The Real Estate Perception Gap

Recently I wrote about the “Accidental Landlord” syndrome, where a seller ultimately concludes that it makes more sense to rent their property than to take an offer far below what they feel their property is worth.  In my earlier discussion the seller was under water on the property so their options were limited.  Presently I’ve got one seller who bought at the peak and is unwilling to walk away from the substantial money they put down and another who owns free and clear, has nearly doubled their money, but “wants what they want” for a sales price.  So in both cases, quality properties are coming off the market and converting to rentals.

So where does that leave the buyers?  Most of my buyers are terribly frustrated that they cannot find a quality home at a “realistic price”, and when they do, there are multiple offers and the competition is fierce.  Huh?  How can it be that buyers are losing out on multiple offers at the same time that sellers are removing their homes from the open market for lack of interest and offers?  I call it, “The Real Estate Perception Gap”.

The “Gap” is the difference between what the buyers, convinced values have to come down further and sellers, who won’t sell for less than what they want, see as fair market value.  This has led to a shortage of inventory.  Currently I would estimate that spread to be between 5-10%.  This is a problem.  When comps (comparable sales) are no longer accepted as a gauge for assessing value, what then is value based on?  Real estate 101 defines market value as what a willing buyer and willing seller agree to with the absence of duress.  But what happens to this model definition when there is duress all over the place?  Confusion, that’s what.  There is high competition for aggressively priced and highly motivated seller properties, and no action on everything else.   In sports we call it a draw; in real estate we call it a stalemate.  So until the distressed properties stop influencing buyer perception, or until they truly take hold and take over the market place (ie: Las Vegas and South Florida), “The Real Estate Perception Gap” will continue to cause sales numbers to decline and frustrated buyers and accidental landlords will grow in number.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and is a professional short sale negotiator. Tim has been married 28 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
This entry was posted in Real Estate and tagged , , , , , , . Bookmark the permalink.

One Response to The Real Estate Perception Gap

  1. Being in the real estate industry we can relate to this article. We are a property management company in St. Charles, MO, and some of our clients were “accidental landlords.” They couldn’t sell their homes at the right price, decided to lease the house, discovered the difficulties of being a landlord, and asked us for help. When these homeowners come to us they often have an opinion of what their home should rent for, just as they have an opinion of what their home should sell for. This may be based on rental advertisements, advice from friends and family, or based on their mortgage payment. From this point we show them comps of rental homes in the area in order to match their price expectations with the conditions of the market. While the reliability of comps are debatable and a “perception gap” is present, this seems to help.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s