
That being said, I wish realtors wouldn’t play so many stupid games. It’s why people hate realtors.
“Let’s tackle a touchy subject – multiple offers, and bidding wars.”
I’m working with buyers in Chula trying to buy an older SFR around $250K, everything decent has 5-10+ offers in a few days. Then go to “best and final” and sell above list price. There is pressure on the lower end of the market. Not seeing those “smoking deals”.
Just a Broker,
Thanks for confirming, and agreed, no smoking deals on the low end anywhere – if you define them as those selling well below list price.
Once a buyer experiences that repeatedly, the game changes from trying to get the best deal, to just hoping to buy a house. Price becomes less and less important when you keep losing, and the impact that has on buyer psychology will determine the future.
As a buyer it pisses me off. Banks are holding off on listing properties forcing people to bid on one or two that are available. We all know what’s going on. It’s just a matter of if we want to play the bankers game or not.
Great job on nightline, they did a top notch job of capturing the essence of JtR, without sensationalizing or using out of context sound bites.
This latest spring sales bounce, optimistic bank outlook, shadow inventory, interest rate manipulation, etc… reminds me of trying to squeeze a few more miles out of a car with an empty gas tank by cranking the wheel back and forth in attempt to slosh a spoonful of gas into the fuel lines.
Jim, great interview!!! I’m going to post it on my website.
No such reality – the name fits. He has no grasp on reality, living in fantasyland. If a bank lists a house for 25% under market, of course it’s going to sell over list price. And in a market with rising prices, more and more homes sell over list. NSR, wake up!!!
Wow, the whole nightline show seems just like a personal promotion ad for JtR !
Ka-Ching! And it is time to hire more people.
The market at all tiers just needs to find equilibrium. Just as bidding wars broke out when homes where overvalued, they can, and will, occur when they are undervalued. The Internet certainly levels the playing field, but eventually buyers lose the capacity to buy, trade up/down, etc. and prices along with sales volume will stabilize.
Having said that, I can’t stand paying higher than list and am a patient person. Let someone else grab that screaming deal.
Agreed. Great profile, Jim. You should post the video link in the upper right corner of the page, so newcomers can find it.
And I disagree about NSR’s point. It is, I think that if the houses sell for more than list, you should just sit it out and wait if you want to pay a fair price.
Clearly, there are a lot of people lining up in the knife-catcher line right now, though.
Great job Jim. The camera likes you….
the low end is what it is because it is already at 50% to 60% below peak. even the most pessimistic bear out there predicted 60% off in less desireable areas.
the multiple offers and the increased sales are perfectly reasonable in that segment of the market.
get the mid and higher end homes in good neighborhoods down to 50% off peak and you’ll see the same feeding frenzy as well.
Great interview. Heroic measures by govt to lower interest rates and boost fence sitters into action via the $8000 tax credit is unfortunately borrowing from future demand (a la general motors a few years ago) for both FTHB and refinancings. Really, who’s going to be left to refinance or buy their first home in another 6 months when everybody’s in a fixed sub 5% loan?
Keep telling the truth Jim……..Congrats!
Congratulations on this piece.
Maybe you should consider a headmount video camera? Just a thought.
JtR-
That’s exactly where we are, they’ve driven by 150 or so and seen inside 35-40 properties, submitted offers on a half dozen. Know pretty much where price will end up, so far they’ve been losing out to investors with cash. My buyers are young and fortunately not anxious.
Thankfully they’re still thinking positive. They’re looking at value to them and not necessarily LP.
I’ve been thinking about the bottom on the low end. I was assuming that the prices would not fall further than they have now at the low end (say, below $200-250k). I have decided that I’m probably wrong-because the eight grand tax credit expires Dec 1. Prices should drop further after that period of time as anybody who qualifies would rush to buy a house before it expires. So, if you DON’T qualify, yet are buying a low end home anyways, waiting until after December might make sense. Now, if you do qualify, I would (and am personally) take the credit, since eight grand next April 15th beats ten, fifteen, maybe even twenty grand to be paid off over thirty years (that is, if the choice is between a house at $220k with a $8k rebate next year vs. the same house at $200k with no rebate, the first is a better choice because getting $8k now to pay $20k more over thrity years is a decent deal).
My coworker has been house shopping lately (just entered escrow) and he’s experienced exactly what you are describing. He was shopping Escondido and Vista and kept finding homes that already had 10+ offers before he even knew about them. He was getting visibly frustrated and upset! He finally submitted two offers and one got accepted, so he’s happy now.
By the way, the one he’s purchasing went for a bit over list, and he’s fine with that. He’s just glad that the hunt is over!
P.S. – Jim, I wanted to send him to you, but he had already signed an exclusive contract with another realtor up there. Shame.
the one he’s purchasing went for a bit over list, and he’s fine with that. He’s just glad that the hunt is over!
Summarizes today’s buyer psychology quite nicely, at least for those on the lower end. People are willing to pay more to get it over with. How much more? $5,000 to $10,000 at least, and after a few years of that, it’ll add up.
signed an exclusive contract with another realtor
For lazy agents who offer so little they have to obligate you contractually to ensure you stick around.
I have never used a buyer-broker contract, and won’t.
I’m glad to see Nightline get the story right, as unpopular as that might be within the industry. Congrats Jim!
Jim: ” If you kept losing out to higher bidders, would that cause you to bid higher next time? ”
After 8+ rejected offers back in 2004, it was becoming hard to stick to what I had budgeted because I was sick of getting rejections time after time. (Even my Realtor was stunned by seeing how much money over asking was being thrown at these nothing sorts of places after they had closed escrow.)
I still cringe at the idea of having to go through a multiple bidder situation ever again. I might up my offer a little, but I’d be more likely to walk.
My Realtor at the time was fond of saying that most of the buyers/speculators who got places I was looking at were figuring a monthly appreciation of $10K+ and felt that it would easily pay for what they had overpaid to “get in.”
This isn’t a snarky question and I’m curious. In general, do buyers this time around feel that they’re getting such an amazing discount over what they might have easily paid a few years ago, that a few thousand more isn’t a big deal compared to what they’re ‘saving’?
There is nothing magical about a list price, such that below list price is “an amazing deal” but above list price means “you’ve gotten screwed.” Yet people seem to treat it as such, which explains why shady retailers can double their list prices than have a “50% off going out of business sale” every day.
Mostly what a list prices does is save time. There have been societies in the past where houses were typically sold by auction right on the front steps. That works too and is obviously a correct “market” price, but think how time-consuming it would be to have to go around to auctions all the time while you were looking for a house. Easier just to have an indication from the seller what they will consider, and skip ones out of your price range.
If there are plenty of buyers out there, you can always make an artificially low list price, and hope people will overbid. In that case it essentially just reverts to a plain old auction. It’s not like those are somehow intrinsically worse than the other way of selling, just different.
Terrific Nightline, JtR! *Chuckle* But I did win the bet so you DO owe me a pint of ice cream…
People who will not pay above list price are stupid. If I list my house for $100.00 it will sell for thousands of percentages above the list price. Does that mean someone got screwed?
Lets face it, BUYERS set the price. If they deem thats the price at that point in time – THAT IS the price at that point in time. If prices fall, they are knifecatchers. If prices rise, all of us have missed the bottom.
It is what it is boys & girls!
Just saw the video- great job Jim.
The end reminded me of the movie scene in “A Few Good Men” The truth, you want the truth?
http://www.youtube.com/watch?v=8hGvQtumNAY
Awesome video on nightline.Glad you got some good press.
Just a Broker wrote:
That’s exactly where we are, they’ve driven by 150 or so and seen inside 35-40 properties, submitted offers on a half dozen. Know pretty much where price will end up, so far they’ve been losing out to investors with cash.
——————
This is important. There is no doubt that the market is seeing a ton of activity, but is it organic, or is it being caused by manipulations in the bond market (in addition to the “free give-aways” from taxpayers to buyers)?
With interest rates where they are, if you put $200K — all cash — into a piece of property and are able to net $1,200/month, then you’re making over 7% on your investment. That sure beats the heck out of the ~1-2% returns in “safe” bonds, MMs, CDs, etc.
As long as interest rates are being artificially suppressed, we will probably continue to see this madness.
Question is: what happens when all these homes are put on the rental market? Also, what happens when/if rates rise?
I think we’re going to see some interesting things in the rental market. We’ll probably see a lot of turnover and slim pickings where good tenants are concerned. The good tenants are looking to buy under these circumstances, too. If rents are higher than their PITI payments, there is no reason for them to rent. Landlords will be scraping the bottom of the barrel for new tenants, IMHO. Many of these “investors” are new to the game and will be shocked by what landlording is all about…especially in these neighborhoods.
Nice ! Jim – you are a walking sound-bite machine and they did a great job of capturing that.
Jim, congrats on making the national news. Very favorable coverage and well deserved. But be careful, next it will be international coverage, BBC or something. Let us know when you start getting the international buyers.
I am wondering how many of these competitive overbid situations, on the low end especially, is because of the availability of FHA financing with 3.5% down.
I am also wondering what the effect on these situations will be when seasonal spring fever is over, summertime hits, and the current expansion in NODS turns into more trustee sales.
I’m pretty much right there. We have submitted three offers and lost out in a multiple bid situation each time. With the first house we bid on, I did a spreadsheet with all the comparables, accounted for market trend and other variables (like condition, lot, etc.) and came up with a offer 10% below list. I thought it was fair and logical, the house was sitting on the market near 30 days and needed a lot of updating. Then on the last day the seller had to respond they received two other offers. We raised our offer, but in the end, we were outbid by $10k. I felt sick. I really loved that house. Bid #2, short sale. The selling agent said that they had prior bank approval @ $550k. It was currently listed at $525k, what was I to do? With our last defeat fresh in my mind, I thought I would offer $550k and make it “easy” for them to say yes. Even though it was $25k over list, the property was easily worth that given the neighborhood. Well, we were outbid again, this time by 4 other offers in the low $600’s. Bid #3 takes the cake however. This time a bank owned in our favorite neighborhood. Listed at $498k, but in a neighborhood that has recently seen sales in the high $600’s. Our agent called us within hours of it being listed to come and see it in person, but we never got the chance because the darn thing went pending after 12 hours! We went to see it anyway and put in a back-up offer @ $610k, but come on. I would think that for the bank to accept an offer so soon, it must have been so far above list we couldn’t have competed anyway. Although some would criticize that I am increasingly paying a greater % over list, I would like to point out that list prices these days are all over the map. It seems too that the more agressive (lower) the list price, the more bids the property has and the higher the resulting sales price. Jim, didn’t you say something to that effect not that long ago? Well, it’s my reality and I am anxiously awaiting your lesson on mulitple bid situations.
Hopefully this isn’t going to make someone mad, but if you look around the table and don’t know who the sucker is, it’s you.
If you’ve gone into the multiple-bid area, you are most assuredly going into a poker game with you as the sucker.
Patience will eventually be rewarded. Once the buyer stimulus (federal and state) is gone, we’ll still have crushing REOs and a shitty economy with higher taxes. Now is not the time to be a hero.
Chuck Ponzi
Jim,
Congrats. You got your caked and get to eat it too. Well done and a very nice segment. You also just alienated a boatload of Realtors!
The more press for Jim the better. A free market should reward good business practices, and good businesses should collectively gain market share over time.
All our problems today reflect failed business practices gaining market share, and government intervention working to give them a monopoly.
Jim,
Love your website and videos. I want you to know that I’ve shown some of your videos to the economics class I teach. Wonderful lessons in supply and demand and expectations.
It’s people like you make this country great.
It’s amazing to see bubble mentality reasserting itself so quickly. Multiple offers flooding in hours after listing, auction-like bidding over list, frustration over “losing”… man, it’s total deja vu.
It’s truly a fascinating disconnect, given that the unemployment rate just jumped to 11.2% statewide. It’s like paying to upgrade your stateroom on the Titanic after hitting the iceberg.
When the money runs out, and it will, we’ll find out there’s more chairs than people.
My point as Freedom pointed out is that if you find yourself in bidding wars, you should sit it out. There are only a few that really need to buy. They can. The rest are worried and frustrated about missing a deal that isn’t going to go away any time soon.
BTW, congrats on the piece.
Jim exposes the problem in the market himself in the Nightline piece, but doesn’t realize it. What happens when the “investors” go away? In a multiple bid situation, how many are really going to live there? The capitulation is where these “investors” don’t want them….
That said, I still don’t see the big deal about offering over asking… just as it can be overpriced, it can be under.
Chuck–In regards to multiple bids, I disagree. We built a large portfolio of investment properties (most of which have been sold-off and traded-up) and all but one were purchased above original the asking price. There is usually a reason why there are multiple offers–the right property at the right price–we stepped up, bought the right properties and feel that the overages we paid were WELL worth it! I have watched so many people low-ball or not step-up and later regret it. Just my opionion based on my personal experience–If it is the right property–go for it!
Isn’t it amazing that telling the truth, being honest, and telling it like it is in your trade is “not” the norm?!
Great job Jim. Keep it up. Some call it luck, some say it’s just doing their job. You’ve gotten the exposure by being who you are. Don’t change, and again congrats!
The funny thing is, some people want to be fooled. There’s been interesting research on this topic. For example, there was this infamous ad from years back:
http://www.milk.com/wall-o-shame/dish.jpg
It’s a junky little indoor TV antenna, but it’s shaped like a satellite dish. The ad copy says “Uses ‘RF’ technology to capture signals right out of the air!” “You pay NO cable fees because you’re not getting cable!”
Psychologists looked at people who bought this thing (and there were a lot), and found that the buyers kind of knew it was B.S., but they bought it anyway, just in case it wasn’t. I’m willing to bet these people make up a large segment of bubble buyers.
My Realtor tried to get us to overbid on a number of properties in 06, though in my area many Realtors were using VRM. On a few properties, my Realtor recommended an offer price. My response to him – write the offer BELOW the lower range because DOM were increasing and the SPR were decreasing and we were heading into the non primetime buying season. He said no, because he was wasting his time and the selling Agent wouldn’t consider an offer below list. He said he didn’t want to insult the Agent and he (my Agent) would look the fool – especailly after my Agent talked to the listing Agent about the property. Coming from the Bay Area and making well above average income, $650K is not a lot of money so to speak, but when we were being outbid by Hummer, Mercedez, BMW leasing, $150 dollar pair of jeans wearing couples, I knew something was up. 2 – 3 yrs later, those homes are either foreclosed or in the process of being foreclosed.
Jim – nice piece on you. I hope you aren’t too inundated with new clients!
3clicks – totally agree. Who buys $150 jeans? Crazy people. I met the founder of Joe’s jeans and told him I thought expensive jeans were the dumbest thing ever. He thought so too.
Couple of thoughts on the “bidding wars”:
San Diego was one of the leaders on the price turnaround, the rest of California followed and finally it’s hitting Canada-people from other areas are going to see the relative value in SD and compete with local buyers.
I suspect a lot of bidding by folks who would have been higher up in the market in the past. This takes pressure off higher price properties, ensuring their price dropping further. Once this happens, I suspect you’ll see some of these buyers bidding on the higher end properties and leaving the entry market. The ones that don’t lose their jobs, that is.