In yesterday’s video you heard about the agent who said he had written 70 offers on behalf of a well-qualified buyer, many at $10,000 to $50,000 above list price, and he still hadn’t sold her a house.
To see how frustrated I should be, I checked my Y-T-D stats:
131 offers written on behalf of buyers.
17 solds and pendings to show for it.
A success rate of 13% sure looks frustrating, but let’s examine. Reviewing the 131 offers, here are my thoughts, based on those results:
1. Willing to write low offers.
Many get no response at all, but you can’t take it personal. I don’t mind writing low offers because it serves as my primary ‘listing-agent-desperation gauge’, plus they help satisfy the buyer’s curiosity on whether you can steal a good one. My best closed sale this year was 8% below list price, though have two short sales pending at 15% off. I’ve written offers at 20% below list, and 15% above.
2. Making offers help educate buyers.
The paperwork is overwhelming, there are at least 23 pages required on each offer – let’s get familiar with it. If you haven’t bought a house in a while, you’ll see something new on the forms every time you read them, so review as many as you can!
3. Expect to lose some bidding wars.
The likelihood of getting into a bidding war is excellent with 90% of the buyers chasing 7% of the inventory – today’s active REO listings/total active listings is 657/9,070 = 7%. Other buyers are going to out-bid people just to end their frustration, and someday that could be you – unless your agent is willing to temper the emotion and write lots of offers.
4. Listing agents are going to take the wrong offer.
The over-worked staffs of the big REO agents are going to screw up. They’ll lose offers, terminate the bidding prematurely, and/or flat out ignore you, hoping you’ll go away.
5. Buyers blow out during inspections.
It is a two-part negotiation. First buyer and seller settle on price, then the buyers execute their due diligence. The REO listing agents don’t want to fix anything, so if you find a deal-killer in a bank-owned, it’s usually a cancellation. Hopefully on a non-REO you can get some love from the seller, but almost always it depends on the listing agent’s zest for closing deals, instead of re-selling them over and over.
6. Making an offer is much easier.
Today, with electronic signatures, the writing of offers is much quicker, but not frivolous. Every offer I’ve written was made in good faith, and almost always a better reflection of actual value than the list price.
7. Timing – sellers are overly-optimistic during the spring and summer.
Buyers have a better chance of getting the sellers’ attention between September and November. By December the sellers throw in the towel, figuring that springtime isn’t far off.
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All in all I don’t feel that frustrated, it’s all part of how the market has changed.
These three game-changers:
a. lower pricing
b. electronic signatures
c. the internet exposing virtually every property for sale to waiting buyers
have helped increase the competition for the good deals, and the rush to snag them has intensified that any house put on the market today that doesn’t get an offer in the first week or two must be listed at the wrong price!
Yet the frustration endures with so many of the REOs listed with robot realtors that you can’t get on the phone, and who let new listings run active for days and days. If we see a substantial increase of REO listings in the coming months it will help soothe some of these frustrations. Agents are pleading for them, and sales should increase because there will be more inventory to go around!
Expect to write a few offers too!
“In yesterday’s video you heard about the agent who said he had written 70 offers on behalf of a well-qualified buyer, many at $10,000 to $50,000 above list price, and he still hadn’t sold her a house.”
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So they’ve offered 50k above asking price and still the seller did not accept the offer?
Many of these sellers are delusional.
I bet many of them still think that if they hang just a little while longer the house will go back up to 2005 prices.
I am concerned that shill buyers are going to distort the process. I’d be interested if any of these end up back on the market and why.
Jim,
Thanks for the excellent well-written post. I (and anyone reading) have learned a lot.
Again, thanks!
Fresno condo complex in meltdown:
Investor blamed for deals that put 96 units at risk.
Published online on Saturday, Sep. 12, 2009
By Sanford Nax / The Fresno Bee
There’s a pool at Stonemark condominiums in Fresno, but no one swims. For-sale signs dot the complex. Dozens of padlocks signal a ghost town.
Only a handful of residents remain — and that number shrank again when Jessica Delatorre moved her family out of the condominium she had rented for about two years.
“We got a notice to move out,” she said recently. “The bank will take it over.”
Lenders are busy at this 106-unit complex at McKinley and Winery avenues in east-central Fresno. All but 10 are bank-owned or going through foreclosure, and property values have dropped by 90% or more.
In interviews and legal documents, many people blame a rough-edged Alameda County real-estate investor with a persuasive pitch for the meltdown of Stonemark.
James Delbert McConville, who has been accused of fraud in lawsuits over other real-estate deals around the state, could not be reached. Steve Morger, an attorney for McConville, declined to comment on the allegations against him. Investors, attorneys and a former employee claim McConville used so-called “straw buyers” –people who used their credit to get loans and often received a fee in return — to gain access to loan proceeds. When the loan payments weren’t made and the properties went into foreclosure, those straw buyers were left on the hook, often suffering damage to their credit ratings.
http://www.fresnobee.com/local/story/1636183.html
Jim,
THANK YOU for this post. I learn something every time I read your blog. Great work.
Man did I ever had it easy when I sold my condo two years ago! No agents, no advertising, no commission to pay, sold within a week at only $5K below my asking price of $280K!
Come to think of it, the purchase in 1999 was also very easy! Saw five places in three different buildings, made one offer for $125K, it was accepted! My agent was very happy with the process, but the seller’s agent was about to quit on the guy because of his outrageous attitude! Apparently, he managed to chase a few potential buyers away with his behaviour.
I’m now a renter again. But if my business works out in the next year or two, I’ll definitely consider buying another condo. The only thing I won’t ever allow is BEING NOMINATED PRESIDENT OF THE HOA!!! Talk about a thankless job!
I’m not kidding! I thought I was being elected as a board member! Instead, they tell me “nope! You’re the president! Congratulations! You rule over us and sign the checks!”
!!!
Arrrrrgh!
Jim, it may not be the same kind of paperwork, but it’s just as irritating! I sympathize with you man!
Who’s buying?
http://money.cnn.com/2009/09/15/real_estate/foreign_home_buyers/index.htm?postversion=2009091512
Despite record U.S. home price affordability, international buyers have been unable to take advantage because of the worldwide recession and credit crunch, a real estate group said Tuesday.
Home sales to foreign clients dropped 9.4% in the year ended in May to 154,000, according to a report from the National Association of Realtors (NAR).
Among international clients who did purchase, almost half paid cash for their property because securing a mortgage was more difficult than before, according to the report.
“It’s at least three times more difficult for foreign buyers to get financing than it is for U.S. citizens who have all the right documentation and good credit,” said Madison Hildebrand, a Coldwell Banker real estate agent in Malibu, Calif.
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While Canada and the United Kingdom remain the largest international shareholders in U.S. real estate market, the NAR said buyers from those countries dwindled. The percentage of buyers from Mexico and India increased.
Foreign interest grew in California, a popular destination for Asian buyers, and the West Coast state accounted for 13% of international purchases, according to the report.
Great post. This is very helpful to understand the buying process in 2009. I wonder what it was like in other years?
Love your posts! At 17 sold or pending YTD, you are still doing excellent business in a down economy. Anyone heard of any other realtors with that many YTD? I’m guessing that Jim is in the top 1% of SD realtors.
Who’s buying?
From my personal experience:
— People my age (I’m 28; talking ages 24-32 here) who have made a large withdrawal from Bank of Mom and Dad
— People my age who don’t have Bank of Mom and Dad, but who are buying inexpensive houses with no down payment and using FHA (or, in a few cases, VA) to do it. This is more common in other states; for instance, my home state of Indiana.
Every one of those folks listed in that famous CNN article about how they spent their $8K rebate was in my age group.
I’ve talked numerous friends out of buying a house this year (again).
-Erica
Thanks propertysearch!
In the real frenzy years (2002-2004), I’d guess my hit ratio was 70% to 80%, where I’d write 40 offers and get 30 accepted.
The market was so hot that I worked with move-up buyers. It was tough chasing around the new hot listings (like today) and you couldn’t make non-contingent offers and be competitive.
So we’d make non-contingent offers with a 30-45 day escrow on House A and knew we could then put the client’s existing House B on the market, and sell/close it in time to go concurrently with the purchase. A+B
If we had a flop, Countrywide would put a HELOC on House B, and fund the down payment to purchase House A. The hitch in the underwriting guidelines allowed for HELOCs on non-owner occupied properties actively listed on the MLS, which you couldn’t do if they were owner-occ.
Countrywide would fund the purchase 80/20, with 80% on the House A, and 20% on House B, in effect doing a cross-collaterization, and causing House B to become non-owner-occ, making it all legit. Eventually we sold every House B, so Countrywide’s risk was lower in a rising market. They looked like the smartest guy in the room.
But they did no income verification, and that’s what come back to haunt them overall. The agents and lenders that didn’t care about jamming their clients into properties they couldn’t afford had a field day at Countrywide.
If they would have had an excellent quality control department, they could have caught all the bad guys, and let the rest of us carry on with legitimate business.
Tila Merriman – LOL
Dig this – I can still say that I’m primarily a listing agent too, another job that has become twice as hard as it used to be, back in the day.
Actually Jim is being modest, his best YTD representing the buyer was 10.769% under list…
Thanks for another awesome post. I learn so much here.
Here’s a good story about where you tax dollars go ………From the Desert Sun: Certain desert cities had been allocatd $8,000,000 from the Riverside County Economic Development Agency Neighborhood Stabilization (whatever in the hell that is and who know what for and for whom) to purchase foreclosed homes. To date, no purchases where able to be made due to outbidding by all cash buyers, short escrow buyers and investors buying in bulk. If the money is not spent by a certain date, it will go back in the kitty. Guess there will be no free homes for Acorn — at least for a while.
I agree with many of the previous comments – this was an excellent post. (Where is that DF from C21??)
90% of the buyers chasing 7% of the properties!
Banks know how to sell these turkeys: price. The REO listing agents don’t care about trying to maximize a few more $$; the bank does not reward them for doing so. Just close baby!
Other sellers are hosed, unless they are willing to compete with bank pricing.
osidecompass at 10.629%!
I’ll never forget…..
He is one of two different buyers who left town right after closing their sale this year, and while gone had a water leak develop in the ceiling of each house, causing thousands of dollars in damage. What’s the chance?
Insurance covered both.
Signed,
Mr. Modest
Jim, in a future post can you focus on the $8,000 first-home buyer credit which expires on November 30, 2009? I’m sure you’ve commented before, and I apologize if I missed it. I first heard about you in the LA Times article last April.
Could you expand your thoughts as to what you feel will transpire in the weeks to come? Do you think the $8,000 credit will be extended to ALL home buyers and/or if the credit will increase to $15,000? Or do you expect it to expire with Congress doing nothing as health care is the focus.
Of course, none of us have a crystal ball, but I, for one, would be very interested in your comments. With your 25-years experience in real estate land, you have such valuable insight. Thanks, JtR!
I thought I was a high maintenance client for you. I guess we have to wrote 8 more offers before you get sick of us ? Of course, I would rather just close on one of the two short sale offers we have going (preferably #2 now that the entourage is back in town this week).
The Lobbying forces will keep/extend/increase/modify the Federal Housing tax credit well into 2010. And the State (CA) will be happy to follow. That said, I just glanced over the Real Estate Report and there a few things that caught my eye (actually too many to list and comment):
1. Home sales were down (N. County Coastal) in August, falling 13.6% from July – no mention this is a huge decrease
2. NAR President C. McMilan – ‘we are encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences’ – I wouldn’t expect anything less with NAR being #3 donating to Congress behind ATT and the American Fed. of State, County & Municipal Employees. And above all Banks and Financial Institutions.
3. NAR Cheif Economist L. Yun – ‘the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter 2010’ – doesn’t the market always trend up in Q2?
Erica,
Third type of buyer in our age group is people like me buying the low-end (homes at car prices) for cash. It is a great opportunity to buy houses at 1970s prices, and I encourage (and assist, where possible) my friends to do the same. Although some would shy away from these neighborhoods, once you get to know them and embrace them they have a much better sense of community than the upscale neighborhoods. And they cannot lose much more value – even if prices decline 20% you only lose $7,500!
It’s weird-when I bought my house in Riverside in May, I made one single offer at $5k under asking, the listing agent inferred they had an FHA offer at asking (mine was 20% conventional), I countered at asking, got the house.