RAW: My Approach To A Changing Market

RAW: Recognition Acceptance Willingness.

I met with a couple the other night who are considering putting their home up for sale.  As I prepared for the meeting, I began in my usual way, by assembling the comparable sales data. This would allow me to assess our market and in this case, make and substantiate the argument that our market was going through another correction.  When the market is changing, pricing and marketing strategy become of paramount importance.  The ability to recognize, plan and ultimately strategize an approach when the market is in flux, is why the real estate industry will never be a purely online enterprise because the market is always in flux.  To use a military phrase, boots on the ground, will always trump an aerial flyby for accurate data collection and interpretation.

I meet all kinds of people in my business.  Every client is different which means I have to be ready for any one of a thousand different scenarios when sitting with a potential buyer or seller.  The reasons a seller is selling affect how we approach selling.  Timing, equity and urgency all factor into the approach, but in the end has little to do with the ultimate sales price.  The “I need to get ‘X’ out of my home to make this worthwhile” idea, bears little relevance on how the market views a property nor what it will sell for, only what the seller would be willing to sell for.  Everyone has their own motivations and because of this, I need to quickly assess that motivation and determine if I can help them and ultimately if I can be successful.  If a seller wants an impossible amount for their home, I will likely decline the listing.  Admittedly this doesn’t happen very often, but it does happen.  There’s an old saying that goes: “It’s better to be the second wife and the third Realtor.”  Funny, but as is with such old jokes, not so far from the truth.

As it turned out the couple were very sweet, thoughtful and inquisitive.  They weren’t thrilled with my current outlook but seemed sincerely appreciative of my candor.  With the market correcting, I wasn’t about to “buy” this listing.  This would just hurt my sellers and cost me money.  “Buying a listing” is the practice of a Realtor overstating the value of a property so that when a seller is thinking about which agent they’ll hire, they say, “Well that agent said we could get $30,000 more,” and this often sways a seller to hire the agent that says they can sell for more.  Unethical?  Perhaps.  But since pricing a home for sale is not an exact science, it can really come down to a matter of opinion.  However, if you know you are competing for a listing, it can be very hard to resist the temptation of adding a few extra bucks when you sense the seller isn’t of the same mind set as you regarding price.  Predicting a higher sales price than your competition isn’t always wrong though.  When the market is on the rise, predicting a movement to the upside is to your client’s benefit.  I’ve prided myself on recognizing this before my competitors and in doing so have helped my buyers and sellers to get better prices.  But when a market is in a correction and prices are flat to softening, buying a listing does no one any good.  It gets the seller committed to an agent and when they are unsuccessful, the agent simply approaches the seller with a price reduction.  That’s not to say all Realtors do this or that I am never wrong or have never taken a listing that I believe was priced incorrectly.  But when I do take such a listing, I am pretty forthright with my sellers.  It doesn’t mean they’ll listen to me but I do make my opinion known.  It’s a little funny really that I am hired for my experience and expertise, yet sometimes my sellers just feel they know more than me.  What can I do?  It’s ultimately their home and every decision theirs.  The only decision I control is whether I take the listing.

When the market is transitioning from one favoring buyers to one favoring sellers, I encourage my buyers to pay a little more to get the house and the sellers to ask a little more than the last comparable sale.  But when the market shifts from sellers to favoring buyers, the dialog is a lot more complex.  For my sellers I try to get them to understand that a declining market is like a game of musical chairs: the goal is to get a chair, any chair, before there are no chairs left.  For buyers the obvious temptation is to say, “Wait, prices are coming down.”  But this is not necessarily the right advice.  Take the market we have today. It is clear to me that prices are in a retreat; that we are giving up some of the 2013 gains.  As I wrote in my last blog, the market trend lines in real estate are never straight up or down, nor are they smooth when looked at month to month.  On the contrary, they are jaggedy little devils that go up and down and side to side, one week to the next.  But here’s the thing… if you find a home you like, you should buy it, or at least try to anyway.  If the price doesn’t seem consistent with the market’s direction and you believe the market is going down, as a buyer I recommend offering less.  And the longer the home has been on the market for sale, the lower you should offer.  That is not to say you are going to steal the home.  “Stealing a home” to use that rather unsavory phrase, requires the presence of duress.  That is, the seller must be under undo stress to get out of the property.  This could be purely financial maybe because they are going into foreclosure or perhaps personal like a divorce or death or imminent job loss or transfer, but in any event there has to be duress.  By definition however, this is not market value.  Market value is what a willing buyer and a willing seller agree on without the presence of duress.  So if the market is in decline and a seller can’t sell for what they thought they could and makes the decision to accept an offer from a would be buyer for less than asking without the presence of duress, that is by definition the market value of that home at that time and place.  So when the market is softening as it is now, a savvy seller is going to be more aggressive on their price in hopes that they’ll capture that one buyer in the market for a home like theirs.  Since they are competing with all the other sellers in their market for that same buyer, it is not advisable to be offering the same value as everyone else, you have to offer more.  The property that offers the most for the least is going to be the one that sells first.

Meanwhile the savvy buyer is going to write a more aggressive offer on the home they like not because they are trying to steal it, rather because they want it.  They just want it for less than the seller is listed at.  A buyer can’t be afraid to write in a softening market and a seller can’t be too quick to say no.  Ultimately the two sides have to come to an understanding if there is to be a deal.  Thus the key to a changing market be it up or down comes down to the RAW truth: Recognition, Acceptance and Willingness.  So with that, go out and make the deal, because a buyer should never lose a dream home over a few bucks and a seller should never walk away from a sure thing when the next one could be months away.  Remember, it’s always better to get a chair, any chair, than to be left standing when the music stops.

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.
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One Response to RAW: My Approach To A Changing Market

  1. shirley spangler says:

    Totally on Spot Tim, as a realtor 37 years in the biz myself !!

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